Legislation and Compliance Update: Pepsi Settles EEOC Class Charge for $3.1 Million

By Michael Klazema on 1/13/2012

The Equal Employment Opportunity Commission announced settlement of a charge it brought against Pepsi Beverages on behalf of black applicants whom Pepsi had declined to hire due to arrests that had not resulted in convictions or to minor convictions that were not relevant to the position. Pepsi will pay over $3.1m and offer jobs to anyone in the class who is still interested in working for Pepsi.

The EEOC appears to have successfully pressed two theories:

  1. According to the EEOC, “Pepsi’s former policy also denied employment to applicants from employment who had been arrested or convicted of certain minor offenses. The use of arrest and conviction records to deny employment can be illegal under Title VII of the Civil Rights Act of 1964, when it is not relevant for the job, because it can limit the employment opportunities of applicants or workers based on their race or ethnicity.

This is consistent with the EEOC’s long-held position that, to hold a conviction record against an applicant, and employer must show that excluding the applicant based on the conviction is job-related and consistent with business necessity.

In explaining this position, the EEOC cited its long-standing guidance: “When employers contemplate instituting a background check policy, the EEOC recommends that they take into consideration the nature and gravity of the offense, the time that has passed since the conviction and/or completion of the sentence, and the nature of the job sought in order to be sure that the exclusion is important for the particular position.  Such exclusions can create an adverse impact based on race in violation of Title VII.”

2.    According to the EEOC, “Under Pepsi’s former policy, job applicants who had been arrested pending prosecution were not hired for a permanent job even if they had never been convicted of any offense.

This is consistent with the EEOC’s long-held position that, to hold a non-conviction against an applicant, an employer must do something beyond finding the criminal history record to determine that the applicant actually committed the offense. Once the employer concludes that the applicant actually committed the offense, then the employer must ensure that excluding the applicant is both job-related and consistent with business necessity, just as it would for a conviction record.

The EEOC’s press release on the subject is available at

Pamela Davata, an attorney who represents the National Association of Professional Background Screeners (NAPBS), commented on the action in an Associated Press article available at

For more information on how this may affect your screening program and how can help, please contact your client relationship representative.

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