Recruiting Issues—Salary History, Criminal Background, and Medical Marijuana, Oh My!

Recruiting Issues—Salary History, Criminal Background, and Medical Marijuana, Oh My! PRESENTERS Pamela Q. Devata, Esq., partner, labor and employment practice group, Seyfarth Shaw LLP Joel A. Klarreich, Esq., partner, Tannenbaum Helpern Syracuse & Hirschtritt LLP

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.

Salary History Inquiry Bans Generally, bans on salary history inquiry prohibit employers or their agents from asking about an applicant’s prior wages or benefits during the hiring or pre-employment process or considering such information when making hiring, compensation, or other employment decisions. Apply to staffing firms, as prospective employers of their temporary employees, as prospective employers of their internal staff, and as recruiters of applicants for permanent placement and direct hire business

Salary History Inquiry Bans Jurisdictions with salary history inquiry bans for private employers (as of March 1, 2018) Albany, NY (effective Dec. 17, 2017) California (effective Jan. 1, 2018) Delaware (effective Dec. 14, 2017) Massachusetts (effective July 1, 2018) New York, NY (effective Oct. 31, 2017) Oregon (effective Oct. 6, 2017)* Philadelphia, PA (effective May 23, 2017, but enforcement stayed pending legal challenge) Puerto Rico (effective March 8, 2017)* San Francisco, CA (effective July 1, 2018)* *Note: Some of the laws have delayed penalty provisions that take effect after the effective dates listed above. For example, in San Francisco, the ban on seeking salary history takes effect July 1, 2018, but the penalty provisions are not effective until July 1, 2019.

Protected Information Salary History Inquiry Prohibition Jurisdiction Protected Information Salary History Inquiry Prohibition What You Can Do Delaware Compensation—including monetary wages, benefits, and other forms of compensation Cannot seek the compensation history from applicant or applicant’s current or former employer. Cannot screen an applicant based on compensation history. Restriction does not appear to apply to current employees. Discuss and negotiate compensation expectations. Seek compensation history after employment offer with compensation has been made and accepted, solely for purpose of confirming applicant’s compensation history. Massachusetts Wages—all forms of remuneration for employment Cannot ask prospective employee or a current or former employer about wage or salary history and cannot require that a prospective employee’s prior wage or salary history meet certain criteria. Cannot contract with an employee to avoid complying with the law. Restriction does not appear to apply to current employees. May confirm wage or salary history if “voluntarily disclosed” or after an offer of employment, including compensation, has been made to the applicant. May discuss salary expectations. May seek an applicant’s salary history through public sources. New York City Salary—broadly defined as an applicant’s current or prior wages, benefits, and other forms of compensation. Broad interpretation of benefits and other forms of compensation—including bonuses, retirement plan, etc. Cannot ask the applicant or applicant’s current or former employer about compensation history or search publicly available records. Restriction does not apply to current employees. Employer can rely on the compensation history if applicant “willingly” and without being prompted discloses past salary. Can discuss salary expectations. Can ask about objective measures of productivity or performance (e.g., sales, revenue, production reports, book of business, etc.) and unvested equity or deferred compensation the applicant would forfeit if he or she left the current employer. Albany, NY Wages—benefits, other compensation, and salary history Cannot inquire directly (or ask current or former employer) about applicant’s wage or salary history and cannot screen applicants based on wage history. Restriction does not appear to apply to current employees. Employer can seek salary history from current or former employer after making job offer with compensation and obtaining applicant’s written consent. Philadelphia, PA Wage history—all earnings however determined (whether based on time, task, commission); includes fringe benefits, wage supplements, or other compensation Cannot inquire, in writing or otherwise, or condition employment or consideration for an interview on disclosure of wage history. Restriction does not appear to apply to current employees. Can rely on information if applicant “knowingly and willingly” discloses his or her wage history. Can discuss applicant’s salary expectations and experience.

Protected Information Salary History Inquiry Prohibition Jurisdiction Protected Information Salary History Inquiry Prohibition What You Can Do Oregon Salary history and compensation, including wages, salary, bonuses, benefits, fringe benefits, and equity-based compensation Cannot inquire directly about his or her salary history but can confirm with written post-offer and post-salary negotiation. Cannot ask current or former employer of the applicant or employee. Cannot confirm salary history before an offer of employment, even if the applicant voluntarily discloses the information. Restriction does not appear to apply to current employees. Employer can confirm prior compensation after the employer makes an offer of employment that includes compensation, if prior written authorization is obtained. Can discuss salary expectations. California Salary history information—generally includes compensation and benefits Cannot personally or through an agent seek salary history. Cannot rely on salary history as “a factor” in hiring or salary decisions. Restriction does not appear to apply to current employees. Can review information subject to disclosure to the public pursuant to law (e.g., FOIA). Can rely if applicant “voluntarily and without prompting” discloses his or her salary history. Silent as to discussing salary expectations. San Francisco, CA Salary history—salary includes financial compensation in exchange for labor, including wages, commissions, and any monetary emoluments; does not include objective measures of productivity, such as revenue, sales, or other production reports Cannot consider or rely on salary history as a factor in hiring or salary decisions. Cannot inquire about an applicant’s salary history, directly or indirectly, whether orally or in writing. Restriction does not appear to apply to current employees. Can consider or verify salary history if applicant “voluntarily and without prompting” discloses his or her salary history, or applicant provides written authorization to their current or former employer to disclose salary history. Puerto Rico Wages—all forms of remuneration for employment Cannot ask prospective employee or a current or former employer about wage or salary history until after negotiation and cannot require that a prospective employee’s prior wage or salary history meet certain criteria. Restriction does not appear to apply to current employees. Can confirm wage or salary history if “voluntarily disclosed” or after an offer of employment, including compensation, has been presented.

Salary History Inquiry Bans—What You Can Do Generally, employers and recruiters can Consider compensation history if an applicant discloses such information voluntarily and without being prompted If an applicant or candidate voluntarily discloses his or her compensation (without prompting), document in your files that the candidate, on his or her own, raised the issue of current or past compensation—and without being prompted to do so Inform applicants about proposed or anticipated salary or salary range for a position Ask applicant his or her compensation expectations (without trying to elicit salary history) Ask an applicant about his or her skill level and experience Ask an applicant what competitive offers or counteroffers he or she received from other prospective employers (allowed pursuant to NYC guidance)

Salary History Inquiry Bans—What You Can Do Ask applicants about objective measures of productivity, such as revenue, sales, and other production reports; volume, value, or frequency of sales; profits generated; books of business (Be sure not to request that the applicant provide any report or other documents containing confidential or proprietary information of another employer or other third parties) Conduct a background check (as permitted by applicable federal, state, and local background checking laws) or otherwise verify nonsalary-related information disclosed by applicant, but if salary history information is revealed, it cannot be used in determining compensation Consider compensation history if an employee is applying for an internal transfer, promotion, or new position with a current employer (per NYC guidance) Search compensation levels for comparable jobs E.g., searching salary for a third-year associate attorney

Salary History Inquiry Bans—What You Can’t Do Generally, employers and recruiters cannot Ask an applicant about past or current salary Ask an applicant about other forms of his or her current or past compensation—bonuses, commissions (including commission rate), or benefits Ask an applicant’s current or former employer for such compensation information Ask an applicant for past W-2s (except for the purpose of verifying representations made about salary history if the applicant, voluntarily and without prompting, offers information about salary history) Contract with an applicant, candidate, or employee to avoid compliance Waivers are not valid Utilize public sources to offer salary history on an applicant (In Massachusetts, public sources may be utilized)

Salary History Inquiry Bans—What You Can’t Do Intentionally attempt to elicit or prompt an applicant to disclose compensation history by asking certain questions or making certain statements For example: “I can help get you a better offer if you give me an idea of what you make.” For example: “I’m not allowed to ask, but if you want to tell me what you make…” Intentionally aid and abet a violation of the law (e.g., unlawfully disclosing an applicant’s salary history to a client when the applicant did not voluntarily disclose it) Note: recruiter should obtain candidate’s consent to share compensation information with a client (if candidate discloses voluntarily and unprompted) Retaliate against someone who opposes or complains about an act of the employer that would violate the law

Salary History Inquiry Bans—When Does It Apply? Where the job is located? Where the interview takes place? Where the employee resides? Where the staffing firm is located? New York Guidance According to New York City Commission on Human Rights (NYCCHR), salary history ban applies where its effect is “felt” in NYC. “If an unlawful discriminatory practice, including an inquiry about salary history, occurs during an in-person conversation in New York City, there will likely be jurisdiction because the impact of the unlawful discriminatory practice is felt in New York City.” “…residency in New York City alone, without more, is generally not enough…” Massachusetts Guidance If it is possible an applicant will work in Massachusetts, or have a primary place of work in Massachusetts, the salary history ban applies.

Salary History Inquiry Bans The New York City Commission on Human Rights (NYCCHR) has published guidance with respect to the NYC Salary History law. According to the NYCCHR “If an unlawful discriminatory practice, including an inquiry about salary history, occurs during an in-person conversation in New York City, there will likely be jurisdiction because the impact of the unlawful discriminatory practice is felt in New York City” “…residency in New York City alone, without more, is generally not enough…”

Salary History Inquiry Bans Accordingly, pursuant to the NYCCHR guidance*, employers and executive search firms should assume that the NYC law applies to: Jobs or placements within NYC Interviews or other “in-person conversations” in NYC, even if the job will not be within NYC However, an applicant’s or candidate’s NYC residence will not, by itself, automatically trigger coverage under the NYC law. Other jurisdictions may, however, assert its laws do protect residents regardless of the location of the position or where the interview takes place. *Most other jurisdictions do not yet have guidance on these issues.

Salary History Inquiry Bans What if you’re a national employer operating in multiple states and jurisdictions, some of which have salary history inquiry ban laws and some of which don’t? Assess where your offices, clients, applicants or candidates, and the job are located. Assess interplay between your offices. Consider implementing compliant policies and practices universally throughout all jurisdictions (regardless of whether certain jurisdictions in which you operate have these laws or restrictions). If you implement a universal policy or practice, it must comply with the most restrictive applicable law.

Salary History Inquiry Bans—Moving Forward Consider proactively engaging with clients to prepare the clients for, and sensitize them to, the changes in these laws and how those changes might affect past hiring and recruitment practices. Make sure job advertisements, job applications, candidate registration forms, and other hiring materials do not ask for or make statements regarding an applicant’s past compensation. Cannot ask for compensation information on a candidate profile or application and make it optional for the candidate to answer

Criminal History—‘Ban the Box’ More than 150 cities and counties and many states have passed a form of “ban-the-box” legislation, including California; Colorado; Connecticut; Delaware; Georgia; Hawaii; Illinois; Indiana; Kentucky; Louisiana; Maryland; Massachusetts; Minnesota; Missouri; Nebraska; Nevada; New Jersey; New Mexico; New York; Ohio; Oklahoma; Oregon; Pennsylvania; Rhode Island; Tennessee; Utah; Vermont; Virginia; Washington, DC; and Wisconsin.

Criminal History—‘Ban the Box’ Generally such ban-the-box laws prohibit employers from asking prospective employees about their criminal history (arrest or conviction record), whether on a job application or in an interview (subject to limited exceptions), until after a certain event, such as The first interview The employer’s conditional offer of employment or placement in a candidate pool (most common)* The acceptance of a job offer, etc.

Criminal History—‘Ban the Box’ What not to do Don’t mention criminal background checks on job advertisements or state employment is conditioned on satisfactory completion of background check No questions or statements about criminal history or background checks on job application No questions or comments about criminal history at job interview Laws may also ban search of public records for criminal history

Criminal History—‘Ban the Box’ What not to do Best practice  Do not even mention background checks or attempt to obtain consent to perform a background check, or ask about criminal history, until after the event specified in the law (e.g., after the first interview, after extending a conditional offer of employment, etc.). For temporary staffing, a conditional offer of employment is typically the equivalent of an offer for placement in the staffing firm’s candidate pool. Best practice for direct hire and permanent placement  Avoid performing background checks on candidates.

Criminal History—‘Ban the Box’ After the qualifying event (e.g., first interview, conditional offer, etc.), employers may Ask, orally or in writing, about criminal history Perform a criminal background check Ask applicant about the circumstances giving rise to the conviction Note: If performing a background check through a consumer reporting agency (CRA), must comply with Fair Credit Reporting Act and applicable state and local background check laws. If performing a background check through a consumer reporting agency, must disclose this to the applicant and obtain applicant’s consent—comply with Fair Credit Reporting Act (FCRA)

Criminal History—‘Ban the Box’ Typically, can never ask about or act on arrests or nonconviction information such as sealed or expunged criminal charges or a juvenile delinquency finding

Criminal History—‘Ban the Box’ Background check discloses criminal history. Now what? Typically there is some process* an employer must go through before denying employment to the prospective employee, which may include, for example: Notifying employee of the background check results and providing copies of inquiries into criminal history Allowing employee to respond Performing an individualized assessment or analysis of whether the conduct of the underlying conviction has a relationship to the job, etc. Notifying applicant of ultimate decision * For example, see FCRA, EEOC Guidance on Consideration of Arrests and Conviction Records in Employment, New York State Human Rights Law, New York City Human Rights Law (the Fair Chance Act), and the New York Correction Law

FCRA Compliance and Litigation       - FCRA Compliance and Litigation New administration New leadership at U.S. Consumer Financial Protection Bureau Different enforcement agenda (common names, middle names, risk indicators on social traces, date measuring) CFPB called into question Increased lawsuits in state court to avoid removal or standing challenges (Spokeo) Forum shopping Plaintiffs’ bar advertising on social media and consolidating resources BMS: May require personal jurisdiction as to each class member

FCRA Responsibilities Permissible purpose Disclosure and written authorization Two-step adverse action requirements Follow all EEO laws and guidance Certification to the CRA

FCRA Penalties Negligent noncompliance Actual damages (back pay sometimes compensatory) Attorneys’ fees Willful noncompliance Actual or statutory $100–1,000 per person Punitive damages Statute of limitations is earlier of two years from “knew or should have known” or five years from report

Claims Against Employers Increased litigation on “solely” for the disclosure claims Release of liability Investigative consumer reports Adverse action theories (and interplay with ban the box) NY, DC, LA—bifurcated checks may be coming Effect of Spokeo and BMS Split in circuits, forum shopping, multiple state court cases Class certification impact

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 State law language in forms Other “extraneous information” Failure to provide Summary of Rights Credit information when not getting credit Investigative consumer report language Electronic systems or applications with additional components Name of CRA Authorization for third parties as a “release”

Sharing of Reports Very risky under FCRA Some clients may request or 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 Staffing 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; NYC Fair Chance) Waiting period (reasonable period) Adverse Action

Auto-Adverse Action Issues Adverse action challenges when recruiters call before adverse action is delivered Failure to send two letters Auto-rejection letters on applicant tracking systems Not placing someone in one position and not notifying them

Additional Adverse Action Requirements: Los Angeles Written assessment that links the specific aspects of the applicant’s criminal history with risks inherent in the duties of the position sought “Fair Chance Process” Opportunity to provide information regarding the accuracy of criminal history, evidence of rehabilitation, other mitigating factors Wait five business days after pre-adverse action If applicant provides information, written assessment If adverse action follows, must provide applicant with a copy of the written assessment Must retain all records and documents related to applications, written assessments, and reassessments for three years

Additional Adverse Action Requirements: New York and New York City New York Article 23-A notice requirements New York City Fair Chance Act Detailed notice form with analysis Provide a copy of “inquiries” or “statements” FCRA summary of rights Keep job open for three business days

Social Media Concerns Finding EEO or other data you don’t want—can’t “unring” the bell If using a third party, must follow the FCRA Protected “legal” off-duty conduct (i.e., smoking)

Medical Marijuana Federal Law: Controlled Substances Act The possession and use of marijuana is illegal under the federal Controlled Substances Act Marijuana is a Schedule I drug with no currently accepted medical use in treatment State Law: 29 states and Washington, DC, have enacted laws that have legalized, to varying degrees, the use of marijuana for medicinal purposes Recreational marijuana is legal in nine states and Washington, DC See norml.org/laws More state laws considered all the time

QUESTIONS?

Pamela Q. Devata Pamela Devata is a labor and employment partner at Seyfarth Shaw LLP in Chicago, IL. She leads Seyfarth’s nationwide background screening, litigation, and compliance team, and is a national authority for all issues related to the Fair Credit Reporting Act, background screening compliance, use of criminal and credit history, and requirements of electronic signature issues as well as requirements for online and manual employment application and applicant tracking system reviews. A nationally recognized employment counselor, Devata has participated in numerous interviews, speeches, webinars, and trainings to employers on the subject of increased scrutiny regarding criminal history and credit checks. She has leveraged her niche area of expertise into a thriving class action practice. Her employment litigation practice also includes state and federal court cases involving allegations of sex, race, and national origin discrimination and harassment. Devata counsels both employers and providers (resellers and consumer reporting agencies) of background information on compliance requirements under FCRA and related state laws, develops procedures for appropriately handling high-volume national hiring needs, and regularly litigates these issues on a single-plaintiff and class-wide basis, as in EEOC v. Kaplan Higher Education Corp., throughout the country. Pamela Q. Devata Seyfarth Shaw LLP pdevata@seyfarth.com 312-460-5882

Joel A. Klarreich, Esq. Klarreich is a partner in the law firm Tannenbaum Helpern Syracuse & Hirschtritt LLP and chairs the firm’s staffing industry and corporate departments. He specializes in business and corporate law with a distinctive focus on the staffing industry. For more than 40 years, he has been representing staffing firms—including temporary help service firms, employee leasing companies, search firms, permanent placement agencies, and home health care providers, as well as franchisors of staffing organizations. Klarreich has represented numerous buyers and sellers of staffing firms in mergers and acquisitions and in public and private stock offerings. He has served as executive vice president and general counsel of an AMEX listed staffing company; is currently general counsel to the New York Staffing Association; was general counsel to the Association of Personnel Consultants of New York; and was associate general counsel of the National Association of Personnel Services. Klarreich has been selected for inclusion in New York Super Lawyers for 2006 through 2017 as well as in Best Lawyers in America List for 2016 through 2018. Joel A. Klarreich, Esq. Partner, Tannenbaum Helpern General Counsel, NYSA jak@thsh.com 212-508-6747