Legal Implications of Background Checks Angela Preston | SVP & Counsel, Corporate Ethics and Compliance | SterlingBackcheck CONFIDENTIAL AND PROPRIETARY This material constitutes confidential and proprietary information of SterlingBackcheck and its reproduction, publication or disclosure to others without the express authorization of Clare Hart or the General Counsel of Sterling Infosystems is strictly prohibited.

2 SterlingBackcheck is not a law firm, and does not dispense legal advice. The information provided herein is general business information, is not based on any particular facts or situations, and is not to be relied upon as legal advice, even if you are currently a client of SterlingBackcheck. You are encouraged to seek advice from your own legal counsel concerning matters covered in this presentation. Disclaimer

3 What’s in an Employment Background Check? ›Social Security Number Trace ›County Criminal Records Search ›Sex Offender Registry ›Motor Vehicle Report ›Employment Verification ›Education Verification ›Professional License Verification ›Credit Report

4 “FCRA class action cases are the new wage and hour.” ›Fair Credit Reporting Act US 1681 et seq. ›Applies to background checks when conducted by a third party consumer reporting agency (CRA) › spike in litigation against employers for technical violations of the statute ›Statutory damages: fertile ground for class actions. $100-$1000 per violation, actual damages, punitive damages and attorneys fees FCRA Litigation

5 FCRA Lawsuit Stats 2015: Over 1,500 FCRA Complaints Month of June 2015: 298 FCRA Complaints, 33 Class Action (11.1%) ↑ Up 67% over same period last year FCRA was up 22.7% in 2015 over 2014, which itself was a record year Dozens of cases pending and new cases filed weekly Consumers are aggressively recruited *Source:

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7 Legal Compliance Issue

8 ›Authorization and Disclosure ›Adverse Action Process ›Ban the Box ›Discrimination Claims based on use of Criminal Records Issues Raised in Litigation or Enforcement Actions

9 Million Dollar Settlements

10 Consent: Disclosure and Authorization

11 ›Before an employer may obtain a consumer report from a CRA, it must make a “clear and conspicuous” written disclosure to the consumer in a document that consists “solely” of the disclosure that a consumer report may be obtained. 604 (15 U.S.C. § 1681b(b)) ›Statute is silent on exact contents of disclosure, but it must stand alone ›604(b)(2)(A)(ii) states that the “authorization may be made” on the disclosure-possible exception to “stand alone” ›Courts are split, but most recent favor plaintiffs. Disclosure and Authorization Requirements

12 ›Disclosure is not provided prior to request for a background check ›Disclosure does not stand alone ›May contain state notices ›May be part of a job application ›May be part of a rolling, continuous online screen, without separation ›Disclosure contains a release of liability Disclosure and Authorization Common Errors

13 ›Review your consent forms. Consider having two separate forms-- both a “disclosure” form and an “authorization” form, signed by the applicant. Beware online systems. ›Confirm that the authorization and disclosure forms are signed prior to ordering the background check › Don’t include extraneous information, like a disclaimer, release of liability, or acknowledgments with the disclosure form ›Provide state requirements on a separate document, so as not to be confused with the FCRA disclosure. › Consult with legal counsel on what language can be included with the disclosure form. FCRA Disclosure and Authorization Best Practices

14 ›1681b(b)(3): Adverse Action ›An adverse action is a denial of employment or any other decision for employment purposes that adversely affects any current or prospective employee, ›Based in whole or in part, on the basis of information in a consumer report. ›If you have a report that has adverse information, some courts have upheld a presumption that the decision was made, at least in part, on the report. What Is Adverse Action?

15 Two Step Process STEP 1

16 Two Step Process

17 ›Pre-adverse notice is not provided in writing or is provided late ›Employer tells the applicant that they will not get the job before pre-adverse notice is sent ›Pre-adverse notice is incomplete and missing copy of the consumer report or current Summary of Rights or state notices ›Final adverse notice is not provided Common Adverse Action Mistakes

18 ›Develop a written policy for the adverse action process ›How to customize your notices ›Restrict communication with candidates while process is pending ›Is there an obligation to keep job open? ›What to include with the pre-adverse notice (full report, Summary of Rights, State notices NJ, WA, MA, NY) ›Ban the Box ordinance requirements (NYC, DC, SF, etc-reason for adverse action) Pre-adverse Action Policy Considerations

19 ›Timing of the second notice (reasonable amount of time) ›How is notice sent ( or snail mail) ›Ban the box considerations for timing of the second notice (some BTB laws state a time frame) ›Notice of individualized assessment (and how it differs in scope and purpose from pre-adverse notice) ›Avoiding any automated decisions (i.e. providing an auto pre- adverse notice after grading of a report) Adverse Action Policy Considerations

20 Ban The Box

21 What is Ban the Box? Basic Ban the Box: In its simplest form, ban the box makes it illegal to include a checkbox on a job application asking about criminal history.

22 ›Type of Employer/Employee Relationship ›Timing of criminal inquiry (post interview, after conditional offer) ›Job-related tests ›Private cause of action/penaties ›Limit on arrest or other record types ›Notice requirements Ban the Box on Steroids

23 The following cities or counties have enacted local ban the box ordinances that apply to private employers: ›Baltimore, MD ›Buffalo, NY ›Columbia, MO ›Montgomery County, MD ›Newark, NJ ›Philadelphia, PA ›Prince George County, MD ›Rochester, NY ›Seattle, SF ›Washington, D.C. ›New York, NY Ban the Box Jurisdictions to Watch

24 EEOC Enforcement Guidance on the Use of Criminal Records (April 2012) Concern is Race Discrimination under Title VII of the Civil Rights Act of 1964 Disparate impact on protected classes (due to high arrest rates) EEOC relies on statistics EEOC guidance calls for a targeted screen that is job related and consistent with business necessity EEOC Discrimination Claims

25 Green Factors Nature and Gravity of the offense Time passed since the offense Nature of the job sought or held New Defacto Requirement: Individualized Assessment Compliance With EEOC Guidance for Criminal Background Checks

26 ›The facts or circumstances surrounding the offense or conduct ›The number of offenses for which the individual was convicted ›Older age at the time of conviction, or release from prison ›Evidence that the individual performed the same type of work, post conviction, with the same or a different employer, with no known incidents of criminal conduct ›The length and consistency of employment history before and after the offense or conduct ›Rehabilitation efforts, e.g., education/training ›Employment or character references and any other information regarding fitness for the particular position ›Whether the individual is bonded under a federal, state, or local bonding program Factors for Individualized Assessments

27 Questions

28 Angela Preston, Esq. SVP and Counsel, Corporate Ethics and Compliance SterlingBackcheck SterlingBackcheck is not a law firm, and does not dispense legal advice. The information provided herein is general business information, is not based on any particular facts or situations, and is not to be relied upon as legal advice, even if you are currently a client of SterlingBackcheck. You are encouraged to seek advice from your own legal counsel concerning matters covered in this presentation. THANK YOU!