As someone who works on lawsuits for a living I join in your question. People make a lot of assumptions about employment lawsuits that I, as something of an insider, don't see IRL. I can at least say that this particular issue has never come up in any employment suit I've ever worked on. It may well be true that employers do certain things because they're afraid of being sued, but I'm not convinced that those fears are well-founded because the things they do to protect themselves ultimately don't seem to do much good when the case goes to trial. For example, people often say that employers put employees on PIPs as a precursor to firing them because they think it will make it harder for the employee to file a lawsuit when he or she is subsequently fired. Does that dissuade some wrongfully terminated people from talking to a lawyer? Probably. But on the other hand, in pretty much every employment case I've seen go to trial involving someone who was fired from a large company, that person was on a PIP. At the very least, the protective effects of these measures seem exaggerated.

I don't think that they get sued for hiring a convict.

It's more that if they get sued for some other reason (legitimate or not), the fact that they hired a convict may count against them in the jury's eyes.

So, as the business sees it, hiring a convict brings extra potential liability.

Isn't this why companies incorporate in Delaware? Isn't it like $50k or something to file suite?