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Employer Use of Background Checks:

Recent Developments in Anti-Discrimination Enforcement and Complying with the Fair Credit

Reporting Act

Presented by: Jennifer N. Warberg

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Jennifer N. Warberg

Attorney

Bullard Law

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• 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

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• 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

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• Strategic Enforcement Plan for FY 2013-2016

http://www.eeoc.gov/eeoc/plan/upload/sep.pdf

• 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

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• 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

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• 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

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• Updated enforcement guidance was issued April 25,

2012 http://www.eeoc.gov/laws/guidance/upload/arrest_conviction.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

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• 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 “job-related and consistent with a business necessity”

• The EEOC has cases pending alleging this kind of discrimination under Title VII

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• 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

http://www.uniformguidelines.com/uniformguidelines.html

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• #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

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• #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

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• 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

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#1 – Eliminate blanket policies that

automatically exclude individuals based on

any criminal record

#2 – Limit inquiries, particularly on job

applications, to convictions which are job-

related

#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

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#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

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• 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

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• 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

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• 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 child-

care workers may also be subject to a more

extensive check

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• 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

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• 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”

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• 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

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• 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

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• 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

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• 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

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• 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 1022 http://www.gpo.gov/fdsys/pkg/FR-2012-11-14/pdf/2012-27581.pdf

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• 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

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• 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

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• 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

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• 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

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• 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

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QUESTIONS?

You may contact Jennifer

Warberg directly at:

jwarberg@bullardlaw.com

503.248.1134

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