Employer Use of Background Checks:

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1 Employer Use of Background Checks: Recent Developments in Anti-Discrimination Enforcement and Complying with the Fair Credit Reporting Act Presented by: Jennifer N. Warberg

2 Jennifer N. Warberg Attorney Bullard Law

3 Why do them? What does the EEOC think about criminal background checks? Complying with the Federal Credit Reporting Act (FCRA) How to stay out of trouble

4 To evaluate character and trustworthiness To keep the workplace safe To prevent theft To comply with the law, i.e. child care providers To reduce liability for negligent hiring

5 Strategic Enforcement Plan for FY A top nationwide enforcement priority for the EEOC is the elimination of systemic barriers in recruitment and hiring Employers should review all hiring policies and procedures, particularly those relating to the use of criminal background checks, and make sure all employees involved in the hiring process have been properly trained

6 A proposed Seattle ordinance would limit employers ability to consider arrest and conviction records in hiring Possible exceptions: employer provides services to vulnerable persons, law enforcement, employer is otherwise required to consider criminal history under federal or state law An employer may refuse employment based on a legitimate business need The newest version of the ordinance does not provide for a private right of action

7 Why? Ex-cons records may prevent them from finding employment Statistics show that ex-cons who do find employment are far less likely to reoffend Racial disparities in incarceration rates mean that blanket exclusions from employment based on criminal history may have a disparate impact on racial minorities Lying on an application about one s criminal record is still grounds for discipline or discharge

8 Updated enforcement guidance was issued April 25, ction.pdf Guidance looks at the relationship between the consideration of criminal history and unlawful discrimination under Title VII The EEOC s position: the use of criminal background checks results in a disproportionate number of individuals from protected classes (particularly African Americans and Hispanics) being unfairly screened out of the employment selection process

9 If the use of criminal background information results in a disparate impact on a protected class of individuals, the employer must show that the practice is jobrelated and consistent with a business necessity The EEOC has cases pending alleging this kind of discrimination under Title VII

10 Two circumstances in which the defense will be met: #1 Employer validates its criminal background screen using the Uniform Guidelines on Employee Selection Procedures A set of guidelines adopted by the EEOC, Civil Service Commission, Dept. of Labor and Dept. of Justice regarding the use of tests and other selection tools such as criminal background checks They provide a framework for employers to use in evaluating employee selection procedures The Guidelines can be found online at

11 #2 Employer develops a targeted screen with an individualized assessment Employer considers at least the following when screening: the nature and gravity of the crime (deception or dishonesty involved? shoplifting vs. embezzlement?) the time elapsed since the conduct the nature of the job (job duties/essential functions, level of supervision, work environment and types of interaction with others) A rational connection should be made between success in the position and the criminal background screen

12 #2, cont. Then look at the individuals who would be excluded by the screen to determine whether the results are consistent with business necessity Notify the individual(s) that he/she has been excluded and give them an opportunity to provide additional information Such information may include: Job references, bonding status, rehabilitation efforts or the identification of inaccuracies in the background check If the person chooses not to provide additional information, the employer is free to make its employment decision based on the targeted screen results

13 Additional considerations: An arrest is not proof of criminal conduct (not convicted beyond a reasonable doubt), therefore, an exclusion based on an arrest record alone will not meet the business necessity defense There are exceptions for certain positions subject to other federal laws, i.e. an individual cannot be an airport screener if he/she has been convicted of certain crimes in the last 10 years Compliance with conflicting federal law is a defense to a charge of discrimination, but state and local laws are preempted by Title VII

14 #1 Eliminate blanket policies that automatically exclude individuals based on any criminal record #2 Limit inquiries, particularly on job applications, to convictions which are jobrelated #3 Develop a narrowly tailored written policy for targeted screening and document the justifications for all targeted screens #4 Train decision-makers on how to implement your policy on criminal background checks

15 #5 Keep criminal history records confidential and dispose of them responsibly #6 While not explicitly required by the EEOC, conducting individualized assessments of excluded persons will help to avoid Title VII liability #7 Document all individualized assessments! The EEOC s guidance has a number of helpful examples

16 Despite its name, FCRA is not just about credit reports Among other things, FCRA regulates the collection, dissemination and use of consumer reports in the employment setting

17 Any communication by a consumer reporting agency relevant to a person s credit worthiness, credit history, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living Examples: criminal background checks, employment history summaries, and drug-test results if assembled and supplied by a consumer reporting agency

18 There are a number of things which are prohibited from inclusion in consumer reports unless an exemption applies Including, but not limited to, bankruptcies 10+ years old; civil suits and judgments 7+ years old; arrests 7+ years old; tax liens paid off 7+ years ago; collections 7+ years old Exemptions: a report to be used in connection with the employment of a person at an annual salary of $75,000 or more; teachers and childcare workers may also be subject to a more extensive check

19 Any person or entity in the business of assembling such information and furnishing consumer reports to third parties Examples: most reference-checking services, online reference-checking databases, credit reporting agencies Temp agencies have a special exemption allowing them to provide information about their workers to clients without triggering FCRA as long as certain disclosures are made to the workers

20 An enhanced consumer report It includes information regarding character, personal characteristics, general reputation or mode of living which was obtained by personal interviews with neighbors, friends and associates Caution! There are additional requirements under FCRA when investigative consumer reports are used We ll focus on the more common consumer report

21 FCRA does not apply to employers gathering information about applicants or employees on its own because a consumer reporting agency is not being used Examples: Calling past employers or job references Getting a driving record directly from the State Google and Facebook searches? Maybe

22 Before getting a consumer report: Give the applicant/employee notice that you might use information in a consumer report to make employment-related decisions If the report will contain medical information, the notice must specifically so state and the person must specifically consent to it Get written permission Certify compliance with FCRA to the third-party from which you are getting the information, including that the applicant/employee was given notice, permission was given and the information will not be used to unlawfully discriminate or otherwise be misused

23 Additional considerations regarding notice: The notice may not be included as part of boilerplate language at the end of a job application It must be a separate form The notice may be, however, included on the same page as the applicant s/employee s written authorization Written consent by e-signature? Special requirements under case law It s safer to require an original signature to be kept in the employee s personnel file or with the job application if not hired

24 Before rejecting an applicant, or reassigning, denying promotion or terminating an employee, you must: Give the applicant/employee a notice and a copy of the consumer report relied on to make the decision this gives the person an opportunity to review and dispute the report Provide the applicant/employee a copy of A Summary of Your Rights Under the Fair Credit Reporting Act form

25 FCRA Forms: The Summary of Your Rights form is one of several new forms to be used starting January 1, 2013 No substantive changes from old forms Substitutes the Consumer Financial Protection Bureau for the Federal Trade Commission Appendices K, M and N to federal regulation 12 CFR part

26 Before rejecting an applicant, or reassigning, denying promotion or terminating an employee, you must, cont.: Effective July 2011, if an applicant s/employee s credit score is included in the consumer report that is relied upon to make an adverse employment decision, there are additional disclosures that must be made to the applicant/employee, including but not limited to: The credit score itself Up to four of the key factors which adversely affected the credit score

27 After taking an adverse employment action: Must put in writing that the adverse action (rejection of application/reassignment/demotion/termination) is being taken because of the consumer report Name, address and number of the consumer reporting agency A statement that the consumer reporting agency didn t make the adverse employment decision and won t be able to address the decision if asked A notice of the applicant s/employee s right to dispute the accuracy of the report, and to get an additional free report if requested within 60 days

28 Retain complete documentation of every step taken to comply with FCRA Copies of correspondence/notices to applicant/employee Draft a memo to the person s file detailing the steps taken under FCRA and why the adverse employment decision was made When you re done with a consumer report, all paper and electronic copies must be securely disposed of

29 Civil liability Private right of action, or by the federal government Statute of limitations for a civil action is the earlier of (1) 2 years after a violation is discovered; or (2) 5 years after the violation occurred Therefore, documentation should be kept for at least 5 years! Criminal liability possible

30 Federal bankruptcy law prohibits a private employer from discriminating against an employee due to bankruptcy Beware of state laws limiting the use of credit history information for employment purposes, i.e. Illinois and Oregon

31 QUESTIONS? You may contact Jennifer Warberg directly at:

32 NFIB.com Resources Are Employee Background Checks Worth the Cost? NFIB s Legal Guide Series Your Competition uses Pre-Employment Testing. Shouldn't You?