Employment Decisions Archives

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 Earlier this year, the state repealed its mini-FCRA to adopt the federal FCRA.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|

Going global: international background checks

As the business world increasingly goes global, even small or medium-sized companies may have international outposts or employees located beyond the U.S. border. In addition, with security – both physical and digital – an important issue, employers want to know everything they can about their employees.

Many employers are turning to international background checks. But a criminal record or a credit report like those used in the United States can get lost in the translation.

First up: cultural norms. What may seem perfectly routine and acceptable in the United States may confuse or offend those in other countries. For example, things like credit checks and drug tests are virtually unheard of abroad and cultural differences may yield what might by American standards be unusual answers in a personality test. A second important consideration: the law. Just as the U.S. has the Fair Credit Reporting Act (FCRA) and other regulations setting the boundaries of background checks, foreign jurisdictions have their own laws of the land. The French Labor Code, for example, requires that its “works council” review employment screening procedures prior to an employer’s use.

One huge legal complication can be found in the area of privacy law. The European Union imposes restrictions on obtaining information about employees or applicants, the way in which such information can be used, and how the information can be shared or transmitted. To alleviate some of the liability concerns, the U.S. has entered into a Safe Harbor framework with the European Commission, which requires compliance with seven principles of data security. And while the EU leads the pack, other countries (like Australia, Canada, Hong Kong, and Japan) also pose challenges with their strict regulation of privacy.

Having an applicant sign a consent form to release information may be of little help as several EU countries also recognize a presumption against enforcement of such agreements on the basis that employees and applicants have limited bargaining power in the employment context. Alternatively, employers may have better luck by having applicants do the work themselves, providing their own background information to avoid implicating data privacy laws. Of course, this raises authentication and accuracy questions.

The collection of criminal information can also present logistical challenges. Many countries do not have an organized court system, and records, if available, may have to be searched on a regional or town-by-town basis, or at multiple agencies (like the police, the court venue and a government agency, for example). Certain countries offer what is known as a “police certificate” which will confirm the information about an applicant found in police records. Some countries, like Poland, have banned the collection of criminal records altogether; Spain prohibits the possession of records but an applicant could, in theory, show an employer his or her record.

If the screening is being conducted by a consumer reporting agency located in the United States, the FCRA requirements also come into play. International background checks are not impossible, but they do pose a number of legal and cultural risks that can be tackled with the right planning and professional assistance from an experienced background screening company.

February 23rd, 2015|Criminal Activity, Educational Series, Employment Decisions, Fraud|

Background screening of independent contractors

The issue of worker misclassification is a hot topic for employers, with state and federal authorities as well as class action suits challenging whether a worker is an employee or an independent contractor. But what about the differences in background screening for independent contractors? Are they subject to the same disclosure and authorization requirements, adverse action notices, and dispute rights that apply to employees?

The answer: it depends.

While the Fair Credit Reporting Act (FCRA) doesn’t directly address independent contractors, the Federal Trade Commission (FTC) has issued two advisory opinions stating that they should be afforded the same rights as employees. The FTC also reiterated this view in its staff report published in July 2011, stating that the FCRA’s broad definition of the term “employment purposes” extends beyond traditional employment relationships. (FTC Staff Report at 32.)

The Allison Letter (a response to an inquiry from a Georgia worker named Herman L. Allison) addressed the issue in the context of a trucking company that hired drivers who owned and operated their own equipment. Characterizing the situation as a “business relationship” and not an “employment relationship,” Allison asked whether the protections of the FCRA still applied.

Taking a broad interpretation of the term “employment,” the FTC said that treating independent contractors differently than employees would hamper the goals of the FCRA. Even a homeowner who conducts a background check on a handyman or other worker hired as an independent contractor should follow the FCRA requirements, the agency wrote.

In a second letter, the FTC considered a query from Harris K. Solomon, an attorney in Florida. A client wished to conduct background checks on individuals selling its insurance products and handling title exams. Again, the agency said the checks would trigger the requirements of the FCRA.

The FTC’s advisory letters – both issued in 1998 – as well as the staff report, are advisory and non-binding on other parties. But they provide insight into how federal authorities would address the rights and protections owed to an independent contractor as the subject of a background check.

However, on the other end of the spectrum, a Wisconsin federal court judge in 2012 held that the disclosure obligations of the FCRA do not apply to independent contractor relationships. The case involved a sales rep who sued EMS Energy Marketing Service after he was terminated. The plaintiff claimed that the company failed to provide him with either the written notice of his rights or a copy of the report as required by the statute. But the court granted summary judgment for the employer, ruling that Lamson was hired as an independent contractor, not an employee, and therefore, the FCRA did not apply. The language of the statute refers only to employees and if a worker is not an employee “it necessarily follows that he or she is not covered by the FCRA,” the court wrote in Lamson v. EMS Energy Marketing Service. The court also distinguished the FTC letters as advisory opinions, adding that the “letters, in and of themselves, are of limited, if any, persuasive power.”

To read the Allison Letter, click here.

To read the Solomon Letter, click here.

December 3rd, 2014|Employment Decisions|

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|Employment Decisions, Legislation|

Cities of Rochester, NY and Baltimore, MD join fast growing list of ban-the-box jurisdictions

Effective November 18, 2014, the City of Rochester, New York ordinance no. 2014-0155 will prohibit employers from requiring applicants to disclose any criminal conviction information during the application process. The employer may inquire about a criminal conviction only after the initial interview. And if the employer does not conduct an interview, it must inform the applicant whether a criminal background check will be performed, before employment is to begin. Additionally, it must wait until after a conditional job offer has been extended before conducting the criminal check or otherwise inquiring into the applicant’s criminal history. The ordinance applies to any position where the primary place of work is located within Rochester, and to any city employees (except fire or police) or vendors regardless of location. Excluded from the ordinance are criminal record inquiries that are authorized by another applicable law.

Baltimore’s Fair Criminal-Record Screening Practices ordinance, which becomes effective August 13, 2014, similarly bans private employers from inquiring about or conducting criminal checks on applicants until a conditional offer has been extended. The ordinance applies to any employer with 10 or more employees within the city of Baltimore, but excludes entities serving minors or vulnerable adults. Unlike some other ban-the-box laws, the Baltimore ordinance does not require that employers provide additional notices to applicants other than those required under the Fair Credit Reporting Act.

For more information on ban-the-box legislation,see the recently published briefing paper by the National Employment Law Project titled Statewide Ban the Box–Reducing Unfair Barriers to Employment of People with Criminal Records.

July 9th, 2014|Employment Decisions, Legislation|

Reminder that EEOC’s guide on criminal checks extends to contractors and subcontractors

The guidance issued in 2012 by the Equal Employment Opportunity Commission’s (EEOC) on using criminal checks in employment decisions was also incorporated into the directive of Office of Federal Contract Compliance Programs (the “OFCCP”). As provided in the EEOC guidance, the OFCCP discourages the use of blanket hiring exclusions against individuals with criminal records, and recommends that contractors follow the EEOC’s best practices for employers to avoid liability for discrimination. The OFCCP advises that contractors, as a general rule, refrain from inquiring about convictions on job applications, and if such inquires are made, “limit the inquiries to convictions that demonstrate unfitness for the particular position.”

May 14th, 2014|Employment Decisions|

Class actions against employers for violations of the FCRA are increasing

An auto parts company (CA USDC Case No. 2:14-cv-3470) and a hotel chain (CA USDC Case No. 3:14-cv-01089) are just the latest employers that have been slapped with class action lawsuits for alleged violations of the Fair Credit Reporting Act (the “FCRA”) charging willful non-compliance with the FCRA’s disclosure, authorization, and/or notice requirements. And the payouts in such lawsuits can be in the millions. Within the past three years, a national trucking company reached a settlement for $4.6 million, a national retail chain for $3 million and a national pizza maker for $2.5 million.

The FCRA allows an applicant or employee to bring a private right of action against an employer who negligently or willfully fails to comply with any of the FCRA’s requirements. Under the statute of limitations, an action must be brought by the earlier of (1) two years after the date of violation discovery by the plaintiff, or (2) five years after the date on which the violation occurred. The employer’s liability for negligent non-compliance is actual damages sustained by the applicant/employee, and reasonable attorneys’ fees and costs. A willful violation carries actual or statutory damages ranging between $100 and $1,000, punitive damages, and attorneys’ fees and costs.

Below are general FCRA compliance reminders to employers when procuring and using background check reports prepared by a consumer reporting agency (“CRA”):

Provide disclosure to the applicant/employee in a standalone document that a consumer report may be obtained and used for employment purposes (language must be clear, with no superfluous information or liability waiver, and separate from the employment application);
Provide to the applicant/employee a summary of rights under the FCRA and applicable state notices;
Obtain the applicant/employee’s authorization for the consumer report;
Before taking adverse action based on the report (1) provide a pre-adverse action notice to the applicant/employee along with a copy of the report, and notices of rights, if not given previously, (2) wait a reasonable period of time (at least 5 days) before taking the adverse action, and (3) after deciding to take the adverse action, provide a notice that contains the FCRA required information, such as the name, address, and telephone number of the CRA that provided the report.

May 14th, 2014|Employment Decisions, Judgment, Lawsuit|

San Francisco enacts ordinance for using criminal records in employment decisions

Effective August 13, 2014, under San Francisco’s Fair Chance Ordinance, companies with 20 or more employees are prohibited from inquiring about an applicant’s criminal history on the employment application or during the first live interview. Along with banning the box, the ordinance imposes several additional restrictions and mandates certain considerations for individualized assessment. San Francisco employers must also ensure that their notice and consent forms for criminal background inquiries later in the process comply with the guidelines that will be published by San Francisco’s Office of Labor Standards Enforcement (OLSE) as well as with the already existing background check disclosure/authorization requirements under California’s ICRAA and the FCRA.

San Francisco is the ninth jurisdiction with legislation that affects private employers. The remaining eight are the states of Hawaii, Massachusetts, Minnesota, Rhode Island, and the cities of Buffalo, NY, Newark, NJ, Philadelphia, PA, and Seattle, WA. Multi-state employers should consider whether their particular circumstances warrant adopting individualized employment applications for jurisdictions with ban-the-box laws, or whether to use a nationwide standard form. Employers who opt for a standard electronic application for all locations need to include a clear and unambiguous disclaimer for applicants in each applicable ban-the-box jurisdiction. It is uncertain whether such disclaimers are sufficient for paper applications of multi-state employers in at least one ban-the-box jurisdiction (Minnesota) or if the box must be removed altogether.

For more information on ban-the-box legislation, see the recently published briefing paper by the National Employment Law Project titled Statewide Ban the Box – Reducing Unfair Barriers to Employment of People with Criminal Records.

Note: Effective August 13, 2014, with our California employment-purpose disclosure/ authorization form, we will be including a supplemental disclosure/authorization notice as prescribed by the OLSE, to use by San Francisco employers.

March 28th, 2014|Criminal Activity, Employment Decisions|

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.

December 10th, 2013|Employment Decisions, Legislation|

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