1. Practical Steps Employers Can Take Today to Comply with the New EEOC Criminal Guidance HR.com Quality of Hire Virtual Event September 27, 2012 Attorney Lester S. Rosen Founder and CEO Employment Screening Resources (ESR) www.ESRcheck.com lsr@esrcheck.com (c) 2012 Lester Rosen 1

2. About the Speaker Attorney Lester S. Rosen is Founder and CEO of Employment Screening Resources (ESR) – www.ESRcheck.com – a nationwide background screening firm accredited by the National Association of Professional Background Screeners (NAPBS®). He is a noted authority on safe hiring and a frequent speaker at national conferences on the topics of background screening, due diligence, and legal compliance. He is the author of “The Safe Hiring Manual,” the first comprehensive guide to background screening. He has qualified and testified as an expert witness in court cases related to screening and hiring issues and has testified before the California Legislature on laws relating to background checks. He chaired the steering committee that founded the screening industry’s professional association – the NAPBS (www.napbs.com) – and served as first co-chair. 2

3. Important Notice This webinar does NOT constitute legal advice and should not be relied upon as legal advice. It is for educational purposes only. 3

4. New 2012 EEOC Guidelines On April 25, 2012, the U.S. Equal Employment Opportunity Commission (EEOC) issued its updated Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964: http://www.eeoc.gov/laws/guidance/arrest_conviction.cfm EEOC Q & A page on Guidance: http://www.eeoc.gov/laws/guidance/qa_arrest_conviction.cfm Title VII applies to employers with 15 or more employees (but caution: threshold headcounts for application of various federal statues can be tricky) 4

5. EEOC History 1987 EEOC Policy Statement on Criminal History. 1990 EEOC Policy Statement on Arrest Records. Septa case from Philadelphia sparked attention to this area. July 26, 2011 public meeting on Arrest And Criminal History As A Barrier. Concerned about accuracy and impact of criminal records – per one study, 65 million Americans have some sort of criminal record. Recent enforcement actions, E-RACE (Eradicating Racism and Colorism in Employment) initiative, and strategic plan to target systemic violators (e.g. Pepsi case). Litigation and settlements (e.g. beverage company case). 5

6. EEOC Stated Purpose Per EEOC, the updated guidance “builds on longstanding court decisions and guidance documents that the EEOC issued over 20 years ago” and “focuses on employment discrimination based on race and national origin.” Per EEOC, statistics and studies show criminal records have a discriminatory impact on Blacks and Hispanics. FAQ: do rules apply to someone that appears not to be a member of a protected class? 6

7. Background Checks Not Eliminated EEOC was clear to say background checks not eliminated. Some situations where there is a clear nexus between the job and the offense. In some situations, federal statutes eliminate certain individuals from certain offenses. 7

8. Arrest vs. Conviction Reiterated Arrest Rules: “The fact of an arrest does not establish the criminal conduct has occurred, and an exclusion based on an arrest, in itself, is not job related and consistent with business necessity. However, an employer may make an employment decision based on the conduct underlying an arrest if the conduct makes the individual unsuitable for the position in question.” 8

9. Conviction Conviction: “In contrast, a conviction record will usually serve as sufficient evidence that a person engaged in particular conduct. In certain circumstances, however, there may be reasons for an employer not to rely on the conviction record alone when making an employment decision.” 9

10. Ban the Box Approach and Narrowed Questions “As a best practice, and consistent with applicable laws, the Commission recommends that employers not ask about convictions on job applications and that, if and when they make such inquiries, the inquiries be limited to convictions for which exclusion would be job related for the position in question and consistent with business necessity.” EEOC discussing the “ban the box” approach where public entities do NOT ask about criminal records upfront so that offenders are not “chilled” or “deterred” from applying. Society has an interest in getting ex-offenders employed as well as protecting the public. 10

11. Discrimination Disparate Treatment: “A violation may occur when an employer treats criminal history information differently for different applicants or employees, based on their race or national origin (disparate treatment liability).” Disparate Impact: “An employer’s neutral policy (e.g., excluding applications from employment based on certain criminal conduct) may disproportionately impact some individuals protected under Title VII, and may violate the law if not job related and consistent with business necessity.” 11

12. Job Related The Guidance also describes two circumstances in which the EEOC believes employers will consistently meet the “job related and consistent with business necessity” defense: 1. “The employer validates the criminal conduct exclusion for the position in question in light of the Uniform Guidelines on Employee Selection Procedures (if there is data or analysis about criminal conduct as related to subsequent work performance or behaviors); or 12

13. “Green Factors” 2. The employer develops a targeted screen considering at least the nature of the crime, the time elapsed, and the nature of the job. Three part test dates to 1987 based upon Green v.Missouri Pacific Railroad, 523 F.2d 1290 (8th Cir. 1975) and the three parts are called the “Green Factors.” Reoccurring theme—NO Automatic Disqualification absent a showing of job relatedness. 13

14. Factors Added to 3 Part Test Nature and gravity of the offense: The harm caused. The legal elements of the crime. The classification of the offense (e.g., misdemeanor vs. felony). Time since the conviction and/or completion of the sentence: Includes evaluation of recidivism. Nature of the job held or sought: More than just job title. Evaluation of specific duties, essential functions, circumstances (e.g. supervised or not) and environment. 14

15. Individualized Assessment If an applicant is the subject of a targeted screen, the EEOC indicated: “The employer’s policy then provides an opportunity for an individualized assessment for those people identified by the screen, to determine if the policy as applied is job related and consistent with business necessity. (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).” 15

16. Notifying Applicant Individualized assessment generally means that an employer informs the individual that he may be excluded because of past criminal conduct; provides an opportunity to the individual to demonstrate that the exclusion does not properly apply to him; and considers whether the individual’s additional information shows that the policy as applied is not job related and consistent with business necessity. The individual’s showing may include information that he or she was not correctly identified in the criminal record, or that the record is otherwise inaccurate. 16

17. Factors Additional evidence an employer should review: Facts or circumstances surrounding the offense or conduct; Number of offenses for which the individual was convicted; Age at the time of conviction, or release from prison; Evidence that individual performed the same type of work, post conviction, without any known incidents of criminal conduct; Length/consistency of employment before/after offense; Rehabilitation efforts; and Whether individual is bonded under a federal, state, or local bonding program. 17

18. EEOC Best Practices – General General Eliminate policies or practices that exclude people from employment based on any criminal record. Train managers, hiring officials, and decision makers about Title VII and its prohibition on employment discrimination. 18

19. EEOC Best Practices – Policy Develop a narrowly tailored written policy and procedure for screening applicants/employees for criminal conduct. Identify essential job requirements and the actual circumstances under which the jobs are performed. Determine the specific offenses that may demonstrate unfitness for performing such jobs. Identify the criminal offenses based on all available evidence. Determine the duration of exclusions for criminal conduct based on all available evidence. Include an individualized assessment. Record the justification for the policy and procedures. Note and keep a record of consultations and research considered in crafting the policy and procedures. Train managers, hiring officials, and decision makers on how to implement the policy and procedures consistent with Title VII. 19

20. Additional EEOC Best Practices Questions about Criminal Records When asking questions about criminal records, limit inquiries to records for which exclusion would be job related for the position in question and consistent with business necessity. Confidentiality Keep information about applicants’ and employees’ criminal records confidential. Only use it for the purpose for which it was intended. 20

21. Criticisms Not a regulation and does NOT have the force and effect of law. However, Courts will consider the opinions of an agency. ISSUE: Even if a Court or jury rejects, defending against a charge by the EEOC or an individual is expensive. Bill pending in Congress to defund the enforcement of the guidelines. Appears effort is to make a criminal history a protected group even though not approved by Congress. New Guidance may encourage litigation. Will create whole new industry with lawyers and consultants dealing with compliance. 21

22. EEOC: The Good, The May Be Good & The Impossible The Good: Background checks are absolutely lawful. EEOC gave more clarity to the three part “Green” test: Nature of the Crime – Harm caused, legal elements of crime, level of offense. Time since the offense – Evaluation of recidivism. Nature of the job – Job title, job duties, essential functions of the job, circumstances (degree of supervision) and environment (e.g. private home vs. factory). 22

23. EEOC: The May Be Good Suggested a “Ban the Box” approach for private employers Suggested an “Individualized Assessment” if applicant fails the three part “Targeted Screen” approach 23

24. EEOC: The Impossible Suggested that employers only ask criminal questions related to job: 1,000s of crimes — extremely difficult. Applicants who do not understand the question can be perceived as lying. Use studies to determine recidivism and relevance of older crimes: Insufficient science –no clear statistics for employers. No defense if following state rules. 14

25. Three Potential Employer Responses First Option: Seek advice from labor law firm to set up system. Second Option: Continue current system with common sense modifications based upon Guidance. Third Option: Utilize the methods outlined in this presentation as basis to set up in-house system for compliance based on new Guidance. 25

26. Second Option At a minimum: Have policy that employer maintains a safe workplace and will conduct strict review of any applicant with a criminal record, but no automatic disqualification. Ensure proper training and documentation. Use the enhanced Green factors. Consider not asking about past criminal convictions up front but use “criminal advisement.” When asking past offenses, apply some limitations based upon seriousness, age and job (Green factors). Use “Individualized Assessment” process as a final safety valve. www.esrcheck.com 26

27. Pre-Adverse Action Notice and EEOC Guidance If a consumer has been eliminated after a background check, they are entitled to two notices: Pre-adverse action notice under the Fair Credit Reporting Act (FCRA). Notice of an “Individualized assessment.” These should be separate documents to demonstrate specific compliance with both EEOC and FCRA. May give Individualized Assessment with the first notice 27

28. “Ban the Box” Most conservative approach: “Ban the Box” on the initial application As practical matter, at least 70% of applicants do not qualify for job, so little value in having an early “knock-out” question that invites litigation/ investigation Instead use a “Criminal Record Check Advisement” to the effect that an appropriate criminal check will be conducted on all finalists Tips: Ensure the advisement does not act as a “de facto” shutting the door by chilling or deterring applicants with criminal records from applying in the first place 28

29. Sample Advisement Instead of Criminal Question “If the company determines an applicant is suitable for the position based on a job related evaluation of skills and experience that may also include an interview, prior to final selection and subsequent employment, an applicant will be subject to a background check that is appropriate to the job functions and business necessity. If related criminal records are revealed in the process, the applicant will not be automatically disqualified.” Cannot be worded in such a way where it in fact closes the door on ex-offenders 29

30. When and How to Ask about Past Criminal Records Assuming an employer “bans the box” and waits until there has been or may be a conditional job offer, an employer may go back to the applicant and ask about potential criminal records. If the applicant is not honest, then any lack of honesty is certainly a matter for employers to consider. An employer can: Ask targeted questions based upon an analysis of the job and an analysis of every crime a person can commit in his or her state. Ask an open ended and broad questions, but only have the information go to the “Criminal Record Assessment Specialist.” Use screening software that shields you from the questions and answers to ask about criminal record. 30

31. Third Option – Formal Program May sound complicated and take time, but no worse then rolling out new employee manual or dealing with an open enrollment period for benefits. Once project is done, only needs periodic tweaking. www.esrcheck.com 31

32. Begin with a Job Class Description Define the Job Class Functions, Duties, Skills, Requirements, Environment, Level of Supervision, Interaction with Others, and Special Risk Factors. This step one in satisfying the EEOC requirement that, “The employer needs to show that the policy operates to effectively link specific criminal conduct, and its dangers, with the risks inherent in the duties of a particular position.” 32

33. For Each Job Class Create and Utilize the Following Tools Job Class Analysis Worksheet. Risk Assessment Matrix. “Green” Factors Review (enhanced). Individualized Assessment Worksheet. 33

34. Job Class Analysis List all the elements of each category for the entire Job Class including: Functions, Duties, Skills, Requirements, Environment, Level of Supervision, Interaction with Others, and Special Risk Factors Rank each element in a range from not important to critical to the job. This “job relatedness” is the basis for determining if further review is required. Importantly, the Functions, Duties, Skills and Environment factors help to not only identify special risk factors, but to allow the employer to potentially disqualify an applicant in these objective areas before initiating the background check. 34

35. Risk Assessment Matrix This matrix compares frequently encountered criminal matters to each element is a defined Job Class. For example crimes of theft by deception such as embezzlement would be highly related to a job in finance/accounting. It should take into account the seriousness of each crime and when it happened. A petty theft conviction from 10 years ago with no subsequent contact with the legal system may no longer be relevant to certain finance positions. If based on the Job Class and the Risk Assessment Matrix the applicant would not be eliminated, then they can proceed in the hiring process and this special review process ends here. If based upon the Job Class, the job related element(s) and the crime(s) in question it is determined that further research is needed, then the applicant goes to the next step, which is a “Green” Factors Review Worksheet. 35

36. “Green” Factors Review If the Risk Assessment Matrix review indicates further research is needed, you move on to a worksheet that contains the enhanced “Green” Factors defined by the EEOC to review the offense and offender circumstances in the required detail. If after the Green Factors review process it is determined the applicant should not be eliminated, then they may continue in the hiring process. If the person would still be eliminated after “Green” Factors Review, then EEOC defined Individualized Assessment is triggered. 36

37. Individualized Assessment Worksheet At this stage, the applicant has been potentially eliminated based upon the first three steps. However, the EEOC says the applicant should have the opportunity to demonstrate a reasons they believe might overturn the current finding of elimination. An employer can facilitate this process providing notice to the applicant about the process and using an Individualized Assessment Worksheet to determine fully and finally if the applicant should be eliminated. If the applicant fails to respond to the notice you can eliminate them based on that alone. 37

38. The Bottom Line Even with increased regulations, employers must still do background checks to ensure that new hires are qualified, capable and free from unacceptable risk. Requires some additional processes be incorporated into policies and procedures. Change is always a burden, but these additional requirements can be effectively managed. Once instituted, employer has a great deal of protection since they can demonstrate good faith compliance. May well result in some offenders capable of doing the work getting through the door when they may have otherwise been eliminated. 38

39. Thank You for Attending Contact Employment Screening Resources (ESR) for further general information: Phone: 415.898.0044 or 888.999.4474 (Toll Free) Email: customerservice@esrcheck.com Website: www.ESRcheck.com Specific questions about this presentation should be directed by email to Les Rosen at: lsr@esrcheck.com 39