It's usually "convicted of a felony or alcohol related offense". Being arrested usually has no negative impact on your job prospects unless you are also charged and convicted (of a felony).

Arrest records do come up in the system when a background check is run as I can vouch for personally. They also come up (in Colorado) with the initially charged crime whether or not the charge was changed or dismissed. This has never hampered my ability to obtain employment, loan, or a lease.

I have filled out job applications that ask if you have ever been arrested, specifically clarifying "whether or not convicted".

Getting involved with "the system" in any way, even if you're not guilty, appears to be a red flag for some employers.

It depends. The Global Entry program for instance cares about arrests, not convictions. Work background checks will turn up arrests as well.

How is that legal ? As a European, I am utterly puzzled.

In New York City, landlords will run background checks that check if you've been arrested or appeared in housing court, but not whether or not you were convicted (or even charged!) in the arrests, and not whether you won or lost the housing court case (or even whether you were the plaintiff or defendant).

It's incredibly pro-landlord, but because there's a shortage of housing supply, they can get away with it.

Only source I can remember for this offhand is behind a paywall, but I used to work in drug policy, so this is something I've witnessed many times: http://bklynr.com/arrested-developments/