Compliance Corner Archives

Consent for International Searches

A basic principle of conducting international searches on an individual is that you need a lawful basis for processing personal data. This principle applies to both employment-purpose and commercial background checks.

Although the number and type of lawful bases vary from one country to another (especially with the enactment of new data protection and privacy laws in many countries over the last several years), a lawful basis for processing personal data common to all international searches is the consent of the individual search subject. From a compliance perspective, obtaining an individual’s consent for the searches is the best practice.

Other than the requirements that the subject’s express consent be unambiguous and freely given, there is no universally prescribed format or wording for an international consent form.

If the subject’s consent cannot be obtained, you can look to a country’s data protection and privacy laws to determine if a different legal basis may be applicable for processing personal data that does not require the subject’s consent. It is always up to the controller of the data to determine the appropriate legal basis for processing personal data.

For individuals located in the EU or UK, there are several legal bases that will satisfy the compliance requirements under the EU GDPR, the UK GDPR and the Data Protection Act of 2018 (UK) if consent cannot be obtained. The controller can still request these searches if it has a legitimate interest in obtaining the individual’s personal data or needs the data to perform a contract.

If the request for the searches is based on a legitimate interest or performance of a contract, the individual must receive a notice of the controller’s intention to process the data. Notice can be given in several different ways, including directly to the individual, in an engagement letter or similar document, or by publication on the client’s website. The way the controller gives notice is their decision.

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Reporting Employment-related Civil Lawsuits

For employment-purpose reports, the federal Fair Credit Reporting Act (FCRA) and its state law counterparts are the laws that most often deal with when determining whether certain information is or isn’t reportable. However, federal laws prohibiting workplace discrimination can also limit what information can be included in these reports. This issue can arise when civil lawsuits are located in which a search subject has sued a former employer.

Although there are several types of federal laws dealing with workplace discrimination, taken together, these laws make it illegal to discriminate against someone (applicant or employee) because of that person’s race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. It is also illegal to retaliate against a person because they complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit.

Providing any such information to a prospective employer in a background screening report could be a violation of anti-discrimination laws which are typically enforced by the U.S. Equal Employment Opportunity Commission (EEOC).

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Decoding Criminal Case Dispositions – Part II

In the previous piece about decoding criminal case dispositions, we listed the most common dispositions (e.g., guilty, not guilty, dismissal, not prosecuted). Here is a list of less common criminal case dispositions, some of which may be only found in one jurisdiction:

Suspended Sentence: This means the court has delayed the sentencing for an offense pending the successful completion of a period of probation or successful completion of a treatment program. If the defendant does not break the law during that period and fulfills the conditions of the probation, the judge usually reduces the degree of the offense or may dismiss the case entirely. Until the sentence is reduced or dismissed, the case is considered pending.

Diversion/Deferred Prosecution: The court has delayed prosecution pending the successful completion of probation conditions, at which point the charges will be dismissed. Until charges are dismissed, they remain pending.

Adjudication Withheld: The judge orders probation but does not formally convict the defendant of a criminal offense.

Probation Before Judgment: In Maryland, probation before judgment (PBJ) is one type of disposition in a criminal case. For a defendant to receive a PBJ as a disposition, the defendant must make a plea of guilty; however, the court stays the finding of guilt and places the defendant on probation. If the defendant satisfactorily completes the probation terms, the guilty plea is stricken. PBJ is not a conviction in Maryland.

Stet Docket: The prosecutor may place the case on the stet docket. This is an indefinite postponement of a criminal case for up to three years. It is not a conviction. In Illinois, it is called “stricken off leave.”

ARD Program: Common in Pennsylvania, it stands for “Accelerated Rehabilitative Disposition Program.” This program is given to the defendant in place of adjudication. If the defendant completes the program, the case is closed.

Conditional Discharge: In New York, a conditional discharge is part of a sentence. When the judge sentences the defendant to a conditional discharge, the judge will indicate the conditions that the defendant must meet for the sentence to be successfully completed.

In New Jersey, a conditional discharge is a type of diversionary treatment program offered to individuals charged with a disorderly person’s offense involving controlled dangerous substances (e.g., heroin, Xanax, Oxycontin, or drug paraphernalia). Upon completion of the terms and conditions of the treatment program, the treatment is terminated and the proceedings against the defendant are dismissed.

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Civil Case Dispositions – Dismissals

A dismissal also can take one of two forms:

With prejudice – which means the plaintiff is barred from filing a new lawsuit based on the same claim.
Without prejudice – which means the plaintiff can still file a new lawsuit based on the same claim, such as when the defendant does not carry through on the terms of the settlement.

A dismissal can be made by the court, the plaintiff, or an agreement between both the plaintiff and defendant.

The court can dismiss a plaintiff’s case if the judge concludes the plaintiff’s case is without merit – often referred to as an involuntary dismissal.
A plaintiff can also dismiss a case – referred to as a voluntary dismissal.
When there is an out-of-court settlement, a dismissal will be filed by one of the parties stating the case is settled – often called a stipulation for dismissal or notice of dismissal. In New York, it is called a notice of discontinuance. (Settlement dismissals usually contain little or no information about the details of the settlement.)

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Expungement of Criminal Convictions – California Style

Some states allow a defendant convicted of a crime to apply for a court order limiting public access to the conviction record or to restore rights and remove disabilities caused by the conviction. This type of order is commonly referred to as an expungement; however, the qualifications for obtaining an expungement and the effect of the expungement vary among the states that allow expungements.

California has an expungement procedure set forth in Penal Code 1203.4. If a defendant meets the qualification of Penal Code 1203.4, the court will allow the defendant to withdraw a plea of guilty or no contest, to reenter a plea of not guilty, and to have the case dismissed. The defendant is also relieved from many of the negative consequences of a criminal conviction.

When reviewing California criminal records showing a conviction, it is important to note if there is also a reference to a Penal Code 1203.4 dismissal because this can impact whether the record is reportable in a background check for a California employer. For example, California law does not allow the reporting of criminal records that result in a non-conviction in employment-purpose reports. Even though the record shows a conviction, the Penal Code 1203.4 dismissal effectively means the conviction never happened.

The reference to the code section will typically be found on the case docket, dated a year or so after the conviction date.

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Decoding Criminal Case Dispositions

A “disposition” is the final outcome of a case, regardless of what it is called. Here is a list of typical criminal case dispositions.

Guilty or Conviction: This is the worst possible disposition if you are the defendant. It means that the case was heard and decided against you. With a conviction, the court will impose a sentence that may include jail time, probation, and paying a fine and court fees.

Not Guilty: The case actually proceeds to a trial, where a jury (or a judge in certain types of cases) decides that the evidence against the defendant was insufficient for a conviction. It does not mean the defendant was innocent – just that the case was heard and decided in the defendant’s favor.

Dismissal: A dismissal is entered when the court determines that the case should not move forward for some reason. There are many reasons for dismissals. For instance, there can be procedural errors, a lack of proper jurisdiction over the type of case, or the prosecutor decides to dismiss the charges (see below).

Nolle Prosequi or Nolle Prosse: A Latin phrase meaning “no more prosecution.” This is another way of saying that a case is dismissed by the prosecutor. This approach is often used when a defendant may agree to plead guilty to a lesser offense that guarantees the prosecution a conviction for a related offense, in exchange for the prosecutor “dismissing” the more serious charge.

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Does New York law require notice to the employee in order to have a consumer reporting agency conduct a background check in connection with the employee’s misconduct?

The NY FCRA sets forth notice and authorization requirements for investigative consumer reports as shown in “https://law.justia.com/codes/new-york/2017/gbs/article-25/380-c/” NY Gen Bus L § 380-C. However, this section is silent on the issue of employee misconduct investigations and we found no language in NY FCRA law that is analogous to the federal FCRA exemption for employee misconduct investigations as provided in 15 U.S.C.1681a(y)(1).

When analyzing this question, we reviewed a 2006 opinion by the Oklahoma Attorney General that addressed a very similar issue. A state senator wanted to know whether OK employers could rely on the FACTA amendment to the federal FCRA that provides the exemption for employee misconduct investigations and dispense with the OK notice requirements for consumer reports. The OK AG said “no,” the reason being that the OK statute (which specifically references the previously enacted federal FCRA) was enacted before FACTA and the OK legislature did not indicate in the statute that amendments to the original FCRA would also be adopted.

Of course, the AG opinion is not a binding law anywhere, including in OK. But it does show how the issue may be analyzed to the detriment of the employer if it arose in litigation. Like the OK statute, the NY FCRA was enacted well before the FACTA amendment in 2003 (NY FCRA was enacted in 1977). However, unlike the OK statute, the NY FCRA does not include any references to the federal FCRA and, therefore, does not rely on any of its language as originally enacted. That is a distinction that can undermine an OK AG-type analysis to the NY FCRA.

The most we can say is that the NY FCRA does not address employee misconduct investigations and that the federal FCRA does set forth an express exemption from its notice requirements for such investigations. Whether there is a conflict between the NY notice requirements (or any other state’s notice requirements) and the federal exemption for employee misconduct investigations remains to be seen and there are no court opinions addressing the issue.

In the absence of guidance from NY FCRA regarding employee misconduct investigations, the employer can follow the federal FCRA exemption for these investigations. It would be prudent for the employer to document the need for confidentiality of the investigation, specifying the reasons why alerting the employee would undermine the investigation.

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New Jersey Crime Categories

As explained in our previous posts, the most serious offenses are categorized as “felonies” and less serious as “misdemeanors.” While this is true in nearly every state, there is an exception (of course) and that exception is New Jersey.

In New Jersey, crimes are not categorized as felonies and misdemeanors but as “indictable crimes,” “disorderly person offenses,” and “petty disorderly person offenses.”

According to New Jersey law, indictable offenses are the equivalent of felonies in other states. Courts classify charges into first, second, third, and fourth-degree charges. A first-degree offense is the most serious of all charges. “Indictable” means that a grand jury has found enough evidence against the defendant to make them face trial.

“Disorderly person offenses” and “petty disorderly person offenses” (sometimes referred to as “DP offenses”) are the equivalent of misdemeanors in other states because they are less serious offenses and are punishable by less than one year in jail.

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Legal considerations when recruiting, hiring out-of-state WFH employees

Since the COVID-19 pandemic, employees working from home (WFH) have created a host of new wrinkles for employers, many of which are still being ironed out.

For employees, the WFH option can be safer (less chances of contracting COVID) and easier (no more commute); for employers, WFH reduces the cost of overhead and can result in happier, more productive employees.

While it may sound easy to simply hire a worker on the other side of the country, there are several legal questions for employers who want to recruit and hire an out-of-state employee who will WFH. The following are some of the important issues that employers should consider.

Recruiting. Looking for a new employee beyond state lines appears to present a limitless supply of potential new workers. But employers need to familiarize themselves with the laws of the state where the applicant lives, particularly with regard to issues such as background checks, criminal record searches and compensation.

Several states – including New Jersey and New York – prohibit employers from inquiring about a job applicant’s salary, benefits and other compensation history.

Other factors may make certain locations a more advantageous space to find new WFH hires.

Some states offer financial incentives to remote workers. Alabama, Georgia, Oklahoma and West Virginia offer bonuses to entice remote workers, ranging from reimbursement of moving expenses to $12,000 in cash (West Virginia will pay $10,000 divided over the course of 12 months with $2,000 paid at the end of the second year in residence).

Employee benefits and protections. Once an out-of-state employee has been hired to WFH, employers have a whole new list of individual state laws to learn. Each state has its own variations on employee benefits as well as legal protections – and in many cases, additional differences at the county and/or municipal level.

These differences can present the possibility of additional liability for employers on issues such as paid sick leave, paid family leave, minimum wage, disability, unemployment and vacation days, among others.

State laws on minimum wage vary widely, along with differences for tip credits and minimum salary thresholds for exemptions. The current minimum wage in Texas is $7.25 per hour, for example, while New York’s minimum wage is $11.00.

Paid family leave is now mandatory (or will be soon) in California, Colorado, Connecticut, Massachusetts, New Jersey, New York, Oregon, Rhode Island, Washington and Washington, D.C.

As for overtime, most states follow the standard payment of time-and-a-half for hours worked over 40 in a workweek, but a handful (including California) have more stringent requirements, while some states (California again) mandate that earned vacation days never expire.

Without a physical location in the state where a WFH employee resides and a breakroom to hang various notices, an employer must still remember to fulfill poster and notification obligations as well as various mandatory trainings. Remote employees do not need to tape posters up on their walls to satisfy state laws, but employers do need to provide certain information and documentation to out-of-state WFH employees to achieve compliance by sharing – and updating – federal, state and local notices.

Even if an employer has a single WFH employee in another state, workers’ compensation insurance is necessary, along with registration with the appropriate state agency. Some states have their own fund that employers must contribute into, while a third-party insurance company will suffice in others.

In addition, each state has different laws on employee protections, sometimes with variations at the local level. Employers should be careful to consider state, county and/or municipal statutes and regulations with regard to noncompete agreements, discrimination and retaliation protections and the requirements to legally terminate an employee.

Tax implications. Employees must be registered for tax purposes in the state where they reside, which means the company itself needs to register its presence in those states for tax purposes. That potentially newfound “tax nexus” to another state may mean sales and use taxes, income taxes and franchise taxes for the employer as well, depending on the requirements of the other state. The failure to properly register and pay the appropriate taxes can result in fines and penalties.

The registration process requires paperwork, time and patience, as it can take several weeks for an employee and the employer to be property registered. And some states – Pennsylvania, for example – also have local city or township registration requirements in addition to those at the state level.

Employers may also be subject to higher corporate income tax rates, which is calculated in part based on the employee’s role and seniority. So a WFH executive in a state with a high tax rate may cost an employer more money than a lower-level WFH employee in that state.

WFH employees themselves may face a tax conundrum with the “convenience of employer” rule that applies in seven states. In Arkansas, Connecticut, Delaware, Massachusetts, Nebraska, New York and Pennsylvania, if an employee works in a different state than her employer by choice – not because the job mandates – then the employer’s state has the right to tax her, and the employer would be required to withhold taxes from her paycheck in both her home state and the employer’s.

Alternatively, some states have reciprocity agreements that expressly forbid this double taxation. A total of 16 states and Washington, D.C. have such deals, where an employee who lives in Wisconsin and works for an Illinois employer, for example, only pays income taxes in Wisconsin. States that have reached such agreements typically share a border, although Arizona has gone above and beyond, with reciprocity in California, Indiana, Oregon and Virginia.

One additional complication: some states have issued temporary guidance to deal with the out-of-state WFH situation during COVID. Alabama and Georgia stated that they would not enforce payroll withholding requirements for employees who are temporarily working from home due to government-mandated stay-at-home orders; Connecticut said that employees WFH due to the pandemic is a necessity for work but New York reached the opposite conclusion, stating that it is for the employee’s convenience.

Employers should consider all of the legal ramifications before hiring an out-of-state WFH employee.

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Civil Cases and Garnishees

A common occurrence when searching civil case records for a company is to locate a record that identifies the company’s role in the case as a “garnishee.” What’s a garnishee and should these cases be included in background reports?

A garnishee can be any company (or person) who holds property (including money) owed to a debtor – that is, someone who has an unpaid judgment against them.

Employers often become a garnishee because they hold wages to be paid to an employee who is a debtor. A creditor can use a procedure called a wage garnishment, which is a court order, that requires the debtor’s employer to hold the debtor’s wages to pay the creditor. The employer as garnishee simply pays the employee-debtor’s wages to the court.

Because a garnishee’s involvement in a civil case is neither negative nor noteworthy, it typically should not be included in the report.

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