Pre Employment Background Screening: Legal …media.straffordpub.com/products/pre-employment...Presenting a live 90‐minute webinar with interactive Q&A Pre‐Employment Background

Presenting a live 90‐minute webinar with interactive Q&A

Pre‐Employment Background Screening: Pre Employment Background Screening: Legal PitfallsCrafting Policies to Comply With Title VII, Fair Credit Reporting Act and State Laws

T d ’ f l f

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

TUESDAY, AUGUST 23, 2011

Today’s faculty features:

Cindy D. Hanson, Partner, Kilpatrick Townsend & Stockton, Atlanta

Pamela Q. Devata, Partner, Seyfarth Shaw, Chicago

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 emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.

Conference Materials

If you have not printed the conference materials for this program, please complete the following steps:

• Click on the + sign next to “Conference Materials” in the middle of the left-hand column on your screen hand column on your screen.

• Click on the tab labeled “Handouts” that appears, and there you will see a PDF of the slides for today's program.

• Double click on the PDF and a separate page will open. Double click on the PDF and a separate page will open.

• Print the slides by clicking on the printer icon.

Continuing Education Credits FOR LIVE EVENT ONLY

For CLE purposes, please let us know how many people are listening at your location by completing each of the following steps:

• Close the notification box

• In the chat box, type (1) your company name and (2) the number of attendees at your location

• Click the blue icon beside the box to send

Tips for Optimal Quality

S d Q litSound QualityIf you are listening via your computer speakers, please note that the quality of your sound will vary depending on the speed and quality of your internet connection.

If the sound quality is not satisfactory and you are listening via your computer speakers, you may listen via the phone: dial 1-866-869-6667 and enter your PIN when prompted Otherwise please send us a chat or e mail when prompted. Otherwise, please send us a chat or e-mail [email protected] immediately so we can address the problem.

If you dialed in and have any difficulties during the call, press *0 for assistance.

Viewing QualityTo maximize your screen, press the F11 key on your keyboard. To exit full screen, press the F11 key againpress the F11 key again.

PRESENTATION TITLE

The FCRA and Background Checks

The Fair Credit Reporting Act (“FCRA”) Applies In More Contexts Than You Might Imagine

Cindy D. Hanson Kilpatrick Townsend & Stockton LLPKilpatrick Townsend & Stockton LLP [email protected](404) 815-6500

The FCRA and Background Checks

• The Fair Credit Reporting Act (“FCRA”) outlines detailed procedures that must be followed when consumer reportsprocedures that must be followed when consumer reports, including credit reports and criminal background checks, are used for employment purposes. Adh t th d i i t t b th• 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

f t ti ll t t hiexposure for a company potentially catastrophic. • Indeed, recent settlements of FCRA class actions

involving employee background checks have numbered in g p y gthe tens of millions of dollars.

6

An FCRA Primer

• The FCRA requires that certain procedures be followed when a “consumer report” is used for employment purposes. 15 U.S.C.consumer report is used for employment purposes. 15 U.S.C. § 1681 et seq.

• Under the FCRA, a consumer report is a written, oral or other communication of information by a consumer reporting agencycommunication 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 gused 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

f7

other information obtained by a consumer reporting agency.

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 otherprocess 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.

8

The Disclosure Form

• The FCRA requires that a company disclose to the applicant or employee that a background check willapplicant 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 informpage consisting of only the text necessary to inform the applicant or employee that the employer intends to obtain his criminal background check or other

tconsumer report.

9

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 http://www ftc gov/os/October 21, 1997, http://www.ftc.gov/os/ 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) (emphasismay be on the form. 15 U.S.C. § 1681b(2)(A)(ii) (emphasis added).

10

Dealing with a Derogatory Report

• When a report contains information that could negatively impact an individual’s eligibility for hire or promotion theimpact 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 thatemployment 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. A “ d ti ” i d fi d b dl d th FCRA• 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).

11

Dealing with a Derogatory Report (cont.)

• An entity considering taking adverse action based in whole or in part on a background check must do thewhole 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 pp p y py

the background check or other consumer report. – Provide the applicant or employee with a summary

of his rights under the FCRA as prescribed by theof his rights under the FCRA, as prescribed by the Federal Trade Commission. See FCRA Summary of Right, http://www.ftc. gov/bcp/edu/pubs/consumer/credit/cre35.pdf

12


• The summary of rights includes:– Notification that the applicant or employee is entitled to– 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 based e app ca t o e p oyee as a 60 dayperiod 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 h ld i l d th dd d h bshould 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

13

reporting agency, it should be provided to the applicant or employee.


– A statement advising the individual that the consumer reporting agency did not make theconsumer 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).

14

The Pre-Adverse Action Notice’s Purpose

• The purpose of this pre-adverse action notice is to provide the consumer with an opportunity to disputeprovide 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.

15

Taking an Adverse Action

• After providing the pre-adverse action notice described above, the employer must wait a reasonable period of time beforethe 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. g

• 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).

16

Contact Information

• Cindy D. Hanson Kilpatrick Townsend & Stockton LLP 1100 Peachtree Street, Suite 2800 Atlanta GA 30309Atlanta, GA 30309 [email protected](404) 815-6500

17

Titl VII d th EEOC’ R tTitle VII and the EEOC’s Recent Focus on Background Checks

By Pamela Q. Devata, PartnerSeyfarth ShawChicago IllinoisChicago, Illinois312/460-5882 - Direct [email protected]

What is the EEOC’s E-Race Initiative?

• E-RACE=Eradicating Racism and Colorism from Employmentg p y

• The EEOC is in the process of identifying “issues, criteria and b i ” th t t ib t t d l di i i ti i thbarriers” that contribute to race and color discrimination in the workplace

• Part of these effort involves reviewing pre-hire processes and other selection and testing criteria

• Systemic Initiative

19 | © 2011 Seyfarth Shaw LLP

What is the EEOC’s focus?

• All pre-hiring/testing selection criteriaB k d i li i d i-Background screening policies and practices

►Credit information

►Criminal History information specifically arrest records deferred adjudications/adjudication withheld/pendingj j p g

• EEOC is requesting information from employers on a nationwide basis►Employment Applications►Hiring criteria►Background screening policies and procedures►Other testing procedures and criteria


EEOC’s Argumentg

• Certain information has a “disparate impact” on minority p p ygroups►Specifically: Arrest records and credit information

• 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 causes a disparate impact on certain minority groups.y g p


Disparate Impactp p

• Disparate Impact: Title VII of the Civil Rights Act of 1964p p g►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 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 impactf “• Burden then shifts and Employer must prove “business

necessity”/job relatedness AND no other less restrictive means of obtaining the same informationg


EEOC Public Meetingsg

• Employer Use of Credit History as a Screening Tool on p y y gOctober 20, 2010 (http://www.eeoc.gov/eeoc/meetings/10-20-10/index.cfm)

• July 26, 2011 on Arrest and Criminal History As A Barrier to Employment.Employment.


EEOC’S Recommendations on Criminal Historyy

• EEOC has long held the view that employers selection criteria g p yregarding criminal history should take into consideration:►nature/seriousness of the offense ►age of the offense►age of the offense►job relatedness

S U if G id li E l S l i P d “UGESP”See Uniform Guidelines on Employee Selection Procedures or “UGESP” under Title VII, 29 C.F.R. Part 1607.1 http://www.eeoc.gov/policy/docs/factemployment_procedures.html

Remember there are additional state law considerations also (ie: NY).


New EEOC Guidance?

• All signs point to new guidance relating to use of:g p g g

Criminal history informationC dit hi t Credit history Timing: Likely by the end of the year


Recent EEOC Litigationg

• EEOC v. Kaplan, Case No. 10 CV 02882 (N.D. Ohio) (complaint filed on December 21, 2010)►Nationwide pattern and practice lawsuit alleging that Kaplan’s use of credit checks in its►Nationwide pattern and practice lawsuit alleging that Kaplan s use of credit checks in its

employment practices caused a disparate impact on Black job applicants and current employees.

• EEOC v. Freeman d/b/a TFC Holdings Co., Case No. 09-CV-2573 (D. Md.) (complaint filed S b 30 2009 MSJ fil d d h i 12/10)on September 30, 2009; MSJ filed and hearing set 12/10): ►Nationwide pattern and practice lawsuit alleging that a Dallas-based convention and corporate

events planning company unlawfully discriminates against Black, Hispanic, and male job applicants on a nationwide basis by using credit histories and certain types of criminal arrests or convictions as selection criteria. The EEOC alleges that the company’s use of credit hi i d i i l b k d l i i i h “ i ifi di i ihistories and criminal backgrounds as selection criteria has a “significant disparate impact in Black applicants and that [the company’s] use of criminal history information has an adverse impact on Hispanic and male applicants.”

• EEOC v Peoplemark Case No 08-CV-0907 (W D Mich ) (complaint filed Sept 29 2008;EEOC v. Peoplemark, Case No. 08 CV 0907 (W.D. Mich.) (complaint filed Sept. 29, 2008; voluntarily dismissed March 29, 2010):

►Nationwide lawsuit under Title VII on behalf of plaintiff and similarly situated African American applicants for employment at Peoplemark. The complaint alleges that the company maintains a policy which denies hiring or employment to any person with a criminal record and that such policy has a disparate impact on African American applicants


policy has a disparate impact on African American applicants.

Class Action Litigationg

• Alleges Disparate Impact under Title VII

Appolon v. University of Miami• Class Action Complaint No. 1:10-cv-24166• Southern District of FloridaSouthern District of Florida• Filed November 22, 2010• Voluntarily Dismissed with Prejudice March 29, 2011

Sutton v. Berglund• Class Action Complaint Case No. 11-CV-152 • Northern District of Illinois• Filed January 10, 2011• Dismissed with Prejudice May 23, 2011


State Law and Other Compliance IssuesLester Rosen

Attorney at LawEmployment Screening Resources

[email protected]

SpeakerSpeaker• Lester S. Rosen is an attorney at law and president of

Employment Screening Resources, a national employment p y g , p yscreening firm. 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 book on background screening and hiring

• He has qualified and testified as an expert in court cases and has testified before the California Legislature on laws l b k h k brelating to background checks and is rated A.V. by

Martindale‐Hubbell• He was the chair of the steering committee that founded

h N i l A i i f P f i l B k dthe National Association of Professional Background Screeners (www.napbs.com), and served as the first co‐chair

www.ESRcheck.com 29

State Law ComplicationsState Law Complications

• In addition to federal FCRA, at last 20 states arguably , g yhave stricter FCRA rules

• May states have additional rules on the use of criminal drecords

– 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)

• Bet practice: have your screening firm only report what• Bet practice: have your screening firm only report what you can legally use in your state

www.ESRcheck.com 30

States that arguably have stricter state lFCRA rules

• Arizona • Massachusetts

• California

• Colorado

• Minnesota • Montana

N J• Georgia

• Kansas

• New Jersey • New Hampshire• New Mexico

• Kentucky

• Louisiana,

• Maine

• New York• Oklahoma

• Maine

• Maryland• Rhode Island• Texas• WashingtonWashington

www.ESRcheck.com 31

Examples of FCRA Type State Rules

• At least 11 state have a 7‐ year limit • Other examples:on criminal records‐some states have an exception if applicant has a higher incomes level (but Texas and Colorado arguably pre‐empted by

• Other examples:

– CA‐numerous “only in California rules”

MA Fi l d tiFCRA)• Various state have special rules for:

– Disclosure form for consumer– Rules for Investigative Consumer

– MA‐Final adverse action letter must be in 10 pt type minimum within 10 days with specified languageg

Reports– Nature and Scope letter– Disputed Accuracy procedures– Timing and notice of reports

with specified language

– NJ‐special notifications of reason why dispute is frivolousg p

– Notification periodsfrivolous

– NY‐corrected copy rule

www.ESRcheck.com 32

Examples of State Criminal RulesExamples of State Criminal Rules• Some states limit employers from

using arrests, such as California, Hawaii Illinois Massachusetts

• Some states limit first offense records, records based upon a Hawaii, Illinois, Massachusetts,

Michigan, Nevada, New York, Pennsylvania, Rhode Island, Utah Virginia, Washington, Wisconsin

• Some states limit expunged or

certain age (other than a seven year limit) or diversion/non‐adjudication programs, such as Georgia Massachusetts Hawaii• Some states limit expunged or

sealed records, such as California, Colorado, Hawaii, Illinois, Ohio, Oklahoma, Oregon, Rhode Island, Texas Virginia Louisiana Maryland

Georgia, Massachusetts, Hawaii, Illinois, California

• Many states have rules reflecting EEOC guidelines‐arrest or

Texas, Virginia, Louisiana, Maryland, New Jersey, South Dakota, Utah, Virginia

conviction must have rational relationship to job given nature and gravity of the offense, nature of the job and age of offenseof the job and age of offense

www.ESRcheck.com 33

Sample states with employer l /limitations on Convictions/Arrests

• Examples of states that place limits on EMPLOYERS: California, Hawaii, Illinois, Massachusetts, Michigan, Nevada, New York, Pennsylvania, Rhode Island, Utah Virginia, Washington, Wisconsin

• An arrest is the opinion of the police officer, but employer may utilize underlying facts if work‐related and can locate facts (but must not summarily dismiss applicant's version)

• 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

• New York passed separate rules concerning use of criminal records, including notice requirements, additional criteria and employer protections

www.ESRcheck.com 34

Choice of LawChoice of Law

• Issue‐whose law applies anywaypp y y• Larger issue for employers with facilities in multiple states that have different rules

• General rule of thumb law of the state where the• 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 NY on age discriminating helps clarify – Plaintiff laid off in Atlanta, tried to sue n NYC 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

www.ESRcheck.com 35

Privacy and State Rulesy

• In 2009 Massachusetts passed strict new dataIn 2009, Massachusetts passed strict new data protections rules

• Many states have data breach rules• Many states have data breach rules

• California passed SB909 requiring employers h b i f CRA’ i lito have web site for CRA’s privacy policy on

authorization form and for CRA to disclose ff h i lioffshoring policy

www.ESRcheck.com 36

The Use of DatabasesThe 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 screeners is• But, one of the biggest areas of criticism against screeners is

“false positives” based on a database use where there is no re‐verification at courthouse (as required in California)S htt // d / ibl d t b• See http://www.concernedcras.com/ on responsible database use

• Issues with FCRA section 613 notice and TIMING• Best use of commercial database is as a “lead generator”

www.ESRcheck.com 37

Using Social Networking sites

• Use of social networking checks on the rise to avoid bl hproblematic hires

• Issues:– Can expose employers AND recruiters to discrimination claims if

i t t h l t t d d t h ti litinternet search reveals protected data such as nationality, race, religion, age or medical issue

– Issues of appearance, grooming or religious affiliations revealed by photosp

– Is there a reasonable expectation of privacy based upon the terms of use and generally accepted standards?

– Legal off‐duty conductI f id tifi d th ti it i it ll li t?– Issue of identifiers and authenticity – is it really your applicant?

• What should employers, recruiters and applicants do?

www.ESRcheck.com 38

Employer Best Practicesp y

• Review Employment Applications (ie: Ban the Box)p y pp ( )• Review Background Screening Policies/Procedures

►Disclosure and Authorization forms►Ad A ti P►Adverse Action Process

• Review and narrow the positions for which you are running credit checks►Accounting/Finance►HR►Information Technology►Information Technology


Employer Best Practices (con’t)p y ( )

• Run credit checks only after conditional offer of employment/ y p yor after interview

• In addition to FCRA requirements, discuss concerns with li t/ lapplicant/employee

• Ensure compliance with state law requirements for credit►OR, WA, HI, IL, MD, CT►OR, WA, HI, IL, MD, CT


Other Common Questions From Employersp y

• What criminal history information can be used to make an yemployment decision?

• What background checks should they be conductingJ b l d i (WI NY PA HI KS MO)►Job related requirements (WI, NY, PA, HI, KS, MO)

• On whom should the checks be run? (whole workforce, executives, specific departments)e ecu es, spec c depa e s)

• 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


Best Practices for Background Checksg

• What should a background check include?g• 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 companyneed, and you may create liability for your company



A good CRA will search for records in a variety of locations:g y• County courthouses• State criminal records repositories• The federal Integrated Automated Fingerprint Identification

SystemPri ate databases maintained b some criminal backgro nd• Private databases maintained by some criminal background checking companies

• Each of these sources contains different information which may be relevant to your background check.



How to get a good background checkg g g1. What to ask for from the applicant (Identifiers)

► Full Name (including maiden, middle, previous, aka)► Date of birth► Date of birth► Social security number (properly maintained in a secure location)► Driver’s license number

2 What to ask for from the CRA2. 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(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


p


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 i dexpired;

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

(7)seven (7) years; or5. 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)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!!!


employment decision!!!


State law controls what information an employer may p y yconsider 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.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!


IT!

Contact Information:Contact Information:

• Pamela Q. Devata • Seyfarth Shaw LLP• 131 S. Dearborn Street, Suite 2400• Chicago, Illinois 60603• 312/460-5882 - Direct

312/460 7882 F• 312/460-7882 - Fax• [email protected]


Documents

Pre Employment Background Screening: Legal …media.straffordpub.com/products/pre-employment...Presenting a live 90‐minute webinar with interactive Q&A Pre‐Employment Background