The Litigation Saga of Waterloo, Iowa’s Ban the Box Law

Cities have been quick to enact laws around the use of criminal history for employment purposes in recent years. These types of laws are commonly known as “Ban the Box” Laws.  In some cases, there is push back from the business community as to these laws. That’s what happened in the city of Waterloo, Iowa. Let’s catch up on the chain of events that surrounds the city’s ban the box law.

Waterloo’s Ban the Box History

Waterloo became the first jurisdiction in Iowa to enact a law around the use of criminal records for employment purposes. The city’s law took effect in July 2020. As enacted, among other things, Waterloo’s law makes it an unlawful discriminatory practice:

• For an employer to include a criminal record inquiry on any application in connection with the employment of any person.
• For employers with fifteen (15) or more persons, with some exceptions, to make any inquiry regarding, or to require any person to disclose or reveal, any convictions, arrests, or pending criminal charges during the application process, including but not limited to any interview.
• For employers with fifteen (15) or more persons, with some exceptions, to make an adverse hiring decision:
  • Based solely on the applicant’s record of arrests or pending criminal charges that have not yet resulted in a conviction;
  • Based on any criminal records which have been lawfully erased or expunged, which are the subject of an executive pardon, or which were otherwise legally nullified;
  • Based on an applicant’s criminal record without a legitimate business reason.

The law impacts many employers in the city. It does not apply to employers that employ less than four persons in the City of Waterloo, the United States government, the State of Iowa, or any state or federal political subdivisions (except, of course, the City of Waterloo). Employers who are required by federal or state law or regulation to make a criminal record inquiry on an employment application are also exempt under this law.

Waterloo Challenged by Business

Before the law went into effect, the Iowa Association of Business and Industry (IABI) filed a lawsuit related to Waterloo’s law. Alleging it violated state law, the IABI asked the district court to prohibit Waterloo from enforcing its law, as well as declare that the it violates both the Iowa Code and the Iowa Constitution.

The Black Hawk County, Iowa District Court disagreed. The District Court decision noted that “the ordinance is consistent with authority given to cities by… [the Iowa Civil Rights Act] to provide ‘broader or different categories of unfair or discriminatory practices.’”.

Following the court’s decision, the IABI immediately filed an appeal.

A Final Decision?

The IABI’s appeal made its way to the Iowa Supreme Court. The Supreme Court issued an opinion on June 18, 2021, reversing part of the lower court’s decision by invalidating parts of the Waterloo ban the box law while upholding parts of the law

The Supreme Court disagreed with the District Court’s reliance on the Iowa Civil Rights Act. The Supreme Court held that they “…are not persuaded that [the Iowa Civil Rights Act] can sustain the ordinance.”

The Court instead reviewed the Waterloo ordinance in relation to Iowa Code section 364.3(12)(a). This section of Iowa law states that “a city shall not adopt, enforce, or otherwise administer an ordinance, motion, resolution, or amendment providing for any terms or conditions of employment that exceed or conflict with the requirements of federal or state law relating to a minimum or living wage rate, any form of employment leave, hiring practices, employment benefits, scheduling practices, or other terms or conditions of employment.”

In its lawsuit, the IABI had argued that the Waterloo ordinance violates Iowa Code section 364.3(12)(a), as it governs hiring practices and terms and conditions of employment in a manner that exceeds or conflicts with federal or state law.

The Supreme Court first addressed the City of Waterloo’s argument that “the ordinance is not preempted anyway because it does not ‘exceed’ the requirements of state and federal law.  Waterloo’s ‘Ban the box’ law, according to the City, simply implements existing civil rights law.”  The Court held that because the Waterloo ordinance “forbids every employer’s use of a criminal history box on the job application form for every job, even if the employer might have valid business reasons for asking about criminal history” the “requirements [of the Waterloo ordinance] go beyond Title VII (federal law) and the ICRA (state law).”

The Supreme Court then held that Iowa Code section 364.3(12)(a) only “preempts ordinances that prescribe different terms or conditions of employment… to the extent [the Waterloo] ordinance merely delays an inquiry into criminal history, it is not prescribing different terms or conditions of employment.”

The Court ultimately held that the provisions of the Waterloo ban the box law that actually set terms and conditions of employment are prohibited under Iowa state law.  This ruling voids the sections of the ban the box law that do not allow certain employers to turn down persons with certain types of criminal records.  However, the sections of the Waterloo ban the box law that simply address the timing of the criminal record history inquiry do not provide for terms and conditions of employment and are not prohibited by Iowa state law.

After this ruling, the following sections of the Waterloo ban the box law are now invalid under Iowa state law:

• For employers with fifteen (15) or more persons, with some exceptions, to make an adverse hiring decision:
  • Based solely on the applicant’s record of arrests or pending criminal charges that have not yet resulted in a conviction;
  • Based on any criminal records which have been lawfully erased or expunged, which are the subject of an executive pardon, or which were otherwise legally nullified;
  • Based on an applicant’s criminal record without a legitimate business reason.

The Supreme Court determined that the other requirements of the Waterloo ordinance are allowed under Iowa state law and remain valid.

Employers in Waterloo may have questions about the final court ruling. You may want to review the final decision with your legal advisor to learn how this may impact your background checks.