Recent Developments in the Hiring Process – Adverse Action to Social Media How to Avoid the Pitfalls of Using Credit Reports, Criminal Background Checks, and Social Media in Hiring. Presented by: Paul KennedyAshley Sims (202) (202) NATIONAL COUNCIL OF HIGHER EDUCATION RESOURCES 2013 Winter Meeting

AGENDA  Criminal Background Checks  Credit Reports  Social Media

Why Check? 1.Legal Requirement: health care, financial services, child and elder care, education, security services 2.Best Practices: “Background verification checks on all candidates for employment, contractors, and third party users” with access to sensitive information (Int’l Organ. For Standardization, Info. Security Std , §8.12) 3.Customer Demands: Routinely required in vendor contracts and business associate agreements 4.Negligent Hiring Liability: –“Family of bus victim gets $9.5M award” – Driver had 31 criminal convictions and a suspended license (Daily News Jan. 2012) –“$1 million awarded in camp lawsuit” concerning the “choking game” – Counselor’s MySpace page: “Be quiet. This is going to hurt.” (Charleston Post & Courier Jan. 2012)

Criminal Background Checks

Employers’ Use Of Criminal History Checks  More than 90% of employers conduct criminal history checks  Job categories: fiduciary responsibilities (78%); access to highly confidential employee information (68%); senior executive (58%)  Crimes most likely to disqualify: violent felony (95%); non-violent felony (74%); violent misdemeanor (58%)  Reasons for checking: safe work environment for employees (61%), reduce legal liability for negligent hiring (55%); reduce/prevent criminal activity (39 %) (SHRM Study Jan. 2010)

Updated Enforcement Guidance -- Approved 4-1 on April 25, 2012:  “EEOC Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964”  Accompanying “Questions and Answers About EEOC’s Enforcement Guidance” See andhttp:// Updated EEOC Enforcement Guidance 6

Reasons for EEOC Revising Guidance:  Criticism of prior EEOC guidance from 1987 by Federal Appeals Court in El v. Southeastern Penn Transport Auth (3rd Cir. 2007)  Concerns about accuracy of criminal background checks (e.g. “incomplete” and “inaccurate”)  Public policy concern of integrating ex-offenders into workforce  Not a sea change – “the Commission will continue its longstanding policy approach” Reasons for Updated 2012 Guidance 7

Disparate Impact Discrimination  Starting Point: EEOC suspicious of all background check policies  EEOC Analysis: National data demonstrates that African Americans and Hispanics are arrested and convicted at disproportionate rates  EEOC Conclusion: Excluding candidates based on criminal records likely has disparate impact on African Americans and Hispanics (a facially-neutral policy that has a disproportionate impact on a protected group)

Arrest Records  Updated guidance does not change prior approach  Excluding candidates based on arrests not job related or consistent with business necessity  However, employer can conduct an investigation of the conduct underlying the arrest and decide that the conduct makes the candidate unfit for the job

Conviction Records  Unlike arrests, the EEOC acknowledges that a conviction is sufficient evidence that the person engaged in the conduct alleged but concern re: record errors and outdated records (as well as disparate impact issues)  Therefore, an employer needs to show that a conviction record screening policy “effectively link[s] specific criminal conduct and its dangers with the risks inherent in the duties of a particular position.”

Job Related/Business Necessity Defense  Two ways to accomplish: –Validation Study: But, EEOC acknowledges “such studies are rare at the time of this drafting”. –“Targeted Screen”/Individualized Assessment: Two Prongs: “Starting point” – “Green” Factors (nature of offense, time elapsed and nature of job). Green v. Missouri Pacific RR (8 th Cir. 1975) Plus, provide candidate opportunity to appeal decision not to hire and to demonstrate why the exclusion based on criminal record should not apply to him/her. “Although Title VII does not require individualized assessment in all circumstances, the use of a screen that does not include individualized assessment is more likely to violate Title VII.”

A Bump In the Road for the EEOC...  EEOC v. Kaplan Higher Education Corp. –On January 28, 2013, a Northern District of Ohio federal judge dismissed the Commission’s Title VII disparate impact class action challenging Kaplan’s criminal and credit background check process because the Commission did not meet its threshold burden to show that class members were adversely affected by Kaplan’s background check policies. –This loss is an embarrassment for the Commission because the court excluded the Commission’s expert on the grounds that his use of “race raters” to determine an applicant’s race from a driver’s license photo was “unreliable.” –Additionally, Kaplan successfully argued that the EEOC, in prosecuting the case against Kaplan, ignored its own guidelines and internal policies frowning on race identification based on appearance.

What Does Kaplan Mean for Employers?  Employers still must be wary: –The Ohio district court’s decision is not technically binding precedent. –The Commission will hone its evidence in future cases. The court in Kaplan noted that the data would have been more reliable had the EEOC simply contacted the class members to ascertain their race.  Federal Contractors Can’t Rely On Kaplan –Federal contractors are required to gather and retain applicant and employee race data.

Individualized Assessment Factors 1.Type of offense: The facts or circumstances surrounding the offense or conduct; 2.Number of offenses: The number of offenses for which the individual was convicted; 3.Age of offender: Older age at the time of conviction, or release from prison; 4.Good work: 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;

Individualized Assessment Factors 5.Employment History: The length and consistency of employment history before and after the offense or conduct; 6.Rehabilitation: Rehabilitation efforts, e.g., education/training; 7.References: Employment or character references and any other information regarding fitness for the particular position; and 8.Bonding: Whether the individual is bonded under a federal, state, or local bonding program

Compliance with Federal and/or State Laws  Federal Laws and/or Regulations -Defense to charge of discrimination: -Positions subject to federal prohibitions and/or restrictions -Federal licenses  State Laws and/or Regulations –“Preempted” by Title VII

Practical Suggestions/“Best Practices”  Do not rely on arrest records  Eliminate blanket exclusions “based on any criminal record”  Develop narrowly tailored written policy/procedures excluding individuals from particular jobs based on a criminal history record – not so easy 1.Identify essential job requirements 2.Identify specific offenses tied to “unfitness” for job 3.Identify time limits applicable to exclusion 4.Document research/consultations to support policy/procedures  Conduct an individualized assessment before final hiring decision, including an appeal process

 When asking questions about criminal records, limit inquiries to records job related/consistent with business necessity  Make inquiries of criminal record – post application (e.g. “ban the box” approach)  Train managers, hiring officials, and decision- makers on how to implement the policy and procedures consistent with Title VII.  Maintain confidentiality of criminal records  The EEOC Guidance is NOT law. Additional EEOC Recommended “Best Practices” 18

State and Local Law  Various state laws impose the following: –(1) workplace notice and posting obligations –(2) limitations on when, during the hiring process, employers may ask applicants about their criminal records –(3) limitations on what records employers may ask applicants about –(4) restrictions on when employers may rely on criminal records to disqualify applicants from consideration.  2012 Legislation:  States: Indiana, Massachusetts, Vermont and Ohio  Local: Newark, New Jersey and Philadelphia, Pennsylvania

Yes  No  Have you ever been convicted of a felony? Application for Employment Ban the Box Laws Criminal History  Three jurisdictions now prohibit employers from requesting criminal history information in the employment application  Hawaii, Massachusetts, and Philadelphia, Pennsylvania

Credit Reports

Statistics On Credit Checks Whose credit is being checked?  47% of respondents conduct credit checks on selected applicants vs. 13% on all applicants  Positions most commonly checked: –Fiduciary/financial responsibilities (91%); –Senior executives (46%); –Access to highly confidential employee information (34%); –Access to company’s or customer’s property (30%) (SHRM Study 8/24/10)

Purpose of FCRA 23  Historically enforced and interpreted by the Federal Trade Commission, the new federal Consumer Financial Protection Bureau is charged with primary enforcement and interpretation authority  Fundamentally, FCRA regulates the scope and flow of the exchange of consumer information  Regulates public records, including criminal records, and is not limited to true credit reports  Does not regulate purely in-house investigations, such as reference checks

1.Employers must obtain informed consent for consumer background checks from job applicants and employees 2.Issue "adverse action" letters if the background check will result in disqualification – “adverse action” against an applicant or employee is broadly construed FCRA Compliance 24

Pre-Adverse Action Notice 25  Generally, if adverse action is intended, an employer must provide the applicant/employee with: 1) an advance copy of the consumer report and 2) the "Summary of Your Rights" document –Purpose is to allow consumer the opportunity to dispute with the CRA any inaccurate or incomplete information –NOTE: Must start using new CFPB “Summary of Your Rights” document by January 1, 2013

Adverse Action Notice 26  If adverse action is taken, an employer must provide the applicant/employee with: –the CRA contact information, –confirmation that the CRA did not made the decision, –notice of the consumer’s right to obtain the report from the CRA, and –notice of the consumer’s right to dispute with the CRA the accuracy or completeness of the report

State Law 7-Year Rules 27  The FCRA does not restrict CRAs from reporting any conviction records (just arrests over 7 years old)  However, various state laws prohibit CRAs from reporting even conviction records that pre-date the background check report by more than 7 years –State law prohibitions vary considerably

State Laws  Eight states currently have laws restricting and/or limiting use of credit reports/history in employment: California, Connecticut, Illinois, Maryland, Oregon, Hawaii, Washington, and Vermont  Many other states with pending legislation, in addition to the “Equal Employment for All Act” pending at the federal level  Restrictions generally do not apply to financial institutions

FTC  2011 FTC Staff Report: 40 years of experience with the FCRA –Reiterated basic points (e.g., FCRA is not limited to credit reports) –Emphasized – Authorization form must be a stand-alone document "Adverse action" is a broad concept Employers must wait to take adverse action FCRA protects contractors and volunteers –Did not address – On-line application procedures and whether electronic signatures suffice Waiting time for pre-adverse action notices (presumptively 5 business days) 29

 Increase in class action filings against employers –FCRA disclosure and authorization forms –FCRA adverse action notices –State equivalents  Several multi-million dollar settlements in nationwide class actions  SOL: earlier of two years after discovery of violation, or five years from date of violation Class Litigation 30

Social Media Checks: Background Investigations

Use Of Social Media Checks By Recruiters and Hiring Managers  More than 92% of recruiters and hiring managers use, or plan to use, social media for recruiting –Facebook (66%); Twitter (54%); LinkedIn (93%)  73% of recruiters have successfully hired a candidate who was introduced or identified through a social network  78% had a negative reaction to illegal drug references; 66% to posts of a sexual nature; 61% to profanity; 54% to spelling or grammatical errors. –89% LinkedIn; 26% Facebook; 15% Twitter (Jobvite Social Recruiting Survey Results 2012)

Online Searches By Employers Declining?  In 2011, 26% of organizations used online search engines to screen applicants in the hiring process. –A decline from 2008, when 34% reported using online search engines for this purpose.  64% have never used online search engines to screen applicants or used them in the past but no longer do so. SHRM 2011 Survey of Employers

Media Coverage Sparks A Wave of State Laws  Use of social media in conducting applicant background checks was a “hot button” media issue in  Media outrage at the common practice of requesting an applicant’s social media log-in/passwords to conduct pre- employment background check. –ACLU v. Maryland Department of Corrections  Sparked a wave of state laws preventing employers from asking for such information: –Maryland, Illinois, California, and Michigan enacted legislation pertaining to employers. –California, Michigan, New Jersey and Delaware enacted legislation pertaining to academic institutions. –Other states introduced legislation that could resurface in 2013: Massachusetts, Minnesota, Missouri, New York, Ohio, Pennsylvania, South Carolina, and Washington.

No Federal Law (Yet)  There is no federal law preventing employers from requesting log-in and password information from employees and applicants, but... –Legislation was introduced in 2012 in both the House and Senate. Social Networking Online Protection Act (SNOPA), H.R and S  Will likely be reintroduced in However, Littler’s forecast is that such legislation is unlikely to pass with the Republican-controlled House.  For 2013, employers should focus on such laws in states where they operate.

Additional Littler Publications

Littler Reports  Criminal Background Checks: Evolution of the EEOC’s Updated Guidance and Implications for the Employer Community – May 2012  Annual Report on EEOC Developments: Fiscal Year 2011, An Annual Report on EEOC Charges, Litigation, Regulatory Developments and Noteworthy Case Developments – January 2012  The FTC Staff Report on “40 Years of Experience with the Fair Credit Reporting Act” Illuminates Areas of Potential Class Action Exposure for Employers – December 2011  An Employer’s Guide to EEOC Systemic Investigations and Subpoena Enforcement Actions – August 2011  Recent EEOC Developments Involving Disqualification of Applicants Based on Criminal History – March 2011

State Law ASAPs  Vermont Becomes the Eighth State to Restrict the Use of Credit Reports for Employment Purposes – June 2012  Indiana Passes New Legislation Restricting Criminal History Information Reported in Background Checks – June 2012  Massachusetts Employers Face New Obligations When Conducting Background Checks Involving Criminal History Records – March 2012  California Joins States Restricting Use of Credit Reports for Employment Purposes – October 2011  Use of Credit Reports by Employers Will Soon Be Restricted in Connecticut – July 2011  Legislation Roundup: Maryland Law Restricts Use of Applicant’s or Employee’s Credit Report or Credit History – April 2011  Massachusetts Becomes the Second State to “Ban the Box” on All Employment Applications – October 2010

Questions?

Paul Kennedy, Esq. Ashley Sims, Esq.