How Does it Affect Me as an Employer? Beth Langley Hagan Davis Mangum Barrett & Langley PLLC Myth Busters Around the FCRA Jennifer Smith Director of Compliance FirstPoint, Inc.

 Title VII of the Civil Rights Act of 1964, as amended  Fair Credit Reporting Act

 Prior to April 25, 2012, the EEOC had generalized Enforcement Guidance that  Discouraged employers from inquiring about arrests in employment decisions, due to the risk of disparate treatment (adverse impact) on certain minorities; and  Encouraged employers to look at the circumstances underlying a record of a criminal conviction in relation to the employers’ job prior to making an adverse employment decision.

 The Fair Credit Reporting Act requires:  Voluntary consent and detailed notices to all applicants/employees who are the subject of criminal background screenings through third party consumer reporting agencies (CRA’s).  CRA may not report records of arrests more than 7 years old.  The FCRA does not limit reporting of convictions. It does, however, provide an extensive mechanism for disputing inaccuracies in background screening and other consumer reports.

 Disproportionately high incarceration rates of African Americans and Hispanics, particularly men.  “Disparate Impact” discrimination of African Americans and Hispanics by Employers’ use of criminal background screening.

Disparate Treatment Discrimination and Disparate Impact Discrimination

 Race, color, religion, sex and national origin.

 An individual is treated differently in the terms and conditions of employment on the basis of race, color, religion, sex or national origin. Example: Employer rejected an African American candidate with a non- violent misdemeanor offense that occurred more than 10 years ago, but has a history of hiring white candidates with comparable criminal records.

 1991 Amendment to Title VII: A particular employment practice that causes a disparate impact on the basis of race, color, religion, sex or national origin and the employer fails to demonstrate that the challenged practice is job related for the position in question and consistent with business necessity…” (emphasis added)

The bulk of the EEOC Guidance addresses the EEOC’s concerns of Disparate Impact Discrimination of African-Americans and Hispanics as a result of criminal background screening. What is a “disparate impact?” Facially neutrally Has a disproportionately negative impact on a protected class

How is “Disproportionate Negative Impact” established?

 How is “Disparate Negative Impact” established?  Employer’s inconsistent hiring/employment practices  Comparisons of similarly situated employees  Protected category vs. Non-protected category  Statistical Evidence

 To avoid Title VII liability  If a facially neutrally policy has a disproportionate effect of screening out a Title VII protected group (e.g., a particular race), the Employer has the burden of establishing that the employment policy/practice is job-related for the position in question and consistent with business necessity.

 Per the EEOC Guidance:  In 2010, 28% of all arrests were of African Americans, even though African Americans comprised approximately 14% of the general population.  In 2008, Hispanics were arrested for federal drug charges at approximately 3 times the rate of the general population.  African Americans and Hispanics are incarcerated at rates disproportionate to their numbers in the general population.

Based upon the statistics cited by the EEOC in its Guidance, the EEOC has concluded that criminal record exclusions have a disparate impact based on race and national origin, particularly as to African Americans and Hispanics.

The proverbial “Catch 22”.

 EEOC Guidance does not affect liability for:  Negligent hiring/retention  Workplace violence  Homicide is the 4 th leading cause of death in the workplace (U.S. Department of Labor, 2011)

 Neither does the Guidance affect liability for:  Theft and fraud  Failure to comply with licensure requirements

 Arrests:  An arrest should not be grounds for adverse action.  The facts underlying the arrest can be the basis for an adverse action.

 Convictions:  “No Convictions/No Job” is no longer acceptable.  Inquire about criminal history when conditional offer is made, and not on job application.

 Convictions:  Engage in a case-by-case analysis for each applicant/employee:  Nature and gravity of offense or conduct;  Time that has passed since the offense or conduct occurred /sentence was completed;  Nature of the job held or sought.  Provide applicant/employee an opportunity to explain circumstances.

 Update Job Descriptions so it is apparent why background screening is job-related and consistent with business necessity.  Examples:  Handles money  Serves alcoholic beverages  Has access to sensitive financial information  Has access to patrons’ valuables

 Examples, continued:  Works in close proximity to small children or to elderly  Security position  Inventory control position  Mobile workplace (e.g., shuttle drivers)

 Examples, continued:  Works in stressful work environment  Delivers passengers, goods or services  Works in high crime area  Has access to medical supplies and pharmaceuticals

 Examples, continued:  Works at night  Works alone

 Document objective factors for employment decision- making  If background screening results are a factor in adverse decision, document why.

 Review prior employment decisions for consistency.  Centralize employment decisions as much as possible to ensure consistency.

 First, contrary to popular belief, there is no national computer or database of criminal records that contains all jurisdictions within the United States  Information Excluded from Consumer Reports  Suits and judgments which from the date of entry antedate the report by more than seven (7) years  Records of arrest or indictment which from the date of disposition, release or parole antedate the report by more than seven (7) years

Convictions, except in certain states, are reported indefinitely Examples of states with reporting restrictions limit reporting of criminal convictions to 7 years:  California (Cal Civil Code §  Nevada (NRS §598C.150)  New Mexico (N.M. Stat. Ann. §56-3-6)  Hawaii (HRS §378-2-§378-3) limits reporting to 10 years Employers may not receive information on certain cases that have been…  Sealed  Pardon granted  Where the applicant received “diversion” which is a special procedure that does not count as a conviction Certain States have more restrictive versions of the FCRA  For instance, Kentucky KRS Chapter No consumer reporting agency shall maintain any information in its files relating to any charge in a criminal case, in any court of this Commonwealth, unless the charge has resulted in a conviction.  In Hawaii, inquiry into and consideration of conviction records for prospective employees shall take place only after the prospective employee has received a conditional offer of employment which may be withdrawn if the prospective employee has a conviction record that bears a rational relationship to the duties and responsibilities of the position.  Massachusetts Employers may not, under any circumstances, inquire or maintain records related to a first conviction for any of the following misdemeanors: drunkenness, simple assault, speeding, minor traffic violations, affray, or disturbance of the peace.

Written Consent and Disclosure Section 604(b)(2)(A) Disclosure to Consumer - a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes; While the section reads “solely of the disclosure”, the document may also include:  A brief description of the nature of the consumer report  The consumer’s authorization for procurement of the report However, it may NOT be included in the employment application Effectiveness of Disclosure and Authorization  An employer may use a one-time evergreen disclosure, and obtain permission from applicants or current employees to procure consumer reports, at any time during the employee’s tenure. The disclosure must state “clearly and conspicuously “ that the employer intends for the disclosure and authorization to cover both the application for employment and for the duration of the employment.

Adverse Action Notices Adverse action: a negative employment action such as not hiring an applicant; not retaining an employee or denying a promotion. If an employer takes adverse action against an applicant or employee based in whole or in part on information contained in a consumer report or an investigative consumer report, the employer must provide a “pre-adverse action” notice under Section 604(b) before taking the adverse action and a subsequent “adverse action” notice under Section 615(a) after adverse action is taken. Once the employer provides the pre-adverse action notice, including a copy of the background report as well as a statement of rights prepared by the Federal Trade Commission (FTC), the employer must wait a “reasonable period of time” before sending the second notice. Therefore, the notices may not be included in the same document. The adverse action notice does not need to include the specific reason for the adverse action, but it must include:  Note that the adverse action is based either in whole or in part on information contained in the background report.  State the consumer reporting agency did not make the adverse employment decision and does not know the basis for the decision  Include the name, address and toll free number of the consumer reporting agency  Inform the applicant of his/her right to obtain another free copy of his/her consumer report within the next 60 days.

Recent Class Actions against Employers for Violations of the Fair Credit Reporting Act  'Singleton, et. al. vs. Domino's Pizza' (United States District Court - Maryland) The lawsuit contends that the plaintiffs were terminated after background checks were completed, but were not provided with a copy of the report or advised of any rights before their termination. Furthermore, both plaintiffs alleged that the background screening consent they signed included a release of liability for the background check on the form that was part of the application packet.  If Domino’s is found to have willfully violated the FCRA, then the damage can be up to $1,000 a person regardless of actual damages  Note: Just because a lawsuit is filed and allegations are made by no means proves the validity of the plaintiff’s claims. However, this highlights the need for employers to review their background screening programs to ensure they are in compliance with the Fair Credit Reporting Act.