Employment Decisions

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.

January 2nd, 2017|Employment Decisions, FCRA, Legislation, Risk Management|

Employers in New Jersey may face tougher restrictions for employment credit checks

Assembly Bill A2298Â which prohibits employment discrimination against a current or prospective employee based on information in a credit report advanced to a second reading on December 14, 2015. The proposed legislation prohibits an employer from requiring a credit check on a current or prospective employee, unless the employer is required to do so by law, or reasonably believes that an employee has engaged in a specific activity that is financial in nature and constitutes a violation of law. The bill does not prevent an employer from performing a credit inquiry or taking action if credit history is a bona fide occupational qualification of a particular position or certain employment classifications. An earlier version of the legislation passed the Senate in May 2012 in a 22-16 vote but was never voted on in the full Assembly.

December 22nd, 2015|Employment Decisions, Legislation|

Portland’s new ban-the-box law goes beyond Oregon’s version

Effective July 1, 2016, covered Portland businesses will be prohibited from asking job applicants about their criminal history or accessing such records until after a conditional offer has been extended. The city’s legislation goes beyond the state’s law, which beginning January 1, 2016, prohibits Oregon businesses, unless exempted, from including criminal history questions during the preliminary hiring stages, but allows the inquiries during the interview process.

Just as with Oregon’s ban-the-box law, businesses within the city of Portland are excluded from coverage when hiring for certain positions, which include law enforcement, criminal justice, and working with children, the elderly, people with disabilities, and other groups considered vulnerable.

December 22nd, 2015|Legislation|

Philadelphia expands its ban-the-box ordinance

On December 15, 2015, Philadelphia Mayor Michael Nutter signed Bill 150815 expanding the city’s ban-the-box legislation. The new ordinance, which goes into effect on or about March 14, 2016, amends Chapter 9-3500 of the Philadelphia Code entitled “Fair Criminal Records Screening Standards,” by modifying certain definitions and adding additional requirements regarding the screening of job and license applicants for criminal history. With limited exceptions, the new ordinance applies to employers having any employees within the city of Philadelphia. (The prior ordinance covered employers with 10 or more employees.) The highlights of the law include:

questions about criminal records must be removed from the job application–the ordinance specifically notes that multi-state applications may not include the question with a disclaimer for Philadelphia applicants not to answer;
employment materials cannot contain questions or refer to the applicant’s willingness to submit to a background check before a conditional offer has been extended;
criminal record inquiries must be postponed until after a conditional offer has been made;
notice of the background check must state that any consideration of the results will be tailored to the job;
employment decisions can only include a conviction that occurred less than seven years ago–employers may add to the seven year period any time of actual incarceration served because of the offense;
screening process must include individualized assessment for each applicant;
if the applicant is rejected based on a criminal conviction, he/she must be advised of the specific reason and provided with a copy of the record.

December 22nd, 2015|Educational Series, Employment Decisions|

Importance of background checks in employment decisions

Performing a background check as part of the hiring process, promotion, or retention in today’s world is essential. Stakeholders expect it. Regulators mandate it.

In a turbulent economy, the pool of job candidates is greater than ever and misrepresentations abound. For many firms, once an offer of employment has been extended, it is common practice to check the candidate’s background. Depending on the risk level of the position and its requirements, background checks can run the gamut from reference calls done internally, to using a consumer reporting agency to perform comprehensive searches to determine the existence of potentially negative information, such as criminal matters, civil litigation, bankruptcy filings, tax liens, judgments, regulatory actions, driving violations, and adverse media publicity, and to verify academic, licensing, employment and other professional qualifications and claims.

The law is clear–an employer who hires or retains a dangerous or incompetent employee can be held liable for that employee’s wrongful acts, if committed in the course and scope of his or her employment. The theories of negligent hiring and retention go even further–someone who is injured by an employee can sue the employer even if the employee’s conduct is outside of the employer’s control. For instance, one court found the owner of an apartment complex liable for a handyman’s assault of a tenant after working hours. The liability existed because the owner failed to screen the handyman’s background, which included a long list of violent crimes.

Underpinning the negligent hiring and retention theories is the negligence of the employer—that is, the employer knew or should have known the employee was unfit for the job, posed an unreasonable risk of harm to others, and did nothing about it. Virtually every state recognizes these theories as causes of action, or if not, has a similar legal theory. One of the best ways to reduce the risk of negligent hiring and retention liability is to perform adequate background checks as part of the hiring process and in connection with promotions or retention.

A well-designed background screening program that is compliant with applicable laws and regulations makes good business sense, as an individual’s prior history is often a predictor of future performance, workplace behavior and cultural fit. Various studies have shown that the cost of a bad hire is one to five times the salary of the job in question, considering the direct and indirect cost involved in recruiting, hiring, training, development, administration, management, and potential litigation, as well as the wasted wages and benefits. Comprehensive background screening can help identify individuals who may have a propensity for violence, theft, fraud, dishonesty, substance abuse, absenteeism, and other misconduct, and at the same time, find the candidates that can make the employer more successful.

Many employers are also required by government regulation, their insurance carriers, and/or their clients to conduct background checks. A comprehensive background check is clearly worth the investment. Employers never want to say “we should have known,” as an uninformed employment decision can result in significant financial losses and quickly tarnish an employer’s reputation.

November 5th, 2015|Educational Series, Employment Decisions|

Oregon bans the box

Oregon became the eighth state to ban the box after the state legislature passed House Bill 3025 and Governor Kate Brown signed the bill into law on June 26.

Beginning January 1, 2016, employers in the state may not require an applicant to disclose a criminal conviction on an employment application or at any time prior to an initial interview. If no interview takes place, disclosure may not be mandated prior to a conditional offer of employment. That means employers are only permitted to ask about criminal convictions during an interview or after it occurs.

Employers must notify an applicant that they will be subject to a criminal background check or required to disclose any convictions but “nothing in [the law] prevents an employer from considering an applicant’s conviction history when making a hiring decision” as long as the employer times the questions in compliance with the statute.

HB 3025 applies to all employers in the state with just four exceptions. Law enforcement agencies, employers in the criminal justice system, and employers seeking “a nonemployee volunteer” are all exempt. Positions where federal, state, or local law requires consideration of an applicant’s criminal history are also not covered by the statute.

Tasked with enforcement: the Oregon Commissioner of the Bureau of Labor and Industries. The law did not create a private right of action allowing individuals to file suit. Importantly for employers in the state, the legislature elected not to preempt municipalities from enacting their own stricter version of the law. For example, the Portland City Council is currently considering its own take on a “ban the box” law that would apply to employers in the city.

Oregon’s passage of the measure adds the state to the fast growing list of jurisdictions to ban the box. There are over 100 cities and counties, and 18 states representing nearly every region of the country that have adopted the policies — California (2013, 2010), Colorado (2012), Connecticut (2010), Delaware (2014), Georgia (2015), Hawaii (1998), Illinois (2014, 2013), Maryland (2013), Massachusetts (2010), Minnesota (2013, 2009), Nebraska (2014), New Jersey (2014), New Mexico (2010), Ohio (2015), Oregon (2015), Rhode Island (2013), Vermont (2015), and Virginia (2015). Six states—Hawaii, Illinois, Massachusetts, Minnesota, New Jersey, and Rhode Island—have removed the conviction history question on job applications for private employers, which advocates embrace as the next step in the evolution of these policies.

Federally, the U.S. Equal Employment Opportunity Commission (EEOC) endorsed removing the conviction question from the job application as a best practice in its 2012 guidance making clear that federal civil rights laws regulate employment decisions based on arrests and convictions.

Employers should keep a close eye on their local authorities to ensure continuing compliance as the list of jurisdictions continues to grow.

Read House Bill 3025.

September 23rd, 2015|Employment Decisions|

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.

September 23rd, 2015|Criminal Activity, Employment Decisions|

DOL offers new guidance on old question of employee or independent contractor

For the last few years, one of the top priorities for the Department of Labor (the “DOL”) has been the fight against the misclassification of employees as independent contractors. In the agency’s latest effort, it released new guidance for employers when classifying workers, using six factors to consider.

The Administrator’s Interpretation 2015-1 focuses on the issue of whether the worker is “economically dependent on the employer or truly in business for him or herself.” The more the worker relies upon an employer for income stream, business skills, and supplies, the more likely he or she is an employee – and entitled to all of the benefits included in that classification, such as overtime or worker’s compensation.

In “The Application of the Fair Labor Standards Act’s ‘Suffer or Permit’ Standard in the Identification of Employees Who Are Misclassified as Independent Contractors,” the DOL started with the Fair Labor Standards Act’s (the “FLSA”) definition of “employ:” “to suffer or permit to work.” Under this broad definition, “most workers are employees,” the agency stated unequivocally.

With that in mind, the DOL turned to the six factors of the economic realities test commonly used by courts when considering whether a worker is an employee or an independent contractor. The agency noted that the labels used by an employer are not determinative of the nature of the relationship and neither are tax filings.

“All of the factors must be considered in each case, and no one factor (particularly the control factor) is determinative of whether a worker is an employee,” the DOL wrote. “Moreover, the factors themselves should not be applied in a mechanical fashion, but with an understanding that the factors are indicators of the broader concept of economic dependence. Ultimately, the goal is not simply to tally which factors are met, but to determine whether the worker is economically dependent on the employer (and thus its employee) or is really in business for him or herself (and thus its independent contractor).”

Is the work an integral part of the employer’s business? If a worker is economically dependent upon the employer, he or she is likely an employee, while a “true independent contractor’s work, on the other hand, is unlikely to be integral to the employer’s business.” Recognizing the increasing use of telecommuting and other flexible work schedules in today’s economy, the DOL added that work can be integral even if it is performed away from the employer’s premises.

The second factor considers whether the worker’s managerial skill affects the worker’s opportunity for profit or loss. A worker in business for him or herself not only has the opportunity to profit but also to experience a loss, the DOL explained. The question isn’t whether a worker is on the job more hours or earns more money but if the worker makes decisions and exercises skill and initiative – hiring other workers or advertising his services, for example – to move the business forward.

In the third factor, the worker’s relative investment as compared to the employer’s investment should be evaluated. “The worker should make some investment (and therefore undertake at least some risk for a loss) in order for there to be an indication that he or she is an independent business,” according to the guidance. Simply purchasing tools or other equipment may not constitute an investment, the agency added, when considered relative to the employer’s investment.

Fourth: does the work performed require special skill and initiative? Technical skills alone will not indicate that a worker is an independent contractor, the DOL said. Instead, business skills, judgment, and initiative should be evaluated. For example, a highly skilled carpenter who provides his services to a construction company may simply be providing skilled labor as an employee. On the other hand, if the carpenter decides which jobs to take, advertises his services, and determines what materials to order, he is more likely to be classified as an independent contractor.

The length of the relationship between the worker and the employer is the focus of factor five. A permanent or indefinite relationship signals an employee, the DOL said. “After all, a worker who is truly in business for him or herself will eschew a permanent or indefinite relationship with an employer and the dependence that comes with such permanence or indefiniteness,” the agency wrote. The length of time should be considered in the context of the industry, however – seasonal positions may not always indicate an independent contractor relationship, for example.

In the sixth factor, the DOL advised employers to think about control. While the control factor should not receive more weight than the other factors in the economic realities test, the nature and degree of the employer’s control should be considered in light of the ultimate determination whether the worker is economically dependent on the employer or an independent contractor. Employers do not need to look over a worker’s shoulder every day to make them an employee, the guidance cautioned, as technological advancements permit many employees to work off-site and unsupervised.

Employers should review the new guidance and be prepared for agency oversight on the issue of worker classification, keeping in mind that the DOL repeatedly emphasized that “most workers are employees.”

Read the Administrator’s Interpretation No. 2015-1.

September 23rd, 2015|Educational Series, Employment Decisions|

Revised FCRA Summary of Rights form released

Did you know that a revised version of the Fair Credit Reporting Act (the “FCRA”) Summary of Rights form was released a few months ago?

If the answer is “no,” don’t worry. The form was not published in the Federal Register and appeared under the radar without an announcement.

The FCRA mandates that employers are required to provide a disclosure and obtain written authorization from any applicant or employee prior to conducting a background check. If the employer decides to take an “adverse action” against the applicant or employee based on the results of the background check, the employer must provide the individual with a copy of the background check and the Summary of Rights form under the FCRA.

The revised form does not require a lot of adjustments for employers. Some of the government addresses found on the last page were changed and all references to Maine’s laws were removed. Earlier this year, the state repealed its mini-FCRA to adopt the federal FCRA.

View the new Summary of Rights form.

September 23rd, 2015|Educational Series, Employment Decisions|

EEOC loses – again – in challenge to background checks

In the latest blow to the Equal Employment Opportunity Commission’s (the “EEOC”) attempts to regulate employers’ use of background checks, the Fourth U.S. Circuit Court of Appeals threw out a case in a scathing opinion that expressed disappointment in the agency’s litigation conduct.

The controversy began in April 2012, when the EEOC released guidance on the issue of criminal background checks for employers. The “Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964” emphasized that while the use of criminal history does not violate the statute per se, an employer may run afoul of the law if the checks result in systemic discrimination based on a protected category like race, color, national origin, religion, or sex.

As an alternative, the agency suggested employers strive to perform individualized assessments of prospective employees, and consider factors such as the nature of the crime and its relation to the potential job, as well as the individual’s rehabilitation efforts and the length of time that has passed since the conviction.

The EEOC then followed up with multiple lawsuits alleging that certain employers engaged in the discriminatory use of background checks, disproportionately screening out African-American workers in cases filed against BMW Manufacturing in South Carolina, Dollar General in Illinois, Kaplan Higher Education Company in Ohio, and Freeman Company in Maryland.

To date, all of the lawsuits have been dismissed and the agency has faced criticism about its efforts to pursue such cases from both industry and lawmakers. The most recent critic: the Fourth Circuit.

In the agency’s case against Freeman Company, the EEOC alleged the company’s use of criminal background checks for all applicants and credit checks for “credit sensitive” positions had an unlawful disparate impact on black and male job applicants. To support its case, the agency produced expert reports by an industrial/organizational psychologist. But the federal district court granted summary judgment for Freeman, finding the psychologist’s reports “rife with analytical errors” and “completely unreliable.”

The Fourth Circuit affirmed the ruling, identifying “an alarming number of errors and analytical fallacies” in the reports, “making it impossible to rely on any of his conclusions.” Freeman provided complete background screening logs for thousands of applicants to the EEOC but the psychologist “cherry-picked” data, the court said, omitting information from half of the company’s branch offices while purporting to analyze all the background checks, and further failed to utilize an appropriate sample size, selecting the vast majority of data to focus on before October 14, 2008.

Although the relevant time period extended to August 31, 2011 and Freeman conducted over 1,500 criminal checks and more than 300 credit reviews between October 14, 2008 and August 31, 2011, the psychologist used data from only 19 applicants during that time, just one of whom passed the check.

A “mind-boggling number of errors and unexplained discrepancies” existed in the psychologist’s database, the panel added, rejecting the EEOC’s argument that the mistakes originated in Freeman’s data. The psychologist introduced the errors, the court said, and further managed to introduce fresh errors when he tried to supplement his original reports with corrections.

“The sheer number of mistakes and omissions in the analysis renders it “outside the range where experts might reasonably differ,” the three-judge panel wrote. One of the panelists added a concurring opinion expressing concern with the “EEOC’s disappointing litigation conduct” and continued efforts to defend the psychologist’s work despite other courts reaching similar conclusions about his reports.

“The Commission’s conduct in this case suggets that its exercise of vigilance has been lacking,” according to the concurring opinion. “It would serve the agency well in the future to reconsider how it might better discharge the responsibilities delegated to it or face consquences for failing to do so.”

With public criticism, zero litigation victories, and a counterargument from one defendant that its background check procedures are the same as those conducted by the agency itself, the Fourth Circuit’s decision does not bode well for the future of EEOC challenges to background checks. That said, employers should still be cautious and utilize background reports in a non-discriminatory manner.

Read the EEOC guidance.

Read the opinion in EEOC v. Freeman.

May 8th, 2015|Employment Decisions|

Previous 123 Next