Employment Decisions Archives

Employment decisions refer to any employer actions that determine, influence, or change the terms, conditions, or outcomes of employment. This includes decisions about recruitment, hiring, promotion, reassigning, evaluating performance, disciplining, terminating, setting wages, or assigning work hours. These decisions are legally significant because they must comply with federal and state employment laws, including anti‑discrimination rules enforced by the EEOC.

When employment meets antitrust

Can employers be criminally liable for antitrust violations? According to the Department of Justice (DOJ), the answer is yes.

Violations of antitrust law in the employment context have made headlines in recent years, as the government has cracked down on “no-poach” and “salary-fixing” agreements between companies. Taking the issue increasingly seriously, the DOJ issued guidance promising to bring criminal charges against employers for such illegal conduct.

First, some background. From an antitrust perspective, greater competition among employers not only helps employees – who can negotiate for higher wages or better benefits between companies – but also benefits consumers more generally. Therefore, Section One of the Sherman Act prohibits employers from expressly or implicitly agreeing not to compete with one another, even for seemingly innocuous and beneficial reasons (like saving money).

Demonstrating the government’s interest in employment antitrust violations, the DOJ filed suit in 2010 against Adobe Systems, Apple, eBay, Google, Intel, Intuit, Lucasfilm, and Pixar, accusing the companies of promising not to recruit each other’s employees. While the cases resulted in consent judgments for the companies involved, the deals didn’t come cheap. Intuit, Lucas Films, and Pixar paid a total of $20 million to settle, while Adobe, Apple, Google, and Intel agreed to a $324 million settlement.

In 2016, the DOJ and the Federal Trade Commission (FTC) – the two federal agencies that share the responsibility to enforce the antitrust laws – released guidance to help employers avoid potential violations of federal law. The overriding message from the agencies: an agreement among competing employers to limit or fix the terms of employment for potential hires may violate the antitrust laws if the agreement constrains individual firm decision making with regard to wages, salaries or benefits, the terms of employment or even job opportunities.

The DOJ also vowed to proceed criminally against naked wage-fixing or no-poach agreements going forward.

“These types of agreements eliminate competition in the same irredeemable way as agreements to fix product prices or allocate consumers, which have traditionally been criminally investigated and prosecuted as hardcore cartel conduct,” the DOJ explained. If an investigation uncovers wage-fixing or no-poaching agreements, the agency “may, in the exercise of prosecutorial discretion, bring criminal, felony charges against the culpable participants in the agreement, including both individuals and companies.”

To avoid facing jail time for an employment crime, businesses need to educate human resources professionals and employees responsible for hiring about the dangers of no-poach and salary-fixing agreements and establish a compliance program to avoid any errors.

Top on the “not to do” list: entering into agreements regarding the terms of employment with companies that compete to hire employees. This prohibition applies to all agreements, whether written or unwritten, spoken or unspoken. Even informal agreements – for example, where individuals at two competing companies agree that employees at a given position should not be paid above a certain amount or a particular range, or the individuals promise each other not to hire or solicit each other’s workers – are illegal.

It is important to remember that the prohibition on salary-fixing extends beyond simply what a worker is paid and includes other benefits as well, from transit subsidies to meals. If one HR professional wants to stop offering increasingly expensive gym memberships to employees and reaches out to other companies to ask that they stop offering gym memberships as well, that would likely violate antitrust law if the companies reached an agreement.

So-called “gentleman’s agreements” with other companies are equally illegal, even if they are unwritten and informal; nor does the use of a third party intermediary insulate an employer from liability under antitrust law, such as a situation where a group of nonprofits hire a consultant who communicates a “pay scale” to all the organizations to establish a wage cap.

Employers should also take care to avoid sharing sensitive information with competitors, which could serve as evidence of an implicit illegal agreement.

Even the mere suggestion of an illegal agreement may constitute an antitrust violation, despite the fact that an agreement is not reached. The FTC filed an enforcement action against an online retailer that emailed a proposal to a competitor that both companies offer their products at the same price. The competitor passed on the invitation and notified the FTC. Even though no agreement was reached, the “invitation to collude” was sufficient for the company to face legal action.

With salary-fixing and no-poach agreements on the government’s radar – and the threat of criminal charges and penalties looming – employers should make an effort to develop antitrust training and compliance programs before a problem arises.

August 25th, 2018|Categories: Compliance Corner for Employment Decisions|Tags: Department of Justice, Employment Decisions|

Reminder to California employers about requirements when taking adverse action based on a criminal record

With the enactment of an updated ban-the-box statute (the Fair Chance Act) on January 1, 2018, employers in California may need a refresher on how to take adverse action based on the criminal record of an applicant.

For those businesses located in Los Angeles, the requirements take on an additional level of complication due to slight differences in the city’s ordinance.

Pursuant to California law, employers with five or more employees must wait until after a conditional offer of employment has been made to ask any questions about a criminal history. This means inquiries about convictions, running a background check or other efforts to find out about an applicant’s criminal past.

As an aside, several types of criminal records are not allowed to be used by employers in the hiring process (including juvenile records, diversions and deferrals, non-felony marijuana convictions that are more than two years old and arrests that did not lead to a conviction).If the employer decides not to hire the applicant, it must conduct an individualized assessment of the conviction at issue to evaluate whether it has a “direct and adverse relationship with the specific duties of the job that justify denying the applicant the position.”

The applicant needs to be notified of the potential for adverse action based on the conviction. Such notice must identify the conviction at issue and include a copy of any background check report; the employer must also provide a deadline for the applicant to submit additional information with regard to the conviction (such as rehabilitation efforts or other mitigating circumstances).

Federal law also kicks in. For those employers that intend to rely in whole or in part on a background check report to take adverse action such as rescinding a conditional job offer, the Fair Credit Reporting Act (FCRA) mandates that applicants be given a pre-adverse action notice, a copy of the report and a notice of rights.

Once the applicant has provided any information and the employer makes a final decision, a second notice is required. This time, the notice should inform the applicant of the final adverse action, explain any procedure in place for the applicant to challenge the decision or request reconsideration and describe the applicant’s right to file a complaint with the state’s Department of Fair Employment and Housing (DFEH). If the FCRA has been triggered by the use of a background check report, the employer must also provide the applicant with an adverse action notice that contains FCRA-required text.

While this process may seem onerous, employers that hire workers in Los Angeles face additional requirements under the city’s Fair Chance Initiative for Hiring Ordinance (FCIHO). The law, which took effect on January 22, 2017, applies to employers with 10 or more workers (defined to include individuals who perform at least two hours of work on average in Los Angeles and are covered by the state’s minimum wage law).

The FCIHO has a narrower definition of a “conditional offer of employment” than that under state law – here, an offer of employment to an applicant “is conditioned only on an assessment of the applicant’s criminal history, if any, and the duties and responsibilities of the employment position.”

Regardless of the source of criminal history, if an employer elects not to hire an applicant, a written assessment that “effectively links the specific aspects of the applicant’s criminal history with risks inherent in the duties of the employment position sought by the applicant” must be performed.

This assessment needs to be provided to the applicant as part of the “fair chance process,” along with any other documentation or information used by the employer as well as a pre-adverse action notice. Again, if a background check report was used, the FCRA requirements apply. The applicant also receives an opportunity to share information the employer should consider before making a final decision, such as evidence of rehabilitation.

After at least five business days, the employer may make a final decision. If the applicant provided additional documentation or information, the employer is obligated to consider it and conduct a written reassessment. If the employer decides to take adverse action against the applicant anyway, the employer must notify the applicant and provide a copy of the reassessment along with the adverse action notice.

June 21st, 2018|Categories: Compliance Corner for Employment Decisions|Tags: Ban-the-Box, California, Employment Decisions, Employment Law, Fair Chance, FCRA|

Reminder to New York City employers about requirements when taking adverse action based on a criminal record

Let’s say you are an employer in New York City with a position to fill. During the hiring process, you learn that an applicant has a criminal conviction. What should you do if you elect not to hire her and want to avoid breaking the law?

The answer is not simple.

In New York State, it is unlawful to deny employment or take an adverse action against an applicant because of a criminal conviction unless a direct relationship exists between the criminal offense(s) and the specific position sought, or the employment of the individual would involve an “unreasonable risk” to property or to the safety and welfare of specific individuals or the general public.

Before an adverse employment decision may be based on a conviction record, Article 23-A of the New York State Correction law provides a list of factors that employers must consider:

New York’s stated public policy “to encourage the licensure and employment of those with previous criminal convictions.”
The specific duties and responsibilities related to the employment sought or held.
The bearing, if any, the criminal offense(s) for which the individual was convicted will have on her fitness or ability to perform one or more of the position’s duties or responsibilities.
The time elapsed since the occurrence of the criminal offense(s).
The age of the individual at the time of the occurrence of the criminal offense(s).
The seriousness of the criminal offense(s).
Any information produced by the individual (or on her behalf) addressing rehabilitation and good conduct. Any certificate of relief from disabilities or certificate of good conduct creates a presumption of rehabilitation with regard to the offense specified in the certificate.
The legitimate interest of the employer in protecting property and the safety and welfare of specific individuals or the general public.

An employer must apply each of these factors on a case-by-case basis before making an adverse employment decision. If all the factors are properly weighed and an employer makes a reasonable, good faith decision that the criminal offense bears a direct relationship to the job duties or that the applicant’s employment would involve an unreasonable risk to safety and welfare, it is not illegal to deny employment.

New York law does require that if employment is denied because of a conviction record, a statement setting forth the reasons for the denial must be provided upon request of the applicant, in writing and within 30 days.

Another wrinkle for employers who use a third-party to perform a background check: the federal Fair Credit Reporting Act (FCRA). If an employer elects not to hire an employee based in whole or in part on the background check, the statute requires the applicant receive a copy of the background check report, a notice of intent to take adverse action and a notice of rights.

Employers in New York City, however, have additional legislation to contend with. The Fair Chance Act (FCA), enacted in 2015, applies to employers with at least four employees. Covered employers are prohibited from inquiring about a job applicant’s criminal history until after a conditional offer of employment has been extended.

Assuming the offer has been made and an employer has learned of a conviction that proves troubling, the FCA sets forth several requirements for an employer to rescind the offer without running afoul of the statute.

After the factors of Article 23-A have been applied, an employer must follow a “fair chance process.” This involves providing applicants with a copy of their background check report – and if a third party was used to perform the check, the FCRA notice of rights and a notice of intent to take adverse action, per the FCRA – and any other information relied upon in connection with the employment decision, such as Internet searches or written summaries of oral conversations.

In addition, employers must provide an analysis of the Article 23-A factors (the New York City Commission for Human Rights (NYCCHR) provides a Fair Chance Act Notice Form for employers to use)) and the opportunity for the applicant to address the criminal history at issue and present any mitigating information or material prior to the employment offer being revoked.

The prospective position must be held open for at least three business days from the applicant’s receipt of the necessary documentation to allow time for a response. Further, if the employer used a third-party background check company, the FCRA also mandates that applicants receive a reasonable period of time to respond (the Federal Trade Commission has suggested that five business days would be sufficient in most circumstances).

The Notice Form requires employers to evaluate each Article 23-A factor and select which exception – direct relationship or unreasonable risk – it is relying upon, with the burden on the employer (and space provided on the Notice Form) to articulate its conclusion. In addition to the Notice Form, employers that made use of a background check report must provide an applicant with an adverse action notice required by the FCRA.

If an employer rescinds a conditional offer after receiving information about the applicant’s criminal history, the FCA established a rebuttable presumption that the withdrawal was due to criminal history.

To rebut the presumption, an employer must demonstrate that the revocation was due to a permitted reason, such as the results of a medical examination (where an exam is otherwise permitted), material information the employer could not have known before the conditional offer was made and would have kept the employer from making the offer in the first place or evidence that the employer did not have knowledge of the applicant’s criminal history prior to revoking the conditional offer.

Some employers are exempt from the FCA when hiring for certain positions if federal, state or local laws require a criminal background check or prohibit employment based on certain criminal convictions. Companies in the financial services industry or employers hiring police and peace officers, for example, may not be subject to the law’s requirements. Those employers who believe they are exempt must inform an individual upon application and keep a record of their use of the exemption.

June 21st, 2018|Categories: Compliance Corner for Employment Decisions|Tags: Employment Decisions, Employment Law, FCRA, New York, New York City|

All judgments and tax liens to be removed from consumer credit reports

As reported last year, Equifax, Experian and TransUnion (the “NCRAs”) implemented enhanced standards for the collection and timely updating of public record data as part of the requirements of the National Consumer Assistance Plan (the “NCAP”) and accordingly, effective July 1, 2017, removed all civil judgments and the majority of tax liens from their databases.

The NCRAs are now going a step further to comply with the NCAP’s standards and to resolve pending litigation by removing all tax liens from consumer credit reports effective April 16, 2018. Bankruptcy records will continue to be reported.

March 22nd, 2018|Categories: Compliance Corner for Employment Decisions|Tags: Consumer Credit, Employment Decisions, Legislation|

New Legislation Prohibits New York City Employers From Inquiring About Applicants’ Salary History

What this is about:
New York City Mayor Bill de Blasio signed a new bill (Int. No. 1253-A) prohibiting private employers from inquiring about an applicant’s salary history during all stages of the employment process.

Effective date:
October 31, 2017

What is prohibited:
Once the law becomes effective, it will be an unlawful discriminatory practice for an employer (which includes employment agency, or employee or agent thereof) to:

Inquire about the salary history (current and prior) of a job applicant
Rely on the salary history of an applicant in determining the salary, benefits or other compensation for such applicant during the hiring process, including the negotiation of a contract

“To inquire” means to communicate, in writing or otherwise, any question or statement to an applicant or an applicant’s employer (current, prior or agent thereof) or to conduct a search of publicly available records or reports for the purpose of obtaining an applicant’s salary history.

What is allowed:
An employer may, without inquiring about salary history, discuss the applicant’s salary, benefits and other compensation expectations. This includes, but is not limited to, unvested equity or deferred compensation that an applicant would forfeit by resigning from the current employer. Also, if an applicant voluntarily and without prompting discloses salary history, the employer may consider such information in determining salary, benefits and other compensation, and may verify the applicant’s disclosure.

Exceptions:
The law provides exceptions where federal, state or local law requires disclosure or verification of salary history for employment purposes, internal transfers or promotions, and public employee positions governed by a collective bargaining agreement.

Enforcement:
The New York City Commission on Human Rights, the agency charged with enforcing the NYC Human Rights Law, will be enforcing this law. Civil penalties of up to $125,000 for an unintentional violation, and up to $250,000 for a “willful, wanton or malicious act” may be imposed.

May 9th, 2017|Categories: Compliance Corner for Employment Decisions|Tags: Employment Decisions, Employment Law, New York City, Salary History|

Additional Guidance and Forms Issued for City of Los Angeles’ Fair Chance Initiative for Hiring Ordinance

As reported in our previous alert, effective January 22, 2017, the Fair Chance Initiative for Hiring (“LAFCIH”) ordinance prohibits employers (with 10 or more employees) from inquiring about an applicant’s criminal history until a conditional job offer has been extended and imposes significant compliance obligations. The Department of Public Works Bureau of Contract Administration (the “BCA” or the “Department”), which bears administrative responsibilities for the LAFCIH, in addition to its rules and regulations published In February, has now provided forms and further guidance to help covered employers (and city contractors/subcontractors) meet their compliance requirements.

The forms and guidance include the following:

It is recommended that all covered employers and city contractors/subcontractors review the materials provided by the BCA. Penalties and fines for violations of the LAFCIH will be imposed starting July 1, 2017.

February 10th, 2017|Categories: Compliance Corner for Employment Decisions|Tags: Background Reports, Ban-the-Box, Employment Decisions, Employment Law, Fair Chance|

New Guidance Regarding City of Los Angeles’ Fair Chance Initiative for Hiring Ordinance

What is this about:

As reported in our previous alert, effective January 22, 2017, the Fair Chance Initiative for Hiring (“LAFCIH”) ordinance prohibits employers from inquiring about an applicant’s criminal history until a conditional job offer has been extended and imposes significant compliance obligations.

The Department of Public Works Bureau of Contract Administration, which bears administrative responsibilities for the LAFCIH, in addition to its rules and regulations (the “Regs”) to guide covered employers (and city contractors/subcontractors) in meeting compliance requirements published last month, has now posted an “individualized assessment and reassessment form.” It is unclear whether the Department expects employers to use this form as provided or whether modifications are permitted. Certain other items in the Regs also remain unclear, and the Department has yet to issue anticipated further guidance.

Notable amplifications and clarifications:

“Applicant” means an individual who submits an application or other documentation for employment to an employer regardless of location.
“Employee” means any individual who performs at least two hours of work on average each week within the geographic boundaries of the City for an employer. Average week is determined by the last four complete weeks before the position is advertised
An individual who lives in the City and performs work for an employer from home, including telecommuting, is an employee.
An individual who works from a home that is outside of the City is not an employee even if he/she works for a Los Angeles-based company, unless the individual also works at least two hours on average per week within the geographic boundaries of the City.
The LAFCIH applies to employees regardless of an employer’s designation of an employee as an independent contractor, and labeling a worker as an independent contractor is not conclusive for the purpose of the LAFCIH.

Criminal history:

According to the Regs,

“A conviction shall include a plea, verdict, or finding of guilt regardless of whether sentence is imposed by the court. In the State of California, an employer is prohibited from asking about any arrest information, unless it results in a conviction, and otherwise specified.”

Note: the definition above cites California Labor Code §432.7(a)(1). The first sentence is correct; however, the second sentence is not, as that statute expressly allows inquiries about pending cases,stating that “nothing

[in this section] shall prevent an employer from asking… about an arrest for which the employee or applicant is out on bail or on his or her own recognizance pending trial.”

Nevertheless, the Regs, in a section titled “Employer Assessment of Criminal History,” go on to state that “arrests cannot be considered in employment decisions.”

Other guidance items:

The Regs amplify other definitions and aim to explain the various employer requirements. This includes, but is not limited to: the application and interview procedure, assessment of criminal history, the “Fair Chance” process, notice and posting, record-keeping, enforcement and exceptions.

See above the above post for links regarding this new guidance.

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.