1. Conducting Background Checks: Compliance Strategies and Client Support

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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.

8. 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.

9. 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

10. 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

11. ‘Ban the Box’ Laws

12. ‘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

13. ‘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)

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

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

16. ‘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

17. ‘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

18. ‘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

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

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

21. ‘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

22. ‘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.”

23. ‘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.).

24. ‘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.”

25. ‘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

26. ‘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)

27. ‘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.

28. ‘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.

29. ‘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

30. ‘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

31. ‘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

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

33. ‘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

34. ‘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

35. ‘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.

36. ‘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

37. EEOC Enforcement Guidance April 25, 2012 Number 915.002

38. 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

39. EEOC Enforcement Guidance
Focus is on race and national origin

40. EEOC Enforcement Guidance
Different treatment of arrest and conviction records

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

42. 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

43. 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

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

45. 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)

46. 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)

47. 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

48. 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

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

50. 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

51. 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

52. 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

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

54. 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

55. 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

56. 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

57. 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

58. 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

59. 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

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

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

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

63. EEOC Enforcement Guidance
Client must treat employee in a nondiscriminatory manner

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

65. EEOC Enforcement Guidance
Co-employers

66. 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.

67. 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