ORDER A REPORT
SECURE FILE UPLOAD

Compliance Corner for Employment Decisions refers to an internal or external resource hub that helps HR teams, managers, and compliance officers navigate the legal requirements tied to employment actions. It ensures decisions are consistent, documented, job‑related, and nondiscriminatory.

Here’s what a strong Compliance Corner usually includes:

  • Legal frameworks — Title VII, ADA, ADEA, FCRA, state laws, and local ordinances.
  • Adverse employment actions — what counts, how to document them, and how to avoid discriminatory impact.
  • Fair Chance hiring — compliant use of criminal history, individualized assessments, and Ban‑the‑Box rules.
  • Background check compliance — proper disclosures, authorizations, and adverse‑action procedures.
  • EEOC guidance — how to ensure decisions are job‑related and consistent with business necessity.
  • Documentation standards — how to record performance issues, investigations, and decision rationale.
  • Consistency in decision‑making — avoiding disparate treatment and disparate impact.
  • Manager training — ensuring supervisors understand legal boundaries and company policy.

Trend of suing employers for technical FCRA violations continues

The threat of a multi-million potential class action lawsuit alleging technical violations of the Fair Credit Reporting Act (FCRA) continues to haunt employers, even where the plaintiffs have alleged or proven no harm.

Pursuant to the statute, employers are required to “provide prior written notice before they can procure a consumer report about any employee or applicant for employment.” Just as important, 15 U.S.C. Section 1681b(b)(2)(A)(i) adds that the notice must be given “in a document that consists solely of the disclosure.”

Seeking to take advantage of the statutory damages available under the FCRA – from $100 up to $1,000 for a willful violation – plaintiffs have challenged employers’ use of a disclosure form that combined the written notice to procure a consumer report with other information or documents, such as an application form.

The trend to sue for FCRA technical violations was started by Singleton v. Domino’s Pizza, LLC in the U.S. District Court of Maryland (case no. 8:11-cv-01823-DKC) where the court ruled that inclusion of a liability release in the employer’s disclosure/authorization form violates the FCRA. Domino’s ended up reaching a settlement with the plaintiffs in 2013 for $2.5 million.

Also taking a strict reading of the statutory language, the Western District Court of Pennsylvania ruled in 2013 in Reardon v. Closetmaid Corporation (case no. 2:0S-cv-01730) that an employer could be liable for the combination of a disclosure/authorization with a liability waiver, and granted summary judgment in favor of the roughly 1,800 job applicants.

In a more recent example, a class of applicants sued Publix Super Markets in the U.S. District Court for the Middle District of Tennessee (case no. 3:14-cv-00720) also based on a violation of the sole disclosure requirement and release of liability. With Domino’s and Closetmaid’s payouts looming over its head and a class of 90,000, Publix agreed to settle the claims for $6.8 million earlier last year.

Although these companies opted not to fight the suits on their merits, a defendant in a case filed in the U.S. District Court for the Eastern District of California (case no. 1:14-742-WBS-BAM) did and won dismissal in October 2014. Syed v. M-I LLC involved identical claims but the judge reached a contrary decision, finding that the FCRA text was not as clear-cut as the plaintiff claimed. Immediately following the subsection mandating the sole disclosure of the employer’s intent to procure a consumer report is a provision that states that the consumer’s authorization is to “be made on the document referred to in clause (i)” – “that is, the same document as the disclosure,” the court noted, and “…thus, the statute itself suggests that the term ‘solely’ is more flexible than at first it may appear…”

The Syed decision is the second one that may give hope to employers facing similar suits. (There are at least six class actions pending.) But the obvious answer for companies looking to avoid the problem entirely is simple: use a standalone disclosure/authorization form that is separate from any other information or documents.

January 29th, 2015|Categories: Compliance Corner for Employment Decisions|Tags: , , , |

Medical marijuana laws put employers in a tough spot

The growing number of jurisdictions permitting medical marijuana is putting employers in a tough position. One the one hand, marijuana remains illegal under federal law and a workforce under the influence isn’t much of a workforce at all. On the other hand, 23 states and the District of Columbia now permit the use of marijuana for regulated medical purposes and some state laws include anti-discrimination provisions prohibiting employers from taking action against employees based on their status as a registered medical marijuana user.

A first-of-its-kind lawsuit demonstrates the conundrum. In December, the American Civil Liberties Union filed suit in a Rhode Island state court on behalf of an individual who allegedly was denied an internship after she disclosed that she lawfully carried a medical marijuana card for severe migraines.

According to the complaint, the company told the applicant that she had been rejected because of her status as a cardholder, and despite promises not to bring medical marijuana on the premises or come to work under the influence, the applicant was denied the position.

The lawsuit charges that the company violated Rhode Island’s medical marijuana law which prohibits schools, employers, and landlords from refusing “to enroll, employ, or lease to, or otherwise penalize, a person solely for his or her status as a cardholder.” The complaint – which also includes allegations of disability discrimination under state law – seeks compensatory and punitive damages.

Employers in states permitting medical marijuana would be well-advised to review their relevant law when considering marijuana use or marijuana-related criminal records in employment decisions. While Rhode Island is not alone in including an anti-discrimination requirement in its law, joined by Arizona, Connecticut, Delaware, Illinois, Maine, Minnesota, Nevada, and New York, other states – including California, Massachusetts, and New York – are clear that employers have no obligation to accommodate an employee’s medical marijuana use or permit them to work under the influence.

Read the complaint.

January 29th, 2015|Categories: Compliance Corner for Employment Decisions|Tags: , , , , , , , , , , , , |

Class action charges LinkedIn with violations of FCRA

According to a new putative class action filed in California federal court, social networking site LinkedIn runs afoul of the Fair Credit Reporting Act (FCRA).

The plaintiffs claim that LinkedIn’s reference search functionality allows prospective employers, among others, to obtain reports on job applicants with profiles on the site. LinkedIn’s dissemination of “Reference Reports” – that are created based on a user’s profile and connections to form a list of former supervisors and co-workers as possible references – are available for users who pay a monthly or annual subscription fee.

“LinkedIn has created a marketplace in consumer employment information, where it sells employment information, that may or may not be accurate, and that is has obtained in part from unwitting members, and without complying with the FCRA,” according to the complaint, which noted the site has more than 300 million members and one million jobs listed.

The Reference Reports bring LinkedIn within the purview of the FCRA, and yet the company fails to comply with a host of statutory requirements, according to the complaint.

Specifically, the complaint alleges that the site violates Section 1581(b) by furnishing consumer reports for employment purposes without obtaining the certifications required by the statute or a summary of the consumer’s rights and also does not maintain any of the procedures required by Section 1681e(a) to limit the furnishing of consumer reports to the limited purposes of the statute. In addition, Section 1681e(b) mandates that all consumer reporting agencies follow reasonable procedures to assure the maximum possible accuracy of consumer report information, Section 1681e(d) requires that a user notice be provided to individuals when a report is provided about them, and Section 1681b states that reports can only be provided after an inquiry to ensure the report is used for a “permissible purpose.” None of these statutory requirements were met by LinkedIn, the suit alleges.

“[A]ny potential employer can anonymously dig into the employment history of any LinkedIn member, and make hiring and firing decisions based upon the information they gather, without the knowledge of the member, and without any safeguards in place as to the accuracy of the information that the potential employer has obtained,” Sweet and the other plaintiffs claim. “Such secrecy in dealing in consumer information directly contradicts the express purposes of the FCRA.”

The main plaintiff alleges that she located a job opening on the site and submitted her resume through LinkedIn. She received a notification from the site that the general manager of the employer had viewed her profile and she was offered the job after an interview. The general manager declined the plaintiff’s offer to provide a list of references but later called back to rescind the offer, telling her that he had checked some of her references and changed his mind.

The plaintiffs seek to certify a nationwide class of LinkedIn users who had a Reference Report run on them as well as a subclass of users who applied for employment via the site and had a Report generated by a potential employer. As for remedies, the putative class requests actual, statutory, and punitive damages, as well as attorney’s fees and costs.

To read the complaint in Sweet v. LinkedIn Corporation, click here.

December 3rd, 2014|Categories: Compliance Corner for Employment Decisions|Tags: , , , |

SEC considers background check rule proposed by FINRA

Financial institutions could face expanded obligations to conduct background screening of applicants for registration pursuant to a rule proposed by the Financial Industry Regulatory Authority (FINRA) to the Securities and Exchange Commission (SEC).

As currently drafted, the National Association of Securities Dealers (NASD) Rule 3010(e), the Responsibility of Member to Investigate Applicants for Registration, provides that a firm “must ascertain by investigation the good character, business reputation, qualifications and experience of an applicant before the firm applies to register that applicant with FINRA,” the regulator explained.

Seeking to “streamline and clarify members’ obligations relating to background investigation, which will, in turn, improve members’ compliance efforts,” FINRA proposed the addition of background checks to the Rule for the SEC’s consideration.

The change would mandate that firms verify the accuracy and completeness of the information in an applicant’s Form U4 (Uniform Application for Securities Industry Registration or Transfer) for first-time applicants as well as transfers. Written procedures for conducting the background check – including a public records search – must also be established.

While the rule is prospective, FINRA announced that it would take a look at currently registered representatives. The financial regulator intends to begin its efforts with a search of all publicly available criminal records for the roughly 630,000 registered individuals who have not been fingerprinted within the last five years; going forward, FINRA will periodically review public records “to ascertain the accuracy and completeness of the information available to investors, regulators and firms,” the agency said.

To read the Federal Register notice: click here.

December 3rd, 2014|Categories: Compliance Corner for Employment Decisions|Tags: , , , |

New York City’s new bill would restrict using credit reports for employment decisions

Last month, the New York City Council’s Committee on Civil Rights held a hearing on a bill that would amend the city’s administrative code, prohibiting employers from using consumer credit reports for personnel decisions. Although the hearing ended without a disposition, it is expected that this bill will pass in some form in the near future. The Committee is holding a separate hearing in December on a bill that would prohibit employment discrimination based on an applicant’s or employee’s criminal history.

October 15th, 2014|Categories: Compliance Corner for Employment Decisions|Tags: , , |

Congress proposes bill that protects regulated employers’ background checks

While the Equal Employment Opportunity Commission (the “EEOC”) is continuing its challenge of employers’ use of criminal history and credit report information in personnel decisions, and new “ban-the-box” laws are rapidly gaining momentum, on September 9, 2014, Congress proposed legislation that protects certain regulated employers from EEOC, state agency and private actions when they strive to comply with the screening laws that are particular to their industries. The Certainty in Enforcement Act of 2014 would amend Section 703 of the Civil Rights Act of 1964 (42 U.S.C. 2000e-2), and cover employers that include those engaged in “health care, childcare, in-home services, policing, security, education, finance, employee benefits, and fiduciary duties.”

October 15th, 2014|Categories: Compliance Corner for Employment Decisions|Tags: , , , |

Class action for unauthorized disclosure of PHI is a new twist under FCRA

A recent class-action is seeking damages for the unauthorized disclosure of personal health information (“PHI”) under the Fair Credit Reporting Act (the “FCRA”). The plaintiffs claim that the defendant hospital allowed the unauthorized access of confidential records of the putative class members, including PHI, held by a third-party records vendor without their knowledge or consent and without sufficient security. Among other claims, the plaintiffs allege that the hospital violated the FCRA by failing to implement adequate safeguards to protect their personally identifiable information and PHI from a data breach suffered by the third-party vendors. The plaintiffs argue that the hospital was a CRA that created “consumer reports” containing sensitive information including names, dates of birth, Social Security numbers, billing information and confidential health records, and disseminated this information to medical service providers affiliated with the defendant, and that the defendant allowed employees of the vendor and others to gain unrestricted access to their personally identifiable information and PHI, which was allegedly misused and intentionally disclosed to third-parties for profit.

September 19th, 2014|Categories: Compliance Corner for Employment Decisions|Tags: , |

District of Columbia joins ban-the-box movement

On August 22, 2014, District of Columbia’s mayor signed new legislation titled the Fair Criminal Record Screening Amendment Act of 2014 that prohibits most employers in DC from both inquiring about criminal history information during the application process and obtaining a criminal background check until after a conditional offer of employment is made to the applicant. The law, which imposes a host of other restrictions and requirements on using criminal record information for personnel decisions, will take effect following a 30-day period of Congressional review as provided in the District of Columbia Home Rule Act and publication in the District of Columbia Register.

September 19th, 2014|Categories: Compliance Corner for Employment Decisions|Tags: , , , |

New Jersey’s new ban-the-box law goes into effect March 1, 2015

Signed into law last month, The Opportunity to Compete Act will effect March 1, 2015, preventing many private employers in New Jersey from asking job candidates about their criminal history on the initial job application. In “banning the box” for private employers, New Jersey joins the District of Columbia, Hawaii, Illinois, Massachusetts, Minnesota, Rhode Island, and cities of Philadelphia (PA), Newark (NJ), Buffalo (NY), Seattle (WA), San Francisco (CA), Baltimore (MD), and Rochester (NY)) in postponing inquiries about criminal record information until later in the hiring process, and imposing other requirements on the use of such records in employment decisions.

September 19th, 2014|Categories: Compliance Corner for Employment Decisions|Tags: , , , , |

Reminder: San Francisco’s tough ordinance that restricts asking about and using criminal records in employment and housing decisions starts August 13, 2014

 

Effective August 13, 2014, the Fair Chance Ordinance (the “FCO”) (see also the FCO FAQs) requires covered employers, contractors, and housing providers to review an individual’s qualifications before inquiring about his/her criminal history and follow strict rules for using the information.

The FCO applies to private employers that are located or doing business in the city and county of San Francisco, and employ 20 or more persons worldwide. This 20-person threshold includes owner(s), management, and supervisory personnel. The FCO covers positions (including contractor and other status) located within San Francisco, regardless of where the employer is located, as long as the position is “in whole, or in substantial part, within the city.” San Francisco’s Office of Labor Standards Enforcement (the “OLSE”) interprets “in substantial part” to mean an average of eight hours of work performed per week in San Francisco.

Along with banning inquiries about a criminal history or pending charges on the job application or during the first live interview, the FCO prohibits asking about six categories of criminal record information altogether, and mandates significant measures for individualized assessment, including considering only “directly-related convictions that have a direct and specific negative bearing on the

[applicant’s] ability to perform the duties or responsibilities necessarily related to the position,” the time elapsed since the conviction, evidence of inaccuracy, evidence of rehabilitation and/or other mitigating factors.

An aspect of the ordinance that is especially noteworthy is that employers are prohibited from inquiring about or considering convictions that are more than seven years old, with “the date of conviction being the date of sentencing.” Under California law, there already is a seven-year limitation on such records, but the look-back period starts from the date that a person is released from custody. Also of note is that before taking any adverse action based on a criminal record, the ordinance requires that the employer wait seven days (from the date of the potential adverse action notice) before taking such action. If during the seven-day waiting period the individual gives the employer notice, orally or in writing, of evidence of an inaccuracy, rehabilitation, or any other mitigating factor, the employer must delay the adverse action for a “reasonable” time to reconsider the action.

Employers must also ensure that criminal background inquiries later in the process comply with the notice guidelines published by the OLSE, as well as with the already existing background check disclosure/authorization requirements under California’s ICRAA and the FCRA. Highlighted below are the ordinance’s more significant notice requirements:

  • Covered employers must post, in a conspicuous place at every workplace, including a temporary site, or other location in San Francisco under the employer’s control where applicants or employees visit, a notice of rights provided by the OLSE. The notice must be posted in English, Spanish, Chinese, Tagalog and any other language spoken by 5% or more of the employees in the workplace, job site, or other location. (Translations of the notice in Chinese, Spanish, and Tagalog are available on the OLSE website.)
  • Employers must state in all job solicitations or advertisements that are reasonably likely to reach potential applicants seeking employment in San Francisco that the employer will consider qualified individuals with a criminal history.
  • Employers mustsendthe notice toeachlaborunionorrepresentative withwhomtheemployerhasacollectivebargainingagreementorotheragreementthatisapplicabletoemployeesinSanFrancisco.
  • Prior to any criminal history inquiry, including from procuring or conducting a background check, an employer must provide this notice to an applicant or employee when he/she is given the required FCRA/ICRAA disclosure and authorization form to sign.

August 8th, 2014|Categories: Compliance Corner for Employment Decisions|Tags: , , , |
© 2012- SCHERZER INTERNATIONAL | ALL RIGHTS RESERVED
Go to Top