The job requirements have appeared all around the country. One ad, placed by a Texas electronics company looking for an engineer, stated that the company would not “consider/review anyone NOT currently employed regardless of the reason.” In New Jersey, a Craigslist ad for assistant restaurant managers required that applicants “must be currently employed.” There are many other examples of these types of ads.

In this economy, many companies fortunate enough to be looking for new employees can find themselves overwhelmed by the number of applicants who respond. Many of the unemployed are so desperate for a job that they are sending out résumés in massive quantities, even if they are underqualified for a particular position.        

In their quest to find qualified workers, some employers are explicitly stating that they will only hire those who are already employed and will not consider the unemployed. While the “must be employed to apply” philosophy may make sense, federal regulators are examining these types of policies, and at least one state has made it illegal.

Earlier this year, the U.S. Equal Employment Opportunity Commission held a public meeting to examine how employers are treating unemployed job applicants. At the meeting, advocates of the movement to prohibit unemployment discrimination testified that unemployment discrimination has a “disparate impact” on minority, older, and disabled workers because they currently face higher than average unemployment rates. And, given the surplus of applicants for many jobs, employers are refusing to consider unemployed applicants at an increasing rate.

In addition to possible future legal ramifications, employers also need to consider the reputational risks related to these types of policies. In such a charged environment, employers that will only interview those with current jobs need to carefully consider whether these policies make sense, especially because other, less controversial, approaches may help employers to find the right candidates without implementing an inflexible rule.

The Business Case

While it may seem heartless to automatically rule out the unemployed, companies can point to practical reasons for implementing or considering such a rule.

Unquestionably, in this recession some very talented people have lost their jobs through no fault of their own. However, those who have retained their jobs in this brutal economy may presumably have exceptionally valuable skill sets or strong work ethics. Their industry knowledge is also more likely to be fresh, while someone who has been unemployed for a long time may not be aware of the latest developments, industry trends, and technologies in their fields.

Employers may think that those who have maintained jobs also demonstrate exceptional stability and dedication to their current jobs and employers. And, by instituting a must-be-employed rule, companies can slow a potential flood of applications to a more manageable number. Unemployed applicants often apply for dozens or even hundreds of jobs at a time, many if not most of which would not be a good fit for their skills and abilities. Employers can easily get overwhelmed trying to work through stacks of applications for those who are not the right fit or do not have the necessary skills. With all these factors at work, it’s no surprise that many companies are looking for ways to carefully manage their hiring procedures. However, those who stipulate that only the employed can apply need to understand the potential risks of implementing such a policy.

The Perils of the Policies

In a recent editorial berating the practice of only hiring the currently employed, The New York Times summed up some of the potential trouble areas: “Jobless workers are not specifically protected by anti-discrimination laws, but various laws outlaw hiring bias on the basis of sex, race, national origin, religion, age and disability. Since African-Americans, older workers — especially older women — and disabled workers have been hit particularly hard in the downturn, discriminating against unemployed people in those groups may violate the law.”

“Take African-American workers,” stated The New York Times. “They make up 12 percent of the work force, but 20 percent of the unemployed. Even college-educated black Americans are far more likely than their white peers to be unemployed,”

While the EEOC has yet to rule on the practice, some experts are claiming that must-be-employed rules are illegal. Speaking before the EEOC at its February hearing, Christine L. Owens, executive director of the National Employment Law Project, said that the practice is discriminatory under both Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act of 1967. This type of attention and rhetoric should cause employers to take notice. The U.S. Equal Employment Opportunity Commission (EEOC) is clearly monitoring the practice, and no company wants to be the EEOC’s test case. While the practice is not specifically illegal now, that could change if some in Congress have their way. The Fair Employment Act of 2011, which was introduced into the U.S. House of Representatives in March, would amend the Civil Rights Act to prohibit discrimination on the basis of unemployment.

Federal regulations aren’t the only ones that matter, of course. Employers must also abide by their local and state laws, and several states are taking direct aim at these types of employment practices. As of June 1, New Jersey has made it illegal to specify that only applicants with current jobs may apply. In New York, the legislature has considered such a law as well.

There are other risks, too. Plaintiffs’ lawyers may smell potential lawsuits, betting that a jury will be sympathetic to an unemployed person who is desperately seeking a job and won’t even be considered for a position. There are also reputational vulnerabilities to consider. Even if companies are within their legal rights to only accept employed applicants, such an approach may not play well in the media or with current or potential employees.

Hiring the Right Workers Without a Rule

Along with considering all the potential problems of must-be-employed rules, employers should ask themselves whether the practice is particularly effective. Speaking at the EEOC hearing, Fernan R. Cepero, representing the Society of Human Resource Professionals (SHRM), said such a rule does not make business sense. Cepero, who is also vice president for human resources at The YMCA of Greater Rochester, told the commission, “In SHRM’s experience, screening out the unemployed is not an effective practice.”

If your company has a must-be-employed policy or is considering one, talk to the experts. Consult with HR, outside counsel, and in-house attorneys to see whether the rule can be defended legally and will actually help you find the best employees. Before implementing a must-be-employed policy, employers should consider other approaches that, without resorting to a bright-line rule, will allow them to target and hire the right candidates, such as:

• Writing clear job descriptions. If you have not updated your job descriptions recently, now is an excellent time to do so. Make sure that job descriptions are specific and that you have thoroughly outlined job duties, responsibilities, and essential functions. This can help limit the number of unqualified candidates who submit applications and résumés.

Have a point person who vets all job postings. This will ensure consistency and minimize the chance that someone in a satellite office will include the must-be-employed language in a help-wanted ad, contradicting company policy.

• Advertising selectively. Many companies use sites like Craigslist because they are cheap, simple, and reach a wide audience. But these types of sites make it easy for applicants to quickly find and apply for many, many jobs. Employers may want to consider a more targeted approach, such as advertising on industry-specific websites or encouraging current employees to recommend candidates. Depending on the job, employers may want to use recruiters or tap networks of professional associations.

• Adopting a technological approach. If your company is filling many positions or has a great deal of turnover, consider investing in software to make the screening process less cumbersome. Allow people to submit applications online, then use search terms to weed out those who are not qualified. With the right technology, you can also save applications that are promising, but for which you may not have any immediate openings. However, you should indicate how long these applications will remain active (e.g., 90 days).

With an online approach, you can automatically acknowledge every application. This will help minimize phone calls and follow up from people asking if you have received their application.

• Screening candidates carefully. Before you start the lengthy process of interviewing candidates face to face, spend a few minutes on the phone with those who seem most promising. That way, you can get a better idea if candidates have the right qualifications and are suitable for the job and your company. For obvious legal purposes, you should document those discussions.

In the current economy, companies do not want to waste time wading through stacks of irrelevant job applications. However, adopting a rule that unemployed people will not be considered for current positions could lead to trouble. You may also miss out on some excellent job candidates. With the right steps, you can create more efficient, effective, and legal hiring processes without resorting to an inflexible rule that could expose you to significant discrimination liability.