Background Checks: What Your Company Needs to Know. Joe Kroeger (520)

Transcription

1 Background Checks: What Your Company Needs to Know Joe Kroeger (520) April 10, 2017

2 Items for Today s Presentation Fair Credit Reporting Act The Basics Background/Credit Checks Statistics Recent Cases EEOC Concerns Best Practices 2

3 Basic Overview What do we mean by background check? Criminal records? Driving history? Employment verification? Credit check? Social media/web presence? Term includes both consumer reports and nonconsumer reports. We ll come back to this. 3

4 Basic Overview Why do employers order background checks? Because they have to (in some cases) - Example: DOT regulated motor carriers are required to review certain motor vehicle records and driving/employment history information. - Arizona state agencies require certain reference and background checks. To protect against negligent hiring - No parent wants to learn that the new bus driver at their child s school was just released from prison for child molestation. To verify accuracy of applicant s credentials. - Particularly important if specific educational or professional credentials are required for a position. 4

5 Basic Overview Legal Issues What are the legal issues surrounding background checks? Does the employer have a legal obligation to conduct a certain kind of background check? Has the employer taken the procedural steps necessary before ordering a background check? (FCRA) Is the use of a background check discriminatory? (Title VII) Does the employer s overall use of criminal records have a discriminatory impact? (Title VII) Has the employer taken the appropriate procedural steps before rejecting or terminating the applicant? (FCRA) 5

6 Basic Overview Ban the Box What are the legal issues surrounding background checks (cont.)? BONUS ISSUE: Did the employer mandate the disclosure of criminal background information at the right stage in the hiring process? (Ban the Box) - Ban the Box refers to a collection of state and local laws and ordinance which prohibit inquiring into criminal conviction history on the job application. - Different Ban the Box laws establish thresholds: After interview? After conditional offer? - No Ban the Box for private employers in AZ Glendale, Phoenix, Pima County, Tempe, and Tucson have ordinances for public employees 2014 Snell & Wilmer L.L.P. 6

7 Basic Overview Ban the Box Do Ban the Box laws prohibit ordering background checks? Generally not. Do Ban the Box laws prohibit consideration of criminal conviction records? Generally not. Then what s the point? Delaying consideration of criminal record until later in the process increases the likelihood that an employer will consider the merits of that candidate. Increases employment opportunities for applicants with convictions. 7

8 Background/Credit Checks -- Statistics 13 % of U.S. employers perform a credit check on all job applicants. 60 % of U.S. employer incorporate credit checks into the screening process for at least some job applicants. -Society for Human Resource Management 8

9 Background/Credit Checks -- Statistics 79% of recruiters and human resources personnel admit to researching job candidates on the Internet. - Microsoft Corp. and CrossTab 2010 Survey 9

10 Fair Credit Reporting Act -- The Basics The Fair Credit Reporting Act (FCRA) is designed to regulate the use of consumer report information and other background information received about individuals from consumer reporting agencies (CRAs). As applied in the employment context, the FCRA regulates the way that background checks are performed on job applicants and/or current employees. 10

11 Fair Credit Reporting Act -- The Basics When Does the FCRA Apply? When an employer procures a consumer report (i.e., conducts a background check) using a CRA (a third party regularly engaged in practice of assembling or evaluating consumer information) Credit report Criminal background check Driving record Social Media Employer hires third party to perform reference checks FCRA likely applies 11

12 Fair Credit Reporting Act -- The Basics When Does the FCRA Not Apply? It does not apply where an employer itself performs the search itself. Examples: - Employer googles the name of the applicant and finds an offensive post on employee s personal blog. - Employer searches county records website for conviction history. - Employer calls references to verify employment. BUT, if you go to a non-government website that offers free public records searches you may still be ordering a consumer report. 12

13 Fair Credit Reporting Act -- The Basics Two Types of Background Checks Consumer Report Any report obtained from a CRA that bears on a person s credit, character, reputation or personal characteristics Investigative Consumer Report Same as consumer report, but, in addition, some or all of the information is obtained through personal interviews of those who know the individual 13

14 Fair Credit Reporting Act -- The Basics Before Obtaining a Consumer Report Must notify individual of employer s intent to obtain a consumer report In writing Clear and conspicuous (i.e., no small print) Stand-alone (i.e., not buried in other provisions) Must certify to CRA that employer will comply with the FCRA 14

15 Fair Credit Reporting Act -- The Basics Before Taking Any Adverse Action Applies whether adverse action based in whole or in part upon the contents of a consumer report Must give the individual a copy of his/her consumer report Must provide the individual with a copy of the Summary of Your Rights Under the Fair Credit Reporting Act Available at or from your CRA 15

16 Fair Credit Reporting Act -- The Basics After Taking Adverse Action Must give the name, address, and phone number of the CRA that supplied the report; Must provide a statement that the CRA that supplied the report did not make the decision to take the adverse action and cannot give specific reasons for it; and Must provide a notice of the individual s right to dispute the accuracy or completeness of any information the agency furnished, and his/her right to free consumer report from CRA upon request within 60 days. Can provide this notice orally, in writing or electronically. 16

17 Fair Credit Reporting Act Why Compliance Matters FCRA violations are typically documented. That makes them ripe for class action treatment with the violation documented for all to see. The FCRA provides for statutory damages of $100 - $1,000 per violation. If your company orders thousands of background checks a year, those numbers can add up to millions (and more (quite quickly) Snell & Wilmer L.L.P. 17

18 Background/Credit Checks Recent Cases In 2011, FirstGroup (a transit operator), agreed to pay $5.9 Million to settle two class actions which alleged the company conducted illegal background checks on prospective employees. Allegations included that the employer: (1) failed to disclose that it was obtaining the background check on a standalone document; (2) failed to give candidates time to contest the results if an adverse action that was going to be taken; and (3) failed to obtain the employees or candidates consent. 18

19 Background/Credit Checks Recent Cases In 2016, Dish Network agreed to pay $1.75 million to contractor technicians, where it allegedly: Failed to disclose background checks; Failed to provide a legally compliant disclosure form; and Barred technicians deemed high risk based on the results of a background check from working for Dish without issuing pre-adverse action notice. 19

20 Background/Credit Checks Recent Cases In January 2017, Kelly Services agreed to settle an FCRA class action for $6.7 million dollars. FCRA disclosure form stated, To the fullest extent permitted by law, I release Kelly, its employees, successors and assigns, from any and all claims, action or liability whatsoever that are in any way related to the procurement of a consumer report about me, or any subsequent investigation(s) of my background or personal history. (emphasis added) This is a cardinal sin under the FCRA! 20

21 Background/Credit Checks EEOC Concerns What does the EEOC have to do with background checks? The EEOC enforces Title VII, which prohibits not only disparate treatment, but disparate impact on protected categories. Former criminals are not a protected category under Title VII, but the EEOC contends that discriminating against applicants who have criminal records has a disparate impact on Hispanics and African-Americans. EEOC Strategic Enforcement Plan for targets facially neutral recruitment and hiring practices that adversely impact particular groups as one of its enforcement priorities. This encompasses background checks. 21

22 Background/Credit Checks EEOC Concerns In 2012, the EEOC issued enforcement guidance on the use of criminal conviction records by employers. Contends that national incarceration data indicates that African Americans and Hispanics are incarcerated at a rate significantly higher than their numbers in the general population Excluding applicants based on criminal record has a disparate impact on these protected groups. Once a plaintiff establishes disparate impact, burden shifts to employer to demonstrate that the challenged practice is job related for the position and consistent with business necessity. 22

23 Background/Credit Checks EEOC Concerns EEOC analyzes disparate impact cases based on the Green factors, which consider: The nature and gravity of the offense or conduct; The time that has passed since the offense or conduct and/or completion of the sentence; The nature of the job held or sought. Based on these factors, the EEOC suggests that there are two ways for a criminal conduct screen to be job related and consistent with business necessity : Validating the screen per the Uniform Guidelines; or Developing a targeted screen considering the Green factors and an opportunity for individualized inquiry. 23

24 Background/Credit Checks EEOC Concerns An individualized assessment generally requires: Notice to the applicant that they may be excluded because of past criminal conduct; Opportunity for the applicant to demonstrate that the exclusion does not properly apply to him or her; Consideration of whether the additional information provided by the applicant shows that the policy as applied is not job related and consistent with business necessity. 24

25 Recent EEOC Enforcement Actions: Pepsi Pepsi s former policy: job applicants who had been arrested pending prosecution were not hired for a permanent job even if they had never been convicted of any offense. EEOC investigation revealed that more than 300 African Americans were adversely affected by Pepsi s criminal conviction hiring policies. Pepsi agreed to pay $3.13 million and provide job offers and training to resolve a charge of discrimination in

26 Recent EEOC Enforcement Actions: J.B. Hunt EEOC filed race discrimination charge against J.B. Hunt after African-American job candidate was denied a truck driver position based on a criminal conviction record. EEOC determined that the company used blanket prohibitions based on criminal convictions. J.B. Hunt agreed to a five-year conciliation agreement, which required it to review, revise, and provide training concerning its hiring practices, with the EEOC monitoring compliance with the agreement. Monetary settlement terms were not disclosed. 26

27 Best Practices Develop or review your background check forms with the assistance of counsel. Do not assume that forms supplied by a CRA are compliant. Should be tailored to your needs: - Are there any applicable state laws? (Not in AZ) - Investigative Consumer Reports? 27

28 Best Practices Standalone means standalone. Separate page or document. - Do not include it in the application. No other information/questions, except: - Notice and Authorization can be on the same page - Questions necessary to conduct background check: Full Legal Name Home Address SS# Date of Birth Prior legal names No waiver/release language. Do not combine with authorization to contact references or perform drug/alcohol screen. 28

29 Best Practices Centralize the process. Who in your organization is responsible for ordering background checks? Who must approve rejecting applicants based on background checks? Train everyone who has that responsibility. Follow-up to ensure compliance. Do not permit any modification of forms/practices without approval of counsel. 29

30 Best Practices Narrowly tailor your background check policies to legitimate business needs. Different positions justify different levels of scrutiny. - Running a credit check on a CFO vs. a janitor If you have written policy prohibiting hire based on certain convictions, make sure it complies with EEOC guidance. Always be able to articulate the business justification for excluding a candidate. 30

31 Best Practices Social Media Are there any restrictions on what kind of social media information you can consider? What is the downside of reviewing social media? 31

32 Best Practices - Hypotheticals Joe Blow applies for a position as the Director of Risk Management for URideSafe Transit. URideSafe s applications asks, Have you ever been convicted of a criminal offense? Joe Blow checks the No box. URideSafe gives Joe Blow a conditional offer, subject to a background check. Background check reveals a criminal conviction from 15 years ago for a bad check. 32

33 Best Practices - Hypotheticals Scenario 1: General Manager of URideSafe wants to hire Joe Blow anyway. Are you allowed to hire him? Scenario 2: General Manager wants to reject Joe Blow because URideSafe s written policy prohibits hiring anyone with a criminal conviction. Are you allowed to reject him? If yes, are there any steps you need to take before rejecting him? 33

34 Best Practices - Hypotheticals Scenario 3: URideSafe does not have a written policy prohibiting hiring applicants with criminal records, but the GM wants to reject him for lying on his application about his conviction history. Are you allowed to reject him for this reason? Do you need to take any procedural steps before rejecting him? 34

35 Best Practices - Hypotheticals Max Millennial applies for a job at URideSafe as a Mechanic. He has no criminal conviction record. After URideSafe gives him a conditional offer, its HR department finds his public Facebook profile. 35

36 Best Practices - Hypotheticals Can you rescind the offer? Do you need to give FCRA adverse action notice? 36

37 Final Takeaways Review your forms. Avoid blanket hiring screens, unless they are based on a statutory or regulatory requirement. Be thoughtful about why you are considering background information what is your business reason? 37

38 QUESTIONS?