Pre-Employment Background Screening: Complying With Ban the Box - - PowerPoint PPT Presentation

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Pre-Employment Background Screening: Complying With Ban the Box Laws, Fair Credit Reporting Act and More

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific WEDNESDAY, FEBRUARY 17, 2016

Presenting a live 90-minute webinar with interactive Q&A Mark S. Goldstein, Esq., Reed Smith, New York Albert E. Hartmann, Counsel, Reed Smith, Chicago Peter J. Stuhldreher, Partner, Reed Smith, Houston

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“Ban the Box” Laws

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Ban the Box State and Local Law Limitations

• Many states and localities now have their own laws and
• rdinances regulating when and how employers may utilize

background checks

• These are typically known as “ban the box” laws

9

Ban the Box The Rationale

• These laws assist individuals with criminal histories in rejoining

the workforce and hopefully will:

• Reduce recidivism and its associated costs
• Enhance public health and safety
• Lead to economic growth

6

States with “Ban the Box” Laws

• California
• Colorado
• Connecticut
• Delaware
• Georgia
• Hawaii*
• Illinois*
• Maryland
• Massachusetts*
• Minnesota*

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• Nebraska
• New Jersey*
• New Mexico
• New York
• Ohio
• Oregon*
• Rhode Island*
• Vermont
• Virginia

* Ban the box law applies to private employers

Ban the Box Common Structures

• With the “box” removed from the application, when can

employers ask about convictions?

• Minimum qualifications (CA, CT, NE, OH, VT, VA)
• First live interview (DE, IL, MD, MN, NJ, NY, OR, RI)
• Conditional offer of employment (CO, HI, NYC)
• Selection as a finalist (NM)
• After background check is run and provided to applicant

(MA)

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Ban the Box “Ban-the-Box” in California

• In July 2014, California barred governmental or public

employers from requesting information regarding criminal convictions until after the employer determines the applicant meets the minimum qualification standards for the position.

• Many CA cities have since passed their own measures:
• San Francisco: Employers with 20+ employees and operations in San

Francisco are prohibited from inquiring into an applicant’s criminal history until after the first “live interview.”

• Compton and Richmond both passed similar measures for employers

who do business with the city.

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Ban the Box “Ban-the-Box” in New York

• In September 2015, New York adopted a fair chance hiring

policy for state agencies where applicants cannot be asked about prior convictions unless the agency has interviewed the candidate and is interested in hiring him or her.

• In June 2015, New York City passed its own Fair Chance Act
• Employers with 4+ employees cannot ask about a conviction record or

run a background check on an applicant until after a conditional offer has been made.

• Also requires that the employer provide the applicant with the employer’s analysis of

the background report if the employer rescinds its conditional offer because of the applicant’s prior conviction, and allow the applicant three days to respond.

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Ban the Box And Across the Nation…

• New Jersey: Employers with 15+ employees may not ask questions

regarding an applicant’s criminal conviction on job applications, and may not inquire regarding criminal convictions until after the applicant’s first interview.

• Illinois: Employers with 15+ employees cannot inquire into, consider, or

require disclosure of an applicant's criminal history until after the applicant has been (i) deemed qualified for the position and (ii) notified that (s)he has been selected for an interview.

• Washington, D.C.: Employers with 10+ employees cannot inquire about

convictions until after a conditional job offer.

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Ban the Box TAKE ACTION

• What do “ban the box” laws mean for employers?
• As an employer, you need to know:
• Local and state laws to see if policies apply to your workplace

(especially when moving into new locations)

• When you can ask about prior convictions
• What convictions you can ask about (Time limits? Expunged or

sealed records? Arrests?)

• Whether you need to provide the applicant with copy of the record
• Whether you need to notify the applicant with reason for denial

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Ban the Box TAKE ACTION

• Before rejecting an applicant on the basis of a criminal record,

evaluate the relationship between the conviction and the applied for position

• Keep a record of when information was collected and when

analysis was performed

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State and Local Credit Check Bans

Credit Checks Federal Requirements

• If an employer wishes to run a check credit as part of the hiring

process, the employer must:

• Get the applicant’s consent before doing so
• Give the applicant a warning (along with a copy of the report received) if

the employer plans to reject the applicant based upon the information

• btained
• Give the applicant an official adverse action notice if the employer does

not hire him/her because of the information obtained

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States and Major Cities with Credit Check Limitation Laws

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States

• California
• Colorado
• Connecticut
• Delaware
• Hawaii
• Illinois
• Maryland
• Nevada
• Oregon
• Vermont
• Washington

Cities

• Chicago
• New York City

Credit Checks New York City

• Effective September 2015, NYC bars most employers from

requesting or considering a prospective or current employee’s “consumer credit history.”

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What is consumer credit history?

• Consumer credit report
• Credit score
• Information obtained from the

individuals re: credit accounts, missed payments, bankruptcies, etc. Who’s exempt?

• Entities required by state or federal

law to use or verify an applicant or employee’s credit history

• Positions w/ signatory authority over

third-party funds of $10,000+

• Positions w/ authority to enter

employer into financial agreements

• f $10,000+

Credit Checks California

California – Labor Code, section 1024.5:

• Credit Report checks can only be performed for:

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• Managerial positions
• Law enforcement
• Positions with the state

Department of Justice

• Positions with regular access to

individuals’ sensitive financial information

• Positions where the individual

will be a named signatory on the company card

• Positions with regular access to

$10,000 cash

• Positions with access to

confidential or proprietary information

• Positions where the individual is

authorized to transfer money or enter into financial contracts on behalf of the employer

Credit Checks Take Action

• What should employers do?
• Always check local/state ordinances when expanding into new territories
• Review existing policies and procedures and update as needed
• Review job descriptions to identify which positions are exempt from

applicable regulations

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Criminal Conviction Discrimination Laws

Criminal Conviction Discrimination Laws

• States with laws prohibiting employment discrimination against

ex-offenders

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Private Employers

• Hawaii
• Kansas
• New York
• Pennsylvania
• Wisconsin

Public Employers

• Arizona
• Colorado
• Connecticut
• Florida
• Kentucky
• Louisiana
• Minnesota
• New Mexico
• Washington

Criminal Conviction Discrimination Laws How these laws work

• Require employers to analyze the connection between the

conviction and the duties of the job applied for

• Nearly all the laws require that an employer be able to show

that there is some rational relationship between the offense committed and the job sought.

• Hawaii: must be “reasonably related” to the job sought
• Kansas: must “reasonably bear” on the applicant’s trustworthiness or

general safety of customers and employees

• New York: must be a “direct relationship” between the job and offense
• Pennsylvania: must be a “job related” offense
• Wisconsin: must “substantially relate” to the employment

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Article 23-A of the NY Correction Law

• Article 23-A requires employers to evaluate applicants and

current employees with conviction histories fairly and on a case-by-case basis.

• The law specifies eight factors that employers must consider

when evaluating an applicant with a prior conviction.

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1. NY State Public Policy 2. Specific duties and responsibilities 3. Bearing the criminal offense has on ability to complete work duties 4. Time elapsed 5. Age of the person at the time of the

• ffense

6. Seriousness of the offense 7. Any information produced by the person in regard to his/her rehabilitation and good conduct 8. Legitimate interest in public safety and welfare

Criminal Conviction Discrimination Laws Take Action

• What should employers do?
• Know the requirements of the applicable law so you know the steps you

must take to make a “fair hiring decision”

• Consider:
• Time elapsed since conviction
• Age of the applicant at the time of offense
• Any evidence of rehabilitation
• Specific responsibilities of the job sought

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FCRA Obligations

The Fair Credit Reporting Act (“FCRA”)

• In addition to the state and local laws, all employers are subject

to the FCRA

• Requires employers to navigate the complexities of multiple

statutory schemes at the same time

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Why the FCRA Matters

• Unprecedented Explosion of FCRA Class Litigation: The law is not a new
• ne, but the wave of class-action litigation directed at employment background

checks is new

• FCRA Perfect Avenue for Class Action Litigation: Statute allows for recovery
• f statutory damages, punitive damages and attorneys’ fees; Statutory

damages are awardable even if the consumer did not suffer any damages as result of willful violation

• Success Leading to New Targets: Success in FCRA litigation aimed at use

and disclosure of credit reports have encouraged plaintiffs’ lawyers to look for new targets

• ALL Employers Should Take Note: Despite larger classes leading to larger

companies being targeted, smaller companies also could be targeted

• FCRA Compliance Investment Pays: Recent settlements are resulting in

millions of dollars in losses to employers, ramping up the importance of effective and efficient preventative FCRA compliance measures

Complying with FCRA in the Employment Context

• FCRA requires employers to follow notice and disclosure procedures when
• btaining or using Consumer Reports or Investigative Consumer Reports

from third-party Consumer Reporting Agencies

• “Consumer Reports” may include information related to criminal background

checks, credit checks, educational history, employment history, driving and other license records, and general reputation or character that is used as a factor when considering an individual’s eligibility for hire, promotion or other employment actions, including investigations

• “Investigative Consumer Reports” are a specific type of Consumer Report

containing information on these subjects that is obtained through personal interviews with neighbors, friends, or other people who may have knowledge concerning any such items of information

• Many types of Consumer Reporting Agencies, including credit bureaus as well as

data collection agencies mining the internet through social media

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Complying with FCRA – Before Obtaining a Consumer Report

• Notify employee or applicant in writing that a Consumer Report

may be obtained and used for employment purposes (hiring, retention, promotion, reassignment)

• Must be a “stand-alone” document
• Cannot contain “extraneous” information
• Obtain conspicuous written authorization from employee or

applicant prior to requesting a Consumer Report

• Provide certification of compliance to the Consumer Reporting

Agency

• Note special rules for requesting Investigative Consumer Reports

and for using Reports during Investigations

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Complying with FCRA – Before Taking an Adverse Action

• Notify employee or applicant that a Consumer Report has been
• btained and that adverse action may be taken on the contents of

the report

• Provide FCRA Summary of Rights and a copy of the Report upon

which the decision may be based

• Put application “on hold”
• Allow for reasonable opportunity for candidate or employee to notify

company of inaccuracies or otherwise dispute the Report contents

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Complying with FCRA – After Taking an Adverse Action

• Notify employee or applicant in writing that adverse action has been

taken based in whole or in part upon the contents of the Consumer Report

• Include name, address, telephone number of the Consumer Reporting

Agency that furnished the Consumer Report

• Inform employee or applicant of his or her rights under FCRA, including

the right to dispute accuracy or completeness of the Consumer Report

• Inform employee or applicant of right to obtain a free copy of the Consumer

Report from the Consumer Reporting Agency if requested within 60 days

• Provide a statement that the Consumer Reporting Agency did not make the

adverse action decision and cannot provide information as to the reasons for the adverse action

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FCRA and Social Media

• The Internet and, in particular, social media networks, can provide

a wealth of personal information about job applicants and employees

• Data collection agencies, or “data brokers,” are private companies

that mine personal data made available through the Internet and social media, and sell it to clients

• FTC has sent warning letters to several data collection agencies

regarding their obligation to comply with FCRA

• According to FTC, a data collection agency “is a consumer reporting agency

because it assembles or evaluates consumer report information that is furnished to third parties that use such information as a factor in establishing a consumer’s eligibility for employment”

32

Explosion of FCRA Class Litigation Generally

• Generous remedies available under the FCRA
• Statute allows lawsuit for violation of ANY provision of the broad statute
• Statute allows for recovery of statutory damages of $100 - $1,000

(in lieu of “actual damages”), punitive damages and attorneys’ fees

• Statutory damages are awardable even if the consumer did not suffer any

damages as result of willful violation

• U.S. Supreme Court decision in 2007 (Safeco Insurance v. Burr)

lowered standard for “willfulness” to “recklessness,” i.e., something more than negligence but less than knowing

• At issue in Safeco was whether the defendant's erroneous interpretation of FCRA

was “objectively unreasonable” and therefore supported a “willfulness” finding

• Therefore, for example, proof that a business practice was brought into question

by an FTC staff opinion letter or court may establish “willfulness”

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FCRA Class Litigation Aimed at Employers

• Success in FCRA litigation aimed at use and disclosure of credit

reports have encouraged plaintiffs’ lawyers to look for new targets

• Employment screening practices are subject to a unique array of

additional duties under the FCRA that each can be basis for a lawsuit

• Employment screening practices are typically uniform and

standardized, making it easier to aggregate claims for class treatment

• Form disclosures, authorizations and notices
• Human resource policies used company-wide

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Types of FCRA Employment-Screening Claims

• Stand-Alone Requirement for Disclosure/Consent Form (§1681b(b)(2))
• Formatting requirement now interpreted as prohibition on “extraneous

language”

• Dozens of class action lawsuits filed against employers in last 6 months

challenging the content of disclosure forms

• Many of these claims challenge waiver-of-liability language
• Per Safeco analysis, willfulness claims bolstered by recent court

decisions on stand-alone requirement and inclusion of waiver language

• 2012 district court decision, citing earlier FTC staff opinion letter
• Reardon v. Closet-Maid (Dec. 2013 W.D. PA.)
• Inclusion of waiver in disclosure is willful violation as a matter of law

35

Other Types of FCRA Class Litigation

• Other Claims Based on Disclosure/Consent Forms
• Inclusion of form in employment application
• Inclusion of additional authorizations in form
• Inclusion of state-mandated notices in form
• Pre-Adverse Action Notice Claims
• Content requirements
• Timing – before decision is made; and allow time to dispute
• Impact of scoring/adjudication by data vendor
• Allowance for applicant to dispute before decision made
• Contacting applicant by phone or email before formal pre-adverse action notice

is sent

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HIRING BEST PRACTICES

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Establishing Policies on What Information Can be Collected and Used

Policies must consider federal, state, and local law

• Policies vary from state to state, or one uniform policy?
• Policies will need to be updated as new state laws are passed

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Policy Content

• Detail notice requirements, rights of the employer and the

individual, and any limitations at each stage of the hiring process

• Provide guidance to those involved in the hiring process
• Provide evidence of the company’s policies if ever challenged

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Policy Content

• Consider which jobs have a legitimate job-related reason to
• btain a background check
• Based on a review of the job duties for each position
• Information gathered should be tailored to what is relevant for the

position in question

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Policy Content

• Avoid blanket policies disqualifying applicants based on

criminal records

• Exceptions: federal or state law, and “targeted exclusions”
• Make individualized assessments, and maintain appropriate

records of the rationale

• Consider Standardized Forms
• Application
• Authorizations
• FCRA Notices

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43

Enforcing Policies Consistently and Uniformly

Consistent and Uniform Enforcement

• Disseminate and train employees regarding the company’s

EEO and background check policies.

• Apply the same standards to similarly-situated applicants.
• Maintain appropriate records of the rationale for hiring

decisions.

• Periodically audit hiring practices to ensure compliance.

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Training Managers, Supervisors, and Employees

• n Company Policy

Training Managers, Supervisors, and Employees on Company Policy

• Highlight differences in state law for multi-state employers
• Reinforce the company’s policies on FCRA compliance and

EEO

• Highlight recent FCRA lawsuits
• Provide contact information for follow-up questions
• Document training and attendance
• Audit compliance

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Using Recruiters in Hiring – Joint Employer Liability

Recruiters and Joint Employer Liability

• Select FCRA knowledgeable recruiters
• Obtain contractual protections
• Be careful to independently ensure FCRA compliance if

reviewing Consumer Report obtained by recruiter

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Using Social Media in Hiring

Social Media – FCRA Issues

• Employer unlikely to be a “consumer reporting agency”
• If the company outsources social media searches, it must

comply with FCRA

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Social Media – Discrimination and Privacy Issues

• Employer can gain knowledge of protected characteristics it
• therwise would not know about
• Religion
• Disability
• Genetic Information
• Others, including under state laws
• Be careful how access to social media accounts is gained
• Employers should not access social media accounts without

authorization

• State laws prohibit employers from requiring applicants to provide access

to social media accounts

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Social Media in Hiring – Best Practices

• If using an outside vendor
• Have the vendor redact protected class information
• If conducting searches in-house
• Should be performed by someone who is not involved in hiring decisions
• Those involved in hiring decisions should not receive protected class

information

• Do not request user names or passwords
• Conduct the same searches of the same websites at the same time in

the application process

• Document search efforts

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Thank You

Mark S. Goldstein mgoldstein@reedsmith.com Albert E. Hartmann ahartmann@reedsmith.com Peter J. Stuhldreher pstuhldreher@reedsmith.com

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