California Archives

New Employment Background Screening Legislation for 2017

“Ban-the-box”

“Ban-the-box” measures, which generally prohibit employers from inquiring about a candidate’s criminal history (including performing background checks) until later in the hiring process, and impose significant compliance requirements, will soon be the norm rather than an exception. The city of Los Angeles, with its new Fair Chance Initiative for Hiring ordinance, is just the latest to join the fast growing list of localities (Austin, Baltimore, Buffalo, Chicago, Columbia – MO, District of Columbia, Montgomery County – MD, New York City, Philadelphia, Portland, Prince George’s County – MD, Rochester, San Francisco, and Seattle) and nine states (Connecticut, Hawaii, Illinois, Massachusetts, Minnesota, New Jersey, Oregon, Rhode Island, and Vermont (effective July 1, 2017)) that have enacted similar laws for private employers.

Juvenile criminal record checks

Effective January 1, 2017, AB 1843 amends Section 432.7 of the Labor Code to prohibit California employers from inquiring about and considering information regarding “an arrest, detention, process, diversion, supervision, adjudication, or court disposition” that occurred while the candidate was subject to the process and jurisdiction of a juvenile court. Certain employment situations are exempted from these requirements, such as a prohibition by law from hiring an applicant who has been convicted of a crime.

Criminal background checks for transportation network companies

Effective January 1, 2017, under California’s AB 1289, a transportation network company (“TNC”) such as Uber, is required to perform criminal background checks on all drivers. The bill also prohibits a TNC from contracting with a driver who is registered on the DOJ’s national sex offender website or has been convicted of specified felonies, or misdemeanor assault or battery, domestic violence, or driving under the influence of drugs or alcohol within the past seven years.

Credit check restrictions

The District of Columbia is the latest jurisdiction to pass a law that prohibits private employers, with certain exceptions, from conducting credit checks on job applicants. The Fair Credit in Employment Amendment Act, which amends the Human Rights Act of 1977 to include credit information as a protected trait will take effect following approval by Mayor Bowser and other enactment actions. Similar to the laws already in effect in ten states for private employers (California – AB 22; Colorado – The Employment Opportunity Act; Connecticut – SB 361; Hawaii – HB 31 SD1; Illinois – HB 4658; Maryland – HB 87; Nevada – SB 127; Oregon – SB 1045; Vermont – Act No. 154 (S. 95); Washington – RCW 19.182 and RCW 19.182.020) and at least two cities (New York City – Stop Credit Discrimination in Employment Act and Philadelphia – Bill No. 160072), it restricts checking an applicant’s credit history except in circumstances where a credit screen is justified by the position’s responsibilities or is required by law.

Wage history inquiries

Pay equity initiatives include California’s AB 1676, which effective January 1, 2017, prohibits employers from using a candidate’s prior salary as the sole basis to justify a pay disparity. California, however, has decided not to follow the Massachusetts provisions (described below) of banning inquiries regarding a candidate’s wage history.

Massachusetts was the first jurisdiction to pass a law that prevents employers from asking job candidates about their salary history. The commonwealth’s Pay Equity Act goes into effect July 1, 2018, and in addition to equal pay requirements, it makes it illegal, among other things, to: (1) require that an employee refrain from inquiring about, discussing or disclosing information about his or her wages, or any other employee’s wages; (2) screen job applicants based on their wages; (3) request or require a candidate to disclose prior wages or salary history; or (4) seek the salary history from a current or former employer, unless he/she provides express written consent, and an offer of employment, including proposed compensation, has been extended.

Effective May 23, 2017, the city of Philadelphia with its Fair Practices Ordinance: Protections Against Unlawful Discrimination will make it unlawful for employers to inquire about a candidate’s wage history during the hiring process, unless a federal, state, or local law specifically authorizes the disclosure or verification of wage information.

Drug testing – marijuana

According to the National Conference of State Legislatures (NCLS), 31 states/jurisdictions (Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Guam, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington) have public medical marijuana and cannabis programs, while several states (Alaska – Ballot Measure No. 2; California – Proposition 64; Colorado – Amendment 64; District of Columbia – Initiative 71; Maine – Question 1; Massachusetts – Question 4; Nevada – Question 2; Oregon – Measure 91; and Washington Initiative 502) have passed laws allowing for the recreational use of marijuana by adults. Since the legal landscape for marijuana use is changing rapidly, employers should review and update their substance abuse policies, including drug-testing. Notably, marijuana remains a Schedule I drug under the federal Controlled Substances Act.

Work authorization verification

California’s SB 1001 is a revival of the 2015 AB 1065, which effective January 1, 2017, makes it unlawful for employers to:

Request additional or different documents than those required under federal law to verify that an individual is not an unauthorized immigrant
Refuse to accept documents provided by the applicant that reasonably appear to be genuine
Refuse to honor documents or work authorization based on specific status or term that accompanies the authorization to work
Attempt to reinvestigate or re-verify a candidate’s authorization to work using an unfair immigration-related practice.

Effective January 1, 2017, Tennessee’s SB 1965 requires that companies with 50 or more employees use the federal E-Verify program to confirm new employees’ work authorization.

As a reminder, starting January 22, 2017, all employers must use the new Form I-9, which is dated November 14, 2016 (the edition date is on the bottom of the form). Employers that fail to use the new form may be subject to civil penalties.

|Employment Decisions, FCRA, Legislation, Risk Management|

Mini FCRA update: Georgia enacts new law, California law mired in uncertainty

Enacted in 1970, the Fair Credit Reporting Act (FCRA) provides federal regulation of consumer reporting agencies that provide consumer reports to third parties.

In the 45 years since the FCRA took effect, several states have passed their own version of the statute to provide additional protections for consumers. Colloquially referred to as “mini” FCRAs, the laws can be found in Arizona, California, Maine, Massachusetts, Minnesota, New Jersey, New York, Oklahoma, and Washington.

Joining the group: Georgia, where House Bill 328 took effect on July 1. The new law applies to consumer reporting agencies (CRAs) that “conduct business” within the state, defined as those entities that “provide information to any individual, partnership, corporation, association, or any other group however organized that is domiciled within this state or whose principal place of business” is located within Georgia’s borders.

A CRA encompasses any person or entity “which, for monetary fees or dues or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties.”

For its part, a consumer report broadly includes “any written, oral, or other communication of any information bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for purposes of credit, insurance, or employment.”

As it closely tracks the federal FCRA, Georgia’s law provides that a CRA that furnishes consumer reports for employment purposes in compliance with the federal statute will be in compliance with the state version.

While Georgia’s new law already took effect, other states have struggled with application of their mini FCRAs.

For example, in 2013, a federal court judge California ruled that one of the state’s two FCRA corrollaries, the Investigative Consumer Reporting Agencies Act (ICRAA), was unconstitutionally vague in Roe v. LexisNexis Risk Solutions, Inc. The case involved an anonymous plaintiff who sued when she failed to obtain employment. She argued she didn’t get the job as a result of an allegedly inaccurate background check furnished by the defendant to her prospective employer in violation of both the FCRA and the ICRAA.

The defendant argued that the ICRAA was unconstitutionally vague as applied and the court agreed. In addition to the FCRA and the ICRAA, California had previously enacted the Consumer Credit Reporting Agencies Act (CCRAA), a law that governs consumer credit checks. The interplay between the CCRAA and ICRAA resulted in confusion for covered entities, the court found, as criminal background information about consumers was regulated by both laws, leaving companies uncertain about which statute’s requirements actually applied.

Although the plaintiff appealed the decision to the Ninth Circuit Court of Appeals, the federal appellate panel dismissed the appeal for procedural reasons; on remand, the federal district court later dismissed the case with prejudice in December 2013. However, the opinion in Roe remains valid law in the state, leaving a shadow of uncertainty hanging over the ICRAA.

Read Georgia’s House Bill 328.

Read Roe v. LexisNexis Risk Solutions, Inc.

|Employment Decisions, FCRA|

California’s marijuana laws present challenges for employers

Even for those not partaking in marijuana, the various California laws regulating its use can be confusing – particularly for employers.

The trend in state legislatures to permit the recreational and/or medicinal use of marijuana began with California’s Compassionate Use Act in 1996, which allowed state residents to use the drug for medical purposes and decriminalized possession of less than 28 grams. Complicating the matter, however: marijuana use remains prohibited by federal law.

With limited use of marijuana legal in the state, how can employers find out about a worker’s use of the drug or limit it without running afoul of state law?

Employers have two options, either try to get their hands on historical information, such as criminal convictions, or seek out current input via drug testing.

Criminal history related to drugs in many instances is off-limits for employers. Job applicants cannot be required to disclose an arrest that did not result in a conviction or participation in a pretrial or post-trial diversion program. Any criminal history that has been expunged, sealed, or dismissed will be unavailable as are marijuana-related convictions dating back more than two years.

While California has not banned the box for private employers, local jurisdictions such as San Francisco have, requiring employers to wait until after a live interview or determining that an applicant meets the qualifications for the position before inquiring into criminal history. Background checks – whether performed in-house or by a third party – require compliance with federal law (the Fair Credit and Reporting Act (FCRA) as well as California’s counterpart, the Investigative Consumer Reporting Agencies Act (although the legality of the state statute is unclear, see story below for more detail). And such investigations into applicants’ history are a current target for the Equal Employment Opportunity Commission – which has filed multiple lawsuits (https://scherzer.co/eeoc-loses-again-in-challenge-to-background-checks/) against employers alleging their background checks constitute disparate impact discrimination against protected groups like African-Americans – and a popular basis for class actions. Recent cases have settled with multi-million awards, including a $2.5 million payout by Domino’s Pizza and a $6.8 million deal between Publix Super Markets and a class of applicants alleging the company violated the FCRA.

Drug tests can be viable option for employers. Once a job offer has been made, an employer may require an applicant to pass a drug test as a condition of employment (as long as all potential employees are subject to the same requirement). After a worker has been hired, drug tests may be used if an employer has a reasonable suspicion that the employee is under the influence. Certain jobs – such as those in the transportation industry like truck drivers – may permit such testing more freely. If a test comes back positive, employers do have the discretion to discipline, terminate, or choose not to hire an applicant even if the individual legally holds a medical marijuana card issued by the state. In addition, despite the requirements under the Americans With Disabilities Act and California state law to provide reasonable accommodations to employees considered disabled, neither federal nor state law requires employers to permit marijuana use as such an accommodation.

|Criminal Activity, Employment Decisions|

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.

|Employment Decisions, Lawsuit|

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.

|Employment Decisions|

California expands privacy protections for state residents

A perennial trendsetter with regard to data security and privacy, California has updated its state law with tweaks that expand the scope of the privacy protections for state residents.

A.B. 1710 made three changes to existing law that go into effect January 1, 2015: first, businesses that maintain “personal information” about California residents must “implement and maintain appropriate and reasonable security procedures and practices” to protect the data from “unauthorized access, destruction, use, modification, or disclosure.” Personal information is defined to include an individual’s first name or first initial and last name, Social Security number, driver’s license number, as well as medical and financial account information.

Second, if a person or business was “the source” of a data breach and offers to provide identity theft prevention and mitigation services to affected individuals, the business must offer the services at no cost for at least 12 months. Some controversy has swirled around this provision, with debate on whether the language actually requires businesses to provide one year of free identity theft protection and mitigation services or if the law simply requires that if the services are offered, they last for 12 months and are provided gratis. Additional guidance may be forthcoming.

Finally, the new legislation prohibits a business from “selling, offering for sale, or advertising for sale” Social Security numbers. Limited exceptions were noted in the bill, including “if the release

[not necessarily a sale] of the Social Security number is incidental to a larger transaction and is necessary to identify the individual in order to accomplish a legitimate business purpose” or “for a purpose specifically authorized or specifically allowed by federal or state law.”

The law’s scope reaches well beyond the borders of California, as it applies to businesses that maintain any personal information about a state resident. Companies would be well advised to familiarize themselves with the new requirements.

To read AB 1710, click here.

|Legislation, Privacy|

California’s A.B. 1710 enhances privacy protections for sensitive personal information

Effective January 1, 2015, A.B. 1710 amends California’s breach notification, security procedures, and Social Security number (SSN) laws, generally outlined as follows:

provides that existing personal information data security obligations apply to businesses that maintain personal information, in addition to those who own or license the information;
provides that if the person or business issuing the notification was the source of the breach, an offer to provide appropriate identity theft prevention and mitigation services, if any, be made at no cost to the affected person for not less than 12 months, along with all information necessary to take advantage of the offer to any person whose information was or may have been breached, if the breach exposed or may have exposed SSN and driver’s license numbers;
provides that a person or entity may not sell, advertise for sale, or offer to sell an individual’s SSN, except as permitted.

|Legislation, Security|

New law bans California employers from asking about dismissed criminal records

Effective January 1, 2014, SB 530, will ban most California employers from asking employees or applicants about arrests that did not result in conviction (except for arrests for which the individual is still awaiting trial) or about participation in a pretrial or post trial diversion program. Generally, the new law prohibits most employers from asking applicants to disclose, or use as a factor in employment decisions, any information concerning a conviction that has been judicially dismissed or ordered sealed.

|Employment Decisions, Legislation|

California passes two new data privacy laws

Effective January 1, 2014, California will have two new data privacy laws: AB 370, which mandates disclosure of “do not track” and other tracking practices in online privacy policies, and SB 46, which amends the state’s data security breach notification law.

AB 370 adds to the California Online Privacy Protection Act (“CalOPPA”) a requirement for companies that collect personally identifiable information online to include disclosures regarding (1) how they respond to a web browser’s “do not track” (DNT) signal, and (2) if third-parties can collect personal information across a network of sites. The law does not require websites to honor browser DNT signals or block third-party tracking; it simply tries to increase transparency about the site’s practices.

SB 46 adds a new category of data triggering California’s breach notification requirements, to wit: “a user name or e-mail address, in combination with a password or security question and answer that would permit access to an online account.” The new law requires notification of unauthorized access to user credential information even if that information is encrypted.

|Educational Series, Legislation, Privacy|

Tenant screening laws update: passing background check costs to the applicants

The states of Washington and Oregon recently enacted laws in connection with tenant screening. Among the provisions in both Washington’s RCW §59.18.257 and Oregon’s OAS §90.295, is that the entire cost of the background check can be charged to the applicant, if the screening is performed by a consumer reporting agency (“CRA”). However, if the landlord conducts the background check, it may not charge in excess of the customary fees of the CRAs in its geographical area.

Notably, California’s Civil Code §1950.6(b) provides that a landlord cannot charge (or pass-through) to the applicant more than $30 for a background check. This application screening fee may be adjusted annually by the landlord or its agent commensurate with an increase in the Consumer Price Index. (The current adjusted amount is $41.50.)

|Business Transactions, Legislation|

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