Conducting Background Checks: Compliance Strategies and Client Support

Conducting Background Checks: Compliance Strategies and Client Support PRESENTERS Pamela Devata, Esq., partner, Seyfarth Shaw LLP Marc D. Freedman, Esq., partner, Law Offices of Marc D. Freedman LLC

Agenda Fair Credit Reporting Act Disclosure and authorization challenges and lawsuits Unique issues relating to staffing companies EEOC criminal history ‘Ban the box’ laws Best practices

FCRA Responsibilities Permissible purpose Disclosure and written authorization Two-step adverse action requirements Follow all equal employment opportunity laws and guidance Certification to the credit reporting agency

Disclosures and Authorizations FCRA requires that disclosures be in a standalone document consisting “solely” of the disclosure 15 U.S.C. § 1681b(b)(2)(A)(i) Written authorization must be obtained prior to ordering the report Statute indicates that disclosure and authorization can be together Increased litigation alleging “extraneous” information in the disclosure violates standalone requirement

Disclosure Form Challenges Release of liability language (see Reardon v. Closetmaid and Singleton v. Domino’s and, in 2015, multiple others) State law language in forms Other “extraneous information” Failure to provide Summary of Rights Failure to provide disclosure and authorization (if separated) Credit information when not getting credit Investigative consumer report language Electronic systems with additional components “Authorization” being too broad

Sharing of Reports Very risky under FCRA Some clients may request/require actual report Check disclosure and authorization forms Ensure candidate consents to report’s disclosure to client Must have before conducting the check and disclosing to client Example: The information gathered by the Company and any consumer reports and/or investigative consumer reports may also be communicated to other companies where you may be eligible to be staffed or employed based on your qualifications.

Client Communication Don’t add commentary if sending report (Adams v. National Engineering case) Example: Attached is a consumer report that was prepared by [Insert CRA]. Please note that Staffing Company had no involvement in the preparation of this report and is passing this on to you merely as an administrative service.

Adverse Action Challenges Two-step adverse action required for employers Pre-adverse action Notification to dispute Summary of rights State law requirements (i.e., reason for decision in San Francisco, Seattle, Maryland counties, Chicago; New York Fair Chance Act) Waiting period (reasonable period) Adverse action

Auto-Adverse Action and New Bad Decisions Adverse action challenges when recruiters call before adverse action is delivered Failure to send two letters Automatic rejection letters on applicant tracking systems Manuel v. Wells Fargo decision in VA Whether an “ineligible” grade in a CRA system is an adverse decision is a question of fact for a jury If only communication could be a problem Consider changing labels

‘Ban the Box’ Laws

‘Ban the Box’ Laws Comes from prohibition of having a checkbox on an employment application asking if the applicant has ever been arrested or convicted of a crime

‘Ban the Box’ Laws States with some form of ‘ban the box’ law: California (2013, 2010) Colorado (2012) Connecticut (2010) Delaware (2014) Georgia (2015) Hawaii (1998) Illinois (2014, 2013) Kentucky (2017) Louisiana (2016)

‘Ban the Box’ Laws Maryland (2013) Massachusetts (2010) Minnesota (2013, 2009) Missouri (2016) Nebraska (2014) New Jersey (2014) New Mexico (2010) New York (2015)

‘Ban the Box’ Laws Ohio (2015) Oklahoma (2016) Oregon (2015) Rhode Island (2013) Tennessee (2016) Vermont (2016, 2015) Virginia (2015) Wisconsin (2016)

‘Ban the Box’ Laws Local ordinances – San Francisco; Chicago; Baltimore, Columbia, Montgomery County, and Prince George’s County, MD; Buffalo, New York City, and Rochester, NY; Philadelphia; Portland, OR; Austin, TX; Seattle

‘Ban the Box’ Laws Generally impose restrictions on covered employers from asking about or using applicant or employee criminal history information Who is a covered employer varies from state to state – For example Number of employees Where employees work How long employed Where employer is located or does business Definitions of employer, employee, and employment

‘Ban the Box’ Laws Typical provisions When to ask – After initial application – After conditional offer – After initial interview – During first interview or after – Initial employment application process

‘Ban the Box’ Laws Time limitation Carveout for state or federal law – None to seven years Carveout for state or federal law

‘Ban the Box’ Laws Number of employees – All private employers to 15 employees

‘Ban the Box’ Laws Additional Provisions – Carveout for certain convictions or arrests – Response to applicant requests – Pre adverse and adverse action letter – Waiting period for adverse action – Individualized assessment – Job applications

‘Ban the Box’ Laws Examples of Provisions Included Specific Staffing Firm Definitions Example: New York City – “Temporary Help Firm” is defined as a “business which recruits, hires, and assigns its own employees to perform work at or services for other organizations, to support or supplement the other organization’s workforce, or to provide assistance in special work situations such as, without limitation, employee absences, skill shortages, seasonal workloads, or special assignments or projects.”

‘Ban the Box’ Laws No inquiries until a certain point in time during the application, hiring, or conditional offer process Example: New Jersey – Employers cannot inquire about an applicant's criminal history during the “initial employment application process” either orally or in writing. “Initial Employment Application Process” covers the period of time from an applicant or employer’s first inquiry about a possible position through the completion of any type of first interview (e.g., in person, by telephone, etc.).

‘Ban the Box’ Laws Example: New York City – Employers cannot inquire about an applicant’s criminal history until after a “conditional offer of employment” is made. A “temporary help firm” makes one when there is “an offer to be placed in the temporary help firm’s general candidate pool.”

‘Ban the Box’ Laws Prohibited inquiries (e.g., until after the “initial employment application process,” a “conditional offer of employment” is made, etc.) Examples: Using a third party to conduct a background check Obtaining a consumer report pursuant to the federal Fair Credit Reporting Act and/or an applicable state FCRA law Interview questions Application questions Public record searches Internet searches

‘Ban the Box’ Laws Other laws may impose blanket restrictions on inquiring into certain criminal history information. – Examples: Arrests not leading to convictions Convictions that have been dismissed, expunged, or invalidated Nonfelonies, or misdemeanors Older convictions (i.e., over seven years old)

‘Ban the Box’ Laws Job Advertisement Restrictions Example: New Jersey – Subject to certain exceptions, employers cannot publish job advertisements restricting applicants to those without criminal records.

‘Ban the Box’ Laws Exceptions—Inquiries Not Prohibited Examples: – Inquiring about any criminal history information voluntarily disclosed by an applicant during the initial employment application process Employers should be mindful that, even under such circumstances, applicants could claim that they were first asked to disclose such information.

‘Ban the Box’ Laws Exceptions Making inquires after the conclusion of the “initial employment application process” or after a “conditional offer of employment” is made – Some states may also prohibit the use of voluntarily disclosed information until after this has occurred – Exceptions for positions involving law enforcement, corrections, the judiciary, homeland security, or emergency management

‘Ban the Box’ Laws Exceptions Where employer participates in a program to employ individuals with criminal histories Where required by law Where consistent with other laws

‘Ban the Box’ Laws Other laws implicated – Federal Fair Credit Reporting Act U.S. Equal Employment Opportunity Commission – Enforces Title VII of the Civil Rights Act of 1964 – Published enforcement guidance: Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964

‘Ban the Box’ Laws State laws – Fair Credit Reporting Acts – Antidiscrimination laws – Local “ban the box” laws

‘Ban the Box’ Laws Inquiries after the “initial employment application process,” a “conditional offer of employment” is made, etc. Fair chance process – Individualized assessment or analysis Provide to individual – Criminal inquiries (e.g., consumer reports, Internet searches, public record searches, conversation summaries) – Pre-adverse action notice and/or adverse action notice

‘Ban the Box’ Laws Depends on the state or city – Examples: New York City Requires fair chance process “Temporary help firms” must follow before withdrawing a “conditional offer of employment” based on criminal history To evaluate an applicant’s job duties, a firm “may only consider the basic skills necessary to be placed in its applicant pool” New Jersey does not require a fair chance process

‘Ban the Box’ Laws Violations Possible private right of action – Compensatory damages (back pay, front pay, and emotional distress) – Punitive damages – Attorneys’ fees Administrative enforcement proceeding Civil monetary penalties New York City – “Temporary help firms” can be liable for aiding and abetting a client’s discriminatory hiring preferences by, for example, only referring individuals with no/less serious criminal histories based on a client’s instructions.

‘Ban the Box’ Laws Recommendations – Review existing job application-related documents – Review job advertisements – Review the hiring process – Ensure familiarity with employees involved in the hiring process – Review client agreements for services provided and indemnification provisions

EEOC Enforcement Guidance April 25, 2012 Number 915.002

EEOC Enforcement Guidance Purpose of the enforcement guidance is to consolidate EEOC’s guidance documentation regarding the use of arrest or conviction records in employment decisions under Title VII of the Civil Rights Act of 1964

EEOC Enforcement Guidance Focus is on race and national origin

EEOC Enforcement Guidance Different treatment of arrest and conviction records

EEOC Enforcement Guidance Arrest – Does not establish that criminal conduct has occurred – Exclusion based on arrest alone is not Job related Business necessity

EEOC Enforcement Guidance Employer may make an employment decision based on the conduct underlying the arrest – If the conduct underlying the arrest makes the individual unfit for the position in question

EEOC Enforcement Guidance Conviction record – Sufficient evidence that individual engaged in particular conduct – Under certain circumstances the employer may not rely on conviction record alone when making employment decision

EEOC Enforcement Guidance Disparate treatment – Employer treats criminal history information differently for different applicants or employees, based on race or national origin

EEOC Enforcement Guidance Disparate impact – A neutral policy may disproportionately impact some individuals protected under Title VII Fair in form but discriminatory in practice May violate the law if not job related and consistent with business necessity – Griggs v. Duke Power Co., 401 U.S. 424 (1971)

EEOC Enforcement Guidance Job-related and consistent with business necessity defense – Comply with Uniform Guidelines on Employee Selection Procedures – Targeted screen considering at least - Nature of the crime - Time elapsed - Nature of the job - Link criminal record to the essential functions of the job – Green v. Missouri Pacific Railroad, 549 F.2d 1158 (Eighth Cir. 1977)

EEOC Enforcement Guidance - Green court found an absolute bar on employment based on any criminal activity unlawful under Title VII, and less than absolute bar cannot be used as a disqualifying factor until empirically validated

EEOC Enforcement Guidance Employer must show a demonstrable relationship to successful performance for the jobs for which it is used – Factual nature of inquiry – Risk analysis

EEOC Enforcement Guidance Employer policy requirements – Individualized assessment for people identified by screen – Not always required Targeted screens Company policy and procedure

EEOC Enforcement Guidance Individualized assessment – Give individual a chance to demonstrate exclusion does not apply 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

EEOC Enforcement Guidance - 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 and 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

EEOC Enforcement Guidance Targeted screens may satisfy business necessity Types of convictions established by employers – Internal policy – Narrowly tailored – Tight nexus to positon Use Green factors

EEOC Enforcement Guidance Rationale – Incomplete criminal records Lack of final disposition – Inaccurate records Not all sealed or expunged records are purged Clerical errors

EEOC Enforcement Guidance FCRA – Under FCRA, a CRA may not report arrests that did not lead to judgment or conviction more than seven years ago – Criminal convictions can be reported for an indefinite period

EEOC Enforcement Guidance Exclusions – Security screener – Access to secure area in airport – Law enforcement officers – Child care workers – Bank employees – Port workers – Child care workers in federal agencies

EEOC Enforcement Guidance EEOC v. BMW The U.S. Equal Employment Opportunity Commission sued BMW, claiming that BMW’s criminal background screening policy was discriminatory because it had a disparate impact on African-Americans, and was not job related and consistent with business necessity BMW’s policy barred employment for people with a history of certain convictions regardless of type (felony or misdemeanor) or the date they occurred

EEOC Enforcement Guidance Approximately 80% of individuals denied employment were African-American Individuals denied employment were employed by a third-party contractor that provided logistics services at BMW’s work site Contractor was responsible for screening applicants and did so pursuant to BMW’s policy

EEOC Enforcement Guidance The EEOC and BMW entered into a consent decree (i.e., a settlement)—BMW agreed to – Pay $1.6 million – Offer jobs – Follow record retention and reporting requirements – Offer training BMW and contractor developed new written hiring procedures involving criminal history

EEOC Enforcement Guidance Things to Consider Unclear why contractor was not also sued for its involvement Staffing firm potential joint-employer liability – Review client contracts – Screening requirements - Comply with existing law? - Imposed additional requirements? – Indemnification

EEOC Enforcement Guidance Application of EEO Laws to Contingent Workers Placed by Temporary Employment Agencies and Other Staffing Firms Effective Dec. 3, 1997 Number 915.002

EEOC Enforcement Guidance Purpose – Provides guidance regarding implication of antidiscrimination practices to temporary, contract, and other contingent workers

EEOC Enforcement Guidance Staffing firm must hire and make job assignments in nondiscriminatory manner

EEOC Enforcement Guidance Client must treat employee in a nondiscriminatory manner

EEOC Enforcement Guidance Staffing firm must take immediate and appropriate corrective action

EEOC Enforcement Guidance Co-employers

DISCLAIMER This presentation is intended as a summary of the issues presented and is not intended to provide legal advice. It is provided for the general information of the attendees. Legal counsel and advice should be sought for any specific questions and before taking any action in reliance on the information presented.

Best Practices Review employment applications annually – Ban the box, etc. Review FCRA disclosure forms annually Consider a two-pass system – No criminal history on first pass; no FCRA forms Review timing of criminal history and individualized assessment Consider centralized background screening role Review background screening policies and procedures, and hiring matrices Review terminology for pre-adverse action initiation and language in notices Timing: On application, during interview, after interview, after background check completed education/employment information request additional information in pre-adverse action telephone call/discussion applicant submit written submission