Please enjoy this week’s Compliance News Flash with blurbs about the President’s travel ban, use of social media information by the government, employment-related criminal background checks and litigation, potential new salary history restrictions, and insurance coverage.
New York City Mayor Bill de Blasio signed legislation prohibiting employers from inquiring about a prospective employee’s salary history during the hiring process. New York City joins Massachusetts and Philadelphia in passing legislation seeking to address the gender pay gap and ensure pay equity in the workplace.
Key details of the new law:
- It will take effect October 31, 2017 and applies to private employers, among others.
- It amends the Administrative Code (section 8-107) of the City of New York in relation to prohibiting employers from inquiring about or relying on a prospective employee’s salary history. Therefore, as an employer, if inquiring into salary history is a part of your background screening process, you will need to re-evaluate this practice in order to ensure compliance by October 31, 2017.
- Once effective, it will be an unlawful discriminatory practice for an employer, employment agency, or employee or agent to (i) inquire about the salary history of a job applicant; or (ii) rely on the salary history of a job applicant in determining salary, benefits or other compensation during the hiring practice, and including the negotiation of a contract.
- Exceptions — an employer can still engage in a discussion with the job applicant about their expectations with respect to salary, benefits and other compensation; but, they cannot ask about salary history. Another exception to the general restriction on inquiring about salary history is where the job applicant proactively discloses salary history, at which point an employer may consider salary history and may even verify the job applicant’s salary history.
- The general prohibition on inquiring about salary history does not apply to situations where federal, state or local law requires such disclosure or verification of salary history for employment purposes; (ii) internal transfers or promotions; and (iii) public employee positions governed by a collective bargaining agreement.
Background screening companies note the term “agent” and the potential for a claim of engaging in an unlawful discriminatory practice. Bear in mind that New York City’s Stop Credit Discrimination in Employment Act (SCDEA) makes it unlawful to “aid or abet” any form of prohibited discrimination, including credit discrimination and this applies to consumer reporting agencies (i.e., background screeners). It is likely that the New York City Commission on Human Rights will issues regulations and guidance to clarify the intent of the law and we will see if they address this issue and other aspects of the law.
In February I started writing a weekly compliance news flash which is published on Friday. In April it dawns on me that I should provide this information to all my wonderful readers (thank you by the way). Clearly I was on the slow train on this one. Regardless, here you go–this week’s compliance news flash which succinctly covers important issues related to employment background checks and immigration compliance (i.e., Form I-9, E-Verify and Homeland Security workplace investigations). Prior versions of the Compliance News Flash can be found by clicking here and here and here. If you would like the news flash to appear in your inbox please send me an email and I will add you to my list — email@example.com.
Perk for members of NAPBS. A colleague of mine is doing a webinar for members of NAPBS on the Foreign Corrupt Practices Act (FCPA). Below is a summary of the webinar Mike Burke will be leading tomorrow (March 29) at 3 pm EST.
The Foreign Corrupt Practices Act (FCPA) impacts every U.S. business that has operations in other countries. Given the nature of the background screening industry, and the contacts between industry and government officials and regulators, U.S. background screeners need to pay particular attention to the FCPA’s compliance requirements. In this program, we will discuss the FCPA’s compliance requirements, the applicability to the background screening industry, and share some best practice tips for compliance.
If you are a member of NAPBS, click here to register.
Please join me next week for a discussion about what employers need to be aware of regarding pre-employment background checks to ensure you have compliant background screening policies and procedures in place. Some of the topics I will discuss include the Fair Credit Reporting Act, state law regarding restrictions on the use of credit information for employment screening purposes, the EEOC’s guidance on the use of criminal history records, and Fair Chance Hiring laws (aka Ban the Box ordinances).
Details: The free webinar is Wednesday, March 15, 2017 from 2:00 PM – 3:00 PM EDT.
Are you an employer that conducts pre-employment background checks for new hires, or maybe background checks for existing employees for promotion, reassignment or retention purposes? Ever randomly wonder if you can use that report and information in it for a purpose other than employment screening? The short answer is, no.
The FTC recently posted on its blog how to use information in such consumer reports and the fact that an employer or other “user” of consumer reports cannot “double dip.” Meaning, if you receive a “consumer report” (aka a background check report) from a background screening company for employment screening purposes, you cannot use it for a different purpose. If you engage the services of a background screening company make sure to read the Notice to Users of Consumer Reports: Obligations of Users Under the FCRA, which explains employers obligations under the law. Your background screener should provide you with a copy of this notice.
An employer’s obligations include:
- Having a “permissible purpose” to request a consumer report from a background screening company — for hiring, promotion, retention or reassignment, the “permissible purpose” is employment. Your background screening vendor should ask you to certify your permissible purpose prior to furnishing a report, which is why you may see language about this in the contract as well as other language related to the parties obligations under the Fair Credit Reporting Act (FCRA) (15 U.S.C. § 1681 et seq.).
- Providing certain disclosures to the job applicant or employee (i) prior to requesting a background check; (ii) when information contained in the report may affect eligibility for employment; and (iii) if an adverse action is going to be taken as a result of information in the report.
- Providing notice regarding the background investigation and securing the job applicant or employee’s written consent.
- Properly dispose of these reports, including by burning, pulverizing, shredding or electronically purging the information — for more on proper disposal of reports click here.
Note section III in the Notice to Users of Consumer Reports: Obligations of Users Under the FCRA as it specifically addresses the use of background check reports for employment purposes. The FCRA imposes additional requirements when employers use reports for employment screening purposes.
A series of recent class action complaints against employers leads me to write about what employers can do to mitigate risk with respect to their background screening program.
I’m talking about pre-employment background checks when an employer uses the services of a third-party background screening company. Under the Fair Credit Reporting Act (FCRA) (15 U.S.C. § 1681 et seq.) employers have two critical responsibilities when using the services of a third-party background screening firm to request background checks on prospective employees.
Employers must do the following in order to comply with the FCRA when requesting a background check:
- Employers must provide prospective employees a clear and conspicuous disclosure regarding the fact that you will conduct a background check AND you must get the individual’s written authorization to conduct such. This is typically called the disclosure and authorization notice and it must be in a stand-alone document. The FCRA requires that when an employer requests a background check (aka a “consumer report”) for employment purposes they must provide “a clear an conspicuous disclosure” in writing “before the report is procured or caused to be procured, in a document that consists solely of the disclosure” and “the consumer has authorized in writing….” (15 U.S.C. § 1681b(b)(2)(A)(i)-(ii))
- Employers must follow the adverse action process, which is potentially a two-step process. The first step is typically referred to as the “pre-adverse action step” and you cannot send a final “no hire” letter until you complete this step. So, hypothetically speaking, after completing step 1 above you receive the results of a background check from your background screening vendor. The report indicates a criminal history or some other adverse item of information. Based on this information, you may decide not to hire the individual. Now what? Before you take any final adverse action you must first provide the individual with a copy of the report you are reviewing and a summary of their rights as prescribed by the Consumer Financial Protection Bureau. This allows the prospective employee to review the report and alert you if any information contained therein is inaccurate or incomplete and also to act on that incorrect or incomplete information with the background screening company. You should wait at least five business days before taking any final adverse action although realize that in some states and cities, Fair Chance laws and ordinances (aka Ban the Box laws and ordinances) may impose greater time periods. For more about Ban the Box, click here.
At a minimum, employers must follow above two steps to comply with the FCRA. Depending on what state or city you are in there may be additional requirements, but these are the basics when doing pre-employment background checks on prospective employees.
Which brings me to the class action litigation and a sampling of the cases brought against employers for alleged non-compliance with the FCRA related to steps 1 and/or 2 described above.
- Class action complaint filed against an airline catering and provisioning company (Case No. 2:17-cv-1298) for allegedly not following the pre-adverse action process.
- Class action complaint filed against a major retail pharmacy chain (Case No. 5:17-cv-6019) for not providing the proper disclosure that a background check would be conducted and failure to follow the pre-adverse action process.
- Class action complaint filed against a plasma provider (Case No. 5:17-cv-6018) for not following the pre-adverse action process.
There is a very active plaintiff’s bar filing complaints against both employers and background screening companies for alleged violations of the FCRA. They do not discriminate based on type of employer or size of your business. You’ve been warned.
But not all is lost as these are curable compliance issues. You start by reviewing your background screening program–your policies and procedures–with counsel versed in the FCRA and state consumer protection laws and guidance that govern background screening. You need to go step by step through the hiring process to understand where you may have deficiencies and need to shore up your compliance. For instance–if, as an employer, you utilize an adjudication matrix or screening standards to automatically classify individuals as “ineligible” for hire and automatically proceed to send a no hire letter we should talk about your background screening program and whether it complies with the requirements of the FCRA. Or, your FCRA disclosure and authorization has a lot of “extraneous language” such as a release of liability language, we should talk. Willful violations of the FCRA are eligible for statutory damages of $100 to $1,000/violation, plus punitive damages and attorney’s fees.
We would be happy to talk to you about your background screening program. Please contact Montserrat Miller at Arnall Golden Gregory at firstname.lastname@example.org or 202-677-4038 for assistance.
Know Before You Hire: 2017 Employment Screening Trends is the title of a good article by Roy Maurer at SHRM. Roy interviews multiple industry experts, including myself, asking for their opinions on what is trending in employment background screening. Some of the trends you will read about include the increase in Ban the Box measures affecting employers, background screening of contingent workers, as well as the use of social media in the hiring process. To read the entire article click here.
The Federal Trade Commission (“FTC”) recently issued guidance applicable to background screening companies (aka consumer reporting agencies) who engage in tenant screening. The FTC highlights four key responsibilities of background screening companies covered by the Fair Credit Reporting Act (“FCRA”), specifically:
- “Follow reasonable procedures to ensure accuracy.
- Get certifications from your clients.
- Provide your clients with information about the FCRA.
- Honor the rights of applicants and tenants.”
For background screening companies I encourage you to look at those responsibilities as described in the guidance carefully because the FTC opines on what “reasonable procedures to ensure accuracy” are and those should be read to apply to employment screening as well. The FTC states, “[c]ertain practices may be indicators that a background screening company isn’t following reasonable procedures. For example, if a report lists criminal convictions for people other than the applicant or tenant – for instance, a person with a middle name or date of birth different from the applicant’s – that raises FCRA compliance concerns. Other examples that raise FCRA compliance concerns include screening reports with multiple entries for the same offense or that list criminal records that have been expunged or otherwise sealed. Another indication that a company’s procedures might not be reasonable are reports that list housing court actions, but do not include the outcome of the action – for instance, that a case was resolved in the tenant’s favor.”
Background screeners–notice that the FTC calls out reports with multiple entries for the same offense, the reporting of expunged or sealed records, reports with no dispositions, and finally, the failure to use a middle name to ensure accuracy.
Background checks for employment screening purposes may contain different information. Most common would be the use of criminal history information, but there are times when an employer requests that their background screening vendor also provide credit history information for a job applicant or employee.
Employers who request credit history information be included in background investigations must, in addition to complying with the requriements of the Fair Credit Reporting Act (15 U.S.C. § 1681 et seq.), be aware of state restrictions on the use of credit information for employment screening purposes. States like Illinois, California and Maryland (and others) restrict the use of credit by employers, as do cities such as New York City and Philadelphia. Generally, these laws restrict the use of credit unless there is a basis for the use of credit history information tied to the position for which a job applicant has applied.
A recent case in Illinois highlights the struggles employers face in those states where there are restrictions.
In a lawsuit against Neiman Marcus, a job applicant alleged that the retailer discriminated against her when it ran a credit check for a position as a sales associate. Mind you, the plaintiff did apparently have a credit history to report (e.g., judgments, collections) but she alleged that Neiman Marcus violated the Illinois Employee Credit Privacy Act (820 ILCS 70/1 et seq.) and that the job-based exemption they claimed did not exempt them from the requirements of the law.
Neiman Marcus argued that as a sales associate the plaintiff would have access to credit card applications which contained sensitive personal information and accordingly the credit check was acceptable as a “bona fide occupational requirement of a particular position.” Neiman Marcus also argued that they were exempt from the Employee Credit Privacy Act due to access to cash and signatory power. The lower court agreed Neiman Marcus acted appropriately when it ran a credit check, but the state appellate court said not so fast. (Ohle v. The Neiman Marcus Group, Case No. 1-14-1994, Illinois Court of Appeals, First District, Second Division, Sept. 27, 2016)
Illinois law synopsis — the legislative intent behind the Employee Credit Privacy Act is that it “prohibits employers from inquiring about or using an employee’s or prospective employee’s credit history as a basis for employment.” The law lists several industry specific exemptions for, for instance, banking and financial industry positions or law enforcement positions. And it also states that where a “bona fide occupational requirement” for a particular position exists (and the law lists specific examples) then the employer would be exempt from the law’s requirements as well.
The bottom line is that if you are in a state which restricts the use of credit for employment screening purposes and you in fact request credit history from your background screening vendor, you need to be aware of not only state restrictions but also local restrictions regarding its use.