September 2013

Tenant screening laws update: passing background check costs to the applicants

The states of Washington and Oregon recently enacted laws in connection with tenant screening. Among the provisions in both Washington’s RCW §59.18.257 and Oregon’s OAS §90.295, is that the entire cost of the background check can be charged to the applicant, if the screening is performed by a consumer reporting agency (“CRA”). However, if the landlord conducts the background check, it may not charge in excess of the customary fees of the CRAs in its geographical area.

Notably, California’s Civil Code §1950.6(b) provides that a landlord cannot charge (or pass-through) to the applicant more than $30 for a background check. This application screening fee may be adjusted annually by the landlord or its agent commensurate with an increase in the Consumer Price Index. (The current adjusted amount is $41.50.)

|Business Transactions, Legislation|

New regulation in the UK mandates licensing of private investigators

Presented to the Parliament by the Secretary of State for the Home Department by Command of Her Majesty on July 31, 2013, the new regulation, which will take effect next year, makes operating as an unlicensed private investigator in the United Kingdom a criminal offense. Licenses will be granted by the Security Industry Authority only when an applicant has successfully completed training and achieved a government-recognized qualification, including an understanding of relevant laws and standards, and the skills required to conduct activities ethically; has confirmed his/her identify; and has passed a criminal background check.

|Legislation|

Illinois amends its password protection law to exclude financial services firms

In August 2013, Illinois passed an amendment to its existing password protection law that lifts restrictions for financial services firms, enabling them to monitor their employees’ business-related social media communications. Effective January 1, 2014, the law will no longer apply when an employer requests access to a “professional account” to “monitor or retain employee communications as required under the state’s insurance or federal law or by a self-regulatory organization. The amendment also permits Illinois employers to seek access to a professional account when the employer has “a duty to screen applicants or employees prior to hiring.”

|Judgment|

New Jersey enacts law for social media password protection

Continuing a nationwide momentum of restricting employers’ access to personal social media content of applicants and employees, in August 2013, New Jersey passed Act 2878 joining eleven other states (Maryland, Illinois, California, Michigan, Utah, New Mexico, Arkansas, Colorado, Washington, Oregon, and Nevada) with similar laws. Dozens more states and the U.S. Congress are considering comparable legislation. New Jersey’s new law, which becomes effective December 1, 2013, prohibits employers from asking or requiring that applicants or employees “provide or disclose any user name or password, or in any way provide the employer access to a personal account through an electronic communications device.”

|Legislation, Social Media|

EEOC fails to prove disparate impact in another case involving background checks

In August 2013, a Maryland federal judge dismissed without a trial a putative suit filed by the Equal Employment Opportunity Commission (the “EEOC”) against event-promoter Freeman for alleged discriminatory background screening practices. Calling the EEOC’s expert report “an egregious example of scientific dishonesty,” the court granted a summary judgment to Freeman based on its findings that the EEOC’s expert testimony was unreliable, and would not support a claim of disparate impact. According to the court’s opinion, the EEOC failed to establish an element of its case when it made no effort to analyze Freeman’s multi-step screening policies to identify the specific practices that caused the alleged disparate impact. The court went on to say: “By bringing actions of this nature, the EEOC has placed many employers in the ‘Hobson’s choice’ of ignoring criminal history and credit backgrounds, thus exposing themselves to potential liability for criminal and fraudulent acts committed by employees, or, on the other hand, incurring the wrath of the EEOC for having utilized information deemed fundamental by most employers.”

The EEOC most likely will appeal the decision, as it has done in another high-profile background check case in Ohio, where in January 2013 the court similarly ruled that the EEOC failed to prove disparate impact. Although these rulings represent a victory for the employer, the EEOC has not reversed its position, and is expected to continue its attempts to severely limit, if not eliminate, the use of criminal and credit checks by private employers.

|Employment Decisions, Judgment|

California passes bill that would require policy disclosures for “do not track”

On August 28, 2013, the California State Senate and Assembly passed AB 370, to amend the California Online Privacy Protection Act (CalOPPA) that would require operators of commercial websites or “online services” accessible to California residents to disclose how the site responds to “do not track” (DNT) browser settings, which in turn will trigger enforceability by federal and state authorities. The amendment is expected to be signed by Governor Jerry Brown.