Pre-Employment Background Screening After EEOC's New Guidance Structuring Policies to Comply With Title VII, Fair Credit Reporting Act and State Law

Transcription

1 Presenting a live 90-minute webinar with interactive Q&A Pre-Employment Background Screening After EEOC's New Guidance Structuring Policies to Comply With Title VII, Fair Credit Reporting Act and State Law WEDNESDAY, AUGUST 1, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Pamela Q. Devata, Partner, Seyfarth Shaw, Chicago Cindy D. Hanson, Partner, Kilpatrick Townsend & Stockton, Atlanta Lester S. Rosen, Founder, President and CEO, Employment Screening Resources (ESR), Novato, Calif. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 10.

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5 EEOC GUIDANCE RELATING TO CRIMINAL HISTORY IN EMPLOYMENT Pamela Q. Devata, Esq. 131 South Dearborn Street, Suite 2400 Chicago, Illinois (312)

6 Agenda Why now? Overview of Guidance Seyfarth Shaw LLP

7 WHY NOW? Seyfarth Shaw LLP

8 EEOC s E-RACE Initiative E-RACE (Eradicating Racism and Colorism in Employment) Since 2007, the EEOC has been in the process of identifying issues, criteria and barriers that contribute to race and color discrimination in the workplace. Part of these effort involves systemic initiative to evaluate pre-hire processes and other selection and testing criteria. El v. SEPTA (SE PA Transportation Authority) (3d Cir. 2007) Seyfarth Shaw LLP

9 EEOC s E-RACE Initiative (Cont.) The EEOC s argument National data supports that use of criminal history has disparate impact on certain minority groups based on race and national origin. Disparate Treatment -- typical Title VII analysis Disparate Impact -- Argument is that people of certain races and national origins are arrested more frequently than others outside of those groups and/or have negative credit information; thus, employers using such information cause a disparate impact on certain minority groups Seyfarth Shaw LLP

10 Disparate Impact Disparate Impact: Title VII of the Civil Rights Act of 1964 Facially neutral policy Has adverse/disparate impacts on certain protected groups. 42 U.S. C. 2000e-2(k)(1)(A)(ii) & (k)(1)(c); Griggs v. Duke Power Co., 401 U.S. 424, 431 (1971). Aggrieved party must show statistical disparate impact EEOC Guidance assumes there is a disparate impact unless employer can show evidence that there is not Guidance states it will NOT be enough to show diverse workforce Will look at employer s reputation in community for exclusion of people with criminal records, recruitment practices, and publicly posted notices. Burden then shifts and Employer must prove business necessity /job relatedness AND no other less restrictive means of obtaining the same information Seyfarth Shaw LLP

11 Public Meeting Public Meeting Held April 25 at 9:30 a.m. EST Vote: Not surprisingly, not unanimous 4 Commissioners in favor; 1 opposed Commissioner Barker (R) opposed Opening statements Discussed disparate impact and high number of incarcerations Also discussed disparate treatment issues with 90% of companies conducting background checks for employment Hundreds of charges pending Seyfarth Shaw LLP

12 Overview of Guidance Seyfarth Shaw LLP

13 Non-Legal Challenges to the Guidance April 2 U.S. Chamber of Commerce Letter Seeking notice and comment period and review by OMB Concerned about guidance limiting employers use of criminal history April 19 Senator Enzi letter Demanding that the EEOC not issue guidance until Guidance publically circulated Comment period allowed OMB has opportunity to review April 19 Industry Letter Signed by over 47 associations and industry groups Seeking notice and comment period House of Representatives Appropriations Bill Passed on May 9 Amendment limiting funds from being used to administer and enforce Guidance Seyfarth Shaw LLP

14 No Bright Line Rules Allowed No Bright Line Rules We don t hire felons Factor test based on Green EEOC gives more detail to what the 3 factors mean: Nature and gravity of the offense the harm caused the legal elements of the crime the classification of the offense (e.g., misdemeanor vs. felony) Time since the conviction and/or complete of the sentence includes evaluation of recidivism Nature of the job held or sought more than just job title evaluation of specific duties, essential functions, and environment Seyfarth Shaw LLP

15 Individualized Assessment Individualized Assessment EEOC recommends an individualized assessment of applicants Though not required, employers will need to evaluate if there are any criminal offenses that have a demonstrably tight nexis to the position in question such that an individualized assessment may be circumvented. Evidence an employer should review: facts or circumstances surrounding the offense or conduct; number of offenses for which the individual was convicted; older age at the time of conviction, or release from prison; evidence that the individual performed the same type of work, post conviction, without any known incidents of criminal conduct; length and consistency of employment before and after offense; rehabilitation efforts; character references; and whether individual is bonded under a federal, state, or local bonding program. Large change for employers Seyfarth Shaw LLP

16 Individualized Assessment Options May be able to use CRA to assist in gathering /get some information education/employment information request additional information in pre-adverse action telephone call/discussion applicant submit written submission Consider timing of individualized assessment: On application During interview After interview After background check completed Record keeping worksheet excel spreadsheet/master list Seyfarth Shaw LLP

17 Ban The Box What an Employer Can Ask An Individual About Criminal History Guidance recommends not asking about arrest or convictions on job applications Only ask about convictions relevant to a specific job Still want falsification argument. Practical effects: Seyfarth Shaw LLP Different employment applications/criminal history questions Ask later in the process? before or during the interview after an interview after conditional offer

18 Arrest Records Arrest Records Guidance indicates use of arrests has a per se disparate impact Use of arrest records is not job related or consistent with business necessity. Employers may base a hiring decision on underlying conduct if the conduct makes the individual unfit for a position. Only way an employer will learn about the conduct is to either: investigate; or Talk to the individual Examples indicate that an employer can put an individual on an unpaid administrative leave during the investigation. Does not distinguish between charges that are pending with a court date or older charges with no prosecution Seyfarth Shaw LLP

19 Compliance with Other Laws Acknowledges that compliance with federal laws and regulations disqualifying convicted individuals from certain occupations is a defense to charge of discrimination. Convictions of theft and fraud that disqualify in the financial services industry. Denying employment based on failure to obtain a federal security clearance if the clearance is required for the job. Complying with state and local laws and regulations will not shield employers from Title VII liability due to Title VII pre-emption of state and local laws. Employers should evaluate whether other laws on which they may be relying as a defense to run specific criminal history or eliminate an applicant/employee are preempted by Title VII Seyfarth Shaw LLP

20 Summary of Guidance Employers will likely show job related and consistent with business necessity if it can prove either that: It validates the use of specific criminal history by having data or analysis about criminal conduct as related to subsequent work performance; Given lack of clear studies, may require I/O psychologist OR It develops a targeted screen considering the following: Nature/gravity of the offense Time since conviction and/or completion of the sentence; and Nature of the job held or sought (These are the SAME factors that have been in effect since 1987) With an individualized assessment to determine if job related Seyfarth Shaw LLP

21 PRESENTATION TITLE An FCRA Primer The Fair Credit Reporting Act Applies In More Contexts Than You Might Imagine Cindy D. Hanson Kilpatrick Townsend & Stockton LLP (404)

22 The FCRA and Background Checks The Fair Credit Reporting Act ( FCRA ) outlines detailed procedures that must be followed when consumer reports, including credit reports and criminal background checks, are used for employment purposes. Adherence to these procedures is important because the FCRA provides for statutory damages of $100 to $1,000 for each willful violation of the statute, making the exposure for a company potentially catastrophic. Indeed, recent settlements of FCRA class actions involving employee background checks have numbered in the tens of millions of dollars. 22

23 An FCRA Primer The FCRA requires that certain procedures be followed when a consumer report is used for employment purposes. 15 U.S.C et seq. Under the FCRA, a consumer report is a written, oral or other communication of information by a consumer reporting agency that bears on a consumer s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living that is used or expected to be used or collected for establishing the consumer s eligibility for personal credit or insurance, employment, or other purposes authorized by the FCRA. 15 U.S.C. 1681a(d). Thus, a consumer report is much broader in scope than just a credit report or a background check it includes criminal and civil records, driving records, civil lawsuits, reference checks and other information obtained by a consumer reporting agency. 23

24 Duties of Employers Who Intend to Use Employee Background Checks An employer s duties vary at each stage of the hiring process when a background check or other consumer report is used. The disclosure form; The applicant or employee s written authorization; Dealing with a derogatory report; Taking an adverse action. 24

25 The Disclosure Form The FCRA requires that a company disclose to the applicant or employee that a background check will be obtained for employment purposes. This disclosure must be made in a document that consists only of the disclosure. 15 U.S.C. 1681b(2)(A)(i). In other words, the disclosure form should be a single page consisting of only the text necessary to inform the applicant or employee that the employer intends to obtain his criminal background check or other consumer report. 25

26 The Applicant or Employee s Written Authorization The FCRA also requires that the employer obtain the applicant s or employee s written authorization to procure a background check or consumer report. The FCRA allows the employer to include this written authorization, typically a signature line confirming that the consumer report has been authorized, on the disclosure form described above. FTC Opinion Letter, Steer, October 21, 1997, statutes/fcra/steer.shtm. Nothing more than the disclosure and written authorization may be on the form. 15 U.S.C. 1681b(2)(A)(ii) (emphasis added). 26

27 Investigative Consumer Report If the employer is also having a consumer reporting agency conduct interviews with prior employers or gather others types of information via interviews, the employer is obtaining an investigative consumer report. For such a report, the FCRA requires additional disclosures be made to the applicant. See 15 U.S.C. 1681d (a) and (b). 27

28 Dealing with a Derogatory Report When a report contains information that could negatively impact an individual s eligibility for hire or promotion, the FCRA requires that certain steps be taken by users of background checks or other consumer reports in the employment context. It is of the utmost importance that these steps be completed before any adverse action is taken with respect to the applicant or employee. An adverse action is defined broadly under the FCRA and includes, among other things, an employment denial, termination, or any unfavorable change in employment. See 15 U.S.C. 1681a(3)(k). 28

29 Dealing with a Derogatory Report (cont.) An entity considering taking adverse action based in whole or in part on a background check must do the following, before taking the adverse action: Provide the applicant or employee with a copy of the background check or other consumer report. Provide the applicant or employee with a summary of his rights under the FCRA, as prescribed by the Federal Trade Commission. See FCRA Summary of Right, gov/bcp/edu/pubs/consumer/credit/cre35.pdf 29

30 Dealing with a Derogatory Report (cont.) The summary of rights includes: Notification that the applicant or employee is entitled to receive a free copy of the background check or consumer report on which the adverse action was based. The applicant or employee has a 60-day period in which to obtain his free report, and the employer s notice to the applicant or employee must so state. The name and contact information for the consumer reporting agency that provided the background check on which the adverse employment decision was based. The contact information provided should include the name, address, and phone number for the consumer reporting agency. If a toll-free telephone number is available for the consumer reporting agency, it should be provided to the applicant or employee. 30

31 Dealing with a Derogatory Report (cont.) A statement advising the individual that the consumer reporting agency did not make the adverse employment decision and cannot, therefore, provide any reasons why the adverse action was taken. 15 U.S.C. 1681m(a)(1)-(2). \ 15 U.S.C. 1681b (3)(A). 31

32 The Pre-Adverse Action Notice s Purpose The purpose of this pre-adverse action notice is to provide the consumer with an opportunity to dispute and correct any inaccurate information in the background check and thereby avoid the adverse employment action that the employer might take based on the report. 32

33 Taking an Adverse Action After providing the pre-adverse action notice described above, the employer must wait a reasonable period of time before taking any adverse action typically declining to hire or promote the individual based in whole or in part on information in a background check. Upon taking an adverse action, the employer must provide notice to the consumer of the action. This is a second, distinct notice from the pre-adverse action notice described above. Such notice may be provided orally, in writing or electronically. The notice to the employee or applicant must disclose that individual s right to dispute information in a background check with the consumer reporting agency that furnished it. 15 U.S.C. 1681m(a)(3). 33

34 State Law and Other Compliance Issues Lester Rosen Attorney at Law Employment Screening Resources (ESR)

35 State Law Complications In addition to federal Fair Credit Reporting Act (FCRA), at least 21 states arguably have stricter FCRA rules Many states have additional rules on the use of criminal records Some rules prevent a screening firm from reporting criminal information in the first place (e.g. seven year rule) Some states prohibit an employer from using information that a screening firm may report (e.g. arrest records) Number of states have discrimination laws impacting criminal records Numerous state and local laws regarding criminal records and eligibility for public employment or licenses that may be an issue under new EEOC Guidance Eight states now have rules regulating credit reports States are increasingly looking at laws about access to social networking sites Best practice: have your screening firm only report what you can legally use in your state 35

36 States that arguably have stricter state FCRA rules Arizona California Colorado Georgia Kansas Kentucky Louisiana Maine Maryland Massachusetts Minnesota Montana New Jersey New Hampshire New Mexico New York Oklahoma Rhode Island Texas Washington Nevada? 36

37 Examples of State Rules At least 11 states have a 7-year limit on criminal records some states have an exception if applicant has a higher income level (but Texas and Colorado preempted by FCRA and Nevada is unsettled) Various states have special rules for: Disclosure form for consumer Rules for Investigative Consumer Reports Nature and Scope letter Disputed Accuracy procedures Timing and notice of reports Notification periods Other examples: CA-numerous only in California rules MA-final adverse action letter must be in 10 point type minimum within 10 days with specified language NJ-special notifications of reason why dispute is frivolous NY-corrected copy rule 37

38 Examples of State Criminal Rules Some states limit employers from using arrests, such as California, Hawaii, Illinois, Massachusetts, Michigan, Nevada, New York, Pennsylvania, Rhode Island, Utah, Virginia, Washington, and Wisconsin (also an issue under the EEOC) Some states limit expunged or sealed records, such as California, Colorado, Hawaii, Illinois, Louisiana, Maryland, New Jersey, Ohio, Oklahoma, Oregon, Rhode Island, South Dakota, Texas, Utah, and Virginia Some states limit first offense records, records based upon a certain age (other than a seven year limit) or diversion/nonadjudication programs, such as California, Georgia, Hawaii, Illinois, and Massachusetts Some states place limits on EMPLOYERS, such as California, Hawaii, Illinois, Massachusetts, Michigan, Nevada, New York, Pennsylvania, Rhode Island, Utah, Virginia, Washington, and Wisconsin 38

39 Sample States with Employer Limitations on Convictions/Arrests Many states have rules reflecting EEOC guidelines arrest or conviction must have rational relationship to job given nature and gravity of the offense, nature of the job, and age of offense Case in point: New York goes beyond Green factors in listing criteria and includes various notice requirements EEOC Guidance emphasizes that state rules concerning eligibility for public jobs or licenses can be discriminatory and violate Title VII Employers placed in potential Catch-22 between state/local requirements and EEOC 39

40 Choice of Law Issue which law applies anyway Key issue for employers with facilities in multiple states that have different rules General rule of thumb law of the state where the job occurs (but arguments can still be made to use law where applicant resides if different) 2010 case in New York on age discrimination helps clarify Plaintiff terminated in Atlanta, tried to sue in NY where decision was made and where law was more favorable for age discrimination Highest NY court ruled 4-3 that there was no jurisdiction since the IMPACT was not in NY 40

41 The Use of Databases Commercial criminal databases can be very valuable since they contain millions of records Can be argued that failure to use a database is negligent But one of the biggest areas of criticism against screening is false positives based on a database use where there is no re-verification at courthouse (as required in California) See on responsible database use Issues with FCRA section 613 notice and TIMING Best use of commercial database is as a lead generator 41

42 Credit Details, Urban Myths & Accuracy Credit reports ran on finalists not all applicants Credit report used to decide who not to hire, not a tool to keep people from the workforce Urban myth employment credit reports DO NOT contain credit scores, but only credit history Also does not have age, and does not impact credit score

43 Credit Concerns Credit reports can appear to invade privacy and potentially be discriminatory unless measures taken to ensure their use is fair, accurate, and relevant Potential discrimination: EEOC held meeting on topic, and expected to produce new guidance Can have errors or not tell the whole story: Refinance situation Confused with someone else Credit card used for child s health care

44 Some States Limit Credit Report Checks Eight states have currently passed laws restricting credit report checks: California Connecticut Hawaii Illinois Maryland Oregon Vermont Washington Best Practice: Approach with caution and use only for positions where there is a business justification based upon the job

45 Using Social Networking Sites Use of social networking checks on the rise to avoid problematic hires Issues: Can expose employers AND recruiters to discrimination claims if internet search reveals protected data such as nationality, race, religion, age, or medical issue Issues of appearance, grooming, or religious affiliations revealed by photos Is there a reasonable expectation of privacy based upon the terms of use and generally accepted standards? Legal off-duty conduct Issue of identifiers and authenticity is it really your applicant? Can employers require applicants to provide a password or allow shoulder surfing 45

46 Some Social Media Solutions Have job description with the essential functions of the job and the knowledge, skills, and abilities needed Have documented training in discrimination Establish standard practice to show decision made on objective basis without use of illegal criteria Perform through an employee behind an ethics wall that does not make hiring decisions, that filters out material using standardized procedures, and only provides job related data to the decision makers after there has been an offer Do not let decision makers view unfiltered internet/social media data Consider showing negative material to applicant first Should a background screening firm perform the task? FCRA issues leaves this an unsettled area 46

47 New: Accreditation for Screening Firms In 2010, the National Association of Professional Background Screeners (NAPBS ) instituted an intensive Background Screening Agency Accreditation Program (BSAAP) Rigorous third party audit related to six critical areas: 1. Consumer Protection 2. Legal Compliance 3. Client Education 4. Product Standards 5. Service Standards 6. General Business Practices NAPBS accreditation becoming only practical means of third party verification of professionalism and competency of screening firm 47

48 Bottom-line Background checks are mission critical for any organization to protect itself and to demonstrate due diligence However, subject to increasing regulation, litigation and legislation Need to perform background checks, but need to ensure done in a legally compliant manner 48

49 About the Speaker Attorney Lester S. Rosen is Founder and CEO of Employment Screening Resources (ESR), a nationwide background screening firm accredited by the National Association of Professional Background Screeners (NAPBS) He is a frequent speaker nationwide on the topics of background screening and due diligence He is the author of The Safe Hiring Manual, the first comprehensive guide on background screening. He has qualified and testified as an expert in court cases, has testified before the California Legislature on laws relating to background checks, and is rated A.V. by Martindale-Hubbell He was the chair of the steering committee that founded the NAPBS ( and served as the first cochair 49

50 Best Practices for Employers to Minimize Risk

51 Employer Best Practices Review Employment Applications (ie: Ban the Box) Review Background Screening Policies/Procedures Disclosure and Authorization forms Adverse Action Process Review and narrow the positions for which you are running credit checks Accounting/Finance HR Information Technology Seyfarth Shaw LLP

52 Employer Best Practices (con t) Run credit checks only after conditional offer of employment/ or after interview Consider state laws for credit (8 states) In addition to FCRA requirements, discuss concerns with applicant/employee Seyfarth Shaw LLP

53 Other Common Questions From Employers What criminal history information can be used to make an employment decision? What background checks should they be conducting Job related requirements (WI, NY, PA, HI, KS, MO) On whom should the checks be run? (whole workforce, executives, specific departments) Should they have a policy (who adjudicates, specific parameters or case by case?) HI does not allow pre-employment screening except for very specific jobs Seyfarth Shaw LLP

54 Best Practices for Background Checks What should a background check include? What may a company legally ask for in a search? What is unlawful? If you don t know what you are getting when you order a background check, you probably won t get what you need, and you may create liability for your company Seyfarth Shaw LLP

55 Best Practices for Background Checks A good CRA will search for records in a variety of locations: County courthouses State criminal records repositories The federal Integrated Automated Fingerprint Identification System Private databases maintained by some criminal background checking companies Each of these sources contains different information which may be relevant to your background check Seyfarth Shaw LLP

56 Best Practices for Background Checks How to get a good background check 1. What to ask for from the applicant (Identifiers) Full Name (including maiden, middle, previous, aka) Date of birth Social security number (properly maintained in a secure location) Driver s license number 2. What to ask for from the CRA Search methods (including sources in consults and frequency) Who performs the search? Who reviews the information after it is collected? (Usually a search company will hire runners to go to various court houses and collect data) Turn-around time for a search (should be three days or less) How it handles incomplete or inaccurate records Seyfarth Shaw LLP

57 Best Practices for Background Checks Generally, consumer reports may not contain: 1. Bankruptcies that pre-date the report by ten (10) or more years; 2. Records of arrest or civil proceedings that pre-date the report by more than seven (7) years or until the governing statute of limitations has expired; 3. Paid tax liens that pre-date the report by more than seven (7) years; 4. Accounts placed for collection that pre-date the report by more than seven (7) years; or 5. Any other adverse item of information (excluding criminal convictions) that pre-date the report by more than seven (7) years. 15 US.C. 1681c(a). BUT: Just because information is legally contained in a consumer report, that does not mean the employer is legally allowed to use it in an employment decision!!! Seyfarth Shaw LLP

58 Best Practices for Background Checks State law controls what information an employer may consider when making an employment decision. For example, at least 12 states prohibit an employer from using an applicant s arrest record when making an employment decision. Most states also restrict an employer s use of criminal records that are sealed, annulled, expunged and/or pardoned by the governor. IF YOU ARE NOT ALLOWED TO USE IT, DO NOT ASK FOR IT! Seyfarth Shaw LLP

59 EEOC Guidance Best Practices GENERAL No Bright line policies USA Fact can assist with applying criteria, but EEOC does not like ineligible without factors and individualized assessment One size fits all will likely be challenged Train managers, hiring officials, and decision-makers about Title VII and its prohibition on employment discrimination; share guidance and draft policies that are in accordance Seyfarth Shaw LLP

60 Best Practices DEVELOPING A POLICY Develop a narrowly tailored written policy and procedures for screening for criminal records; Only request information that is job related from a background screening vendor Identify essential job requirements and the actual circumstances under which the jobs are performed; Only ask about and request criminal history information that is job related to those requirements. Determine the specific offenses that may demonstrate unfitness for performing such jobs; Identify the criminal offenses based on all available evidence; Review studies, seminars, etc. Determine the duration of exclusions for criminal conduct based on all available evidence; Individualized damage assessment Record the justification for the policy and procedures; Note and keep a record of consultations and research considered in crafting the policy and procedures. Train managers, hiring officials, and decision-makers on how to implement the policy and procedures consistent with Title VII; Seyfarth Shaw LLP

61 Best Practices QUESTIONS ABOUT CRIMINAL RECORDS When asking questions about criminal records, limit inquiries to records for which exclusion would be job related for the position in question and consistent with business necessity. Consider timing of the criminal history question so as not to chill applicants from applying. CONFIDENTIALITY Keep information about the criminal records of applicants and employees confidential (only use it for the purposes for which it was intended) Seyfarth Shaw LLP