Mid-Year Update on Employment Background Screening Legislation

BAN-THE-BOX

List of jurisdictions is growing

“Ban-the-box” measures, which generally prohibit employers from inquiring about a candidate’s criminal history (including performing background checks) until later in the hiring process, and impose significant compliance requirements, will soon be the norm rather than an exception. The list of localities that have enacted such legislation is growing fast and now includes Austin, Baltimore, Buffalo, Chicago, Columbia – MOLos Angeles (enforcement started July 1, 2017), Montgomery County – MD, New York City, Philadelphia, Portland, Prince George’s County – MD, Rochester, San Francisco, and Seattle, and ten states (Connecticut, District of Columbia, Hawaii, Illinois, Massachusetts, Minnesota, New Jersey, Oregon, Rhode Island, and Vermont (effective July 1, 2017)).

Although not labeled as “ban-the-box,” California’s Department of Fair Employment and Housing regulations (the “Regs”) that went into effect July 1, 2017 impose certain similar requirements when employers consider criminal history information in employment decisions. As reported in our previous blog, the Regs are substantially based on the enforcement guidance issued by the Equal Employment Opportunity Commission in April 2012, and prohibit employers from using a candidate’s criminal history in personnel decisions if such information will have an adverse impact on individuals that are in a legally protected class.

Amended rules for New York City’s “ban-the-box” take effect August 5, 2017

Nearly two years after the enactment of New York City’s Fair Chance Act (FCA), and without much fanfare, the City’s Commission on Human Rights published its amended rules that  establish certain definitions and procedures, and clarify the comprehensive requirements of the FCA when using criminal history in employment decisions, and considering applicants for licenses, registrations, and permits.

CREDIT CHECK RESTRICTIONS

Eleven states (California – AB 22; Colorado – The Employment Opportunity Act; Connecticut  – SB 361; District of Columbia – Fair Credit in Employment Amendment Act, Hawaii – HB 31 SD1; Illinois  – HB 4658; Maryland  HB 87;  Nevada – SB 127; Oregon – SB 1045; Vermont – Act No. 154 (S. 95); Washington – RCW 19.182 and  RCW 19.182.020) and at least two localities  (New York City – Stop Credit Discrimination in Employment Act, and Philadelphia – Bill No. 160072), have enacted laws that generally prohibit private employers from checking a candidate’s credit history, except in circumstances where a credit screen is justified by the position’s responsibilities or is required by law.

WAGE HISTORY INQUIRIES

Pay equity initiatives, which among their provisions include a ban on inquiries about a candidate’s wages, are gaining momentum nationwide. The following jurisdictions have enacted such laws and many more are considering similar measures: Delaware – HS1 (effective December 14, 2017); Massachusetts – Pay Equity Act (effective July 1, 2018); New York City – Intro 1253 (effective October 31, 2017); Oregon HB 2005 (effective December 1, 2019); Philadelphia – Fair Practices Ordinance: Protections Against Unlawful Discrimination (set to go into effect May 23, 2017 but now facing a legal challenge); Puerto Rico – Equal Pay Act (effective March 8, 2017); and San Francisco – Parity in Pay Ordinance (effective July 1, 2018).

Pending before California’s Senate is AB 168 that would prohibit employers from seeking an applicant’s salary history and impose significant penalties for violations. Notably, California already has a pay equity law, AB 1676, and although the law does not ban salary history inquiries, it does prohibit employers from using a candidate’s prior wages as the sole basis to justify a pay disparity.

WORK AUTHORIZATION VERIFICATIONS

Revised Form I-9

The USCIS released a revised version of Form I-9, Employment Eligibility Verification on July 17, 2017. Employers can use this revised version or continue using Form I-9 with a revision date of “11/14/16 N” through September 17, 2017. Beginning September 18, 2017, however, employers must use the new form (with the revision date of “07/17/17 N”).

Reminder to California employers

California’s  AB 1065 that went into effect January 1, 2017 makes it unlawful for employers to:

  1. request additional or different documents than those required under federal law to verify that an individual is not an unauthorized immigrant;
  2. refuse to accept documents provided by the applicant that reasonably appear to be genuine;
  3. refuse to honor documents or work authorization based on specific status or term that accompanies the authorization to work; and
  4. attempt to re-investigate or re-verify a candidate’s authorization to work using an unfair immigration-related practice.
August 4th, 2017|Educational Series, Employment Decisions, Legislation, Risk Management|

New Regulations for California Employers Regarding Criminal Background Checks

What this is about:
The Department of Fair Employment and Housing (the “DFEH”) recently enacted regulations (“Regs”) for California employers that impose new requirements when considering criminal history information in employment decisions.

Effective date:
July 1, 2017

What this means:
Substantially based on the enforcement guidance issued by the Equal Employment Opportunity Commission in April 2012, the Regs prohibit employers from using a candidate’s criminal history in personnel decisions, if such information will have an adverse impact on individuals in a legally protected class. The Regs also expand the types of records that California employers are already prohibited from considering. Namely, any non-felony conviction for possession of marijuana that is older than two years is now off-limits.

Requirements:
If an employer obtains conviction information from a source other than the candidate — consumer report or internally performed search — the employer must first notify the candidate that he/she has been screened out because of a conviction before taking any adverse action. This notice requirement differs from that of the Fair Credit Report Act (the “FCRA”), which mandates notices only if the employer takes adverse action based on information contained in a third-party report. Ban-the-box city ordinances, such as those in Los Angeles and San Francisco, have yet different requirements, providing that a notice may be required if the adverse action is based on criminal history information from any source, including disclosure by the candidate.

The Regs also mandate that the candidate is given a reasonable opportunity to demonstrate that the exclusion should not be applied due to his/her particular circumstances, and consideration whether any additional information provided by the candidate or otherwise obtained by the employer warrants an exception.

According to the Regs, the candidate bears the initial burden of proof for establishing that the employer’s background screening policy has an adverse impact on a protected class. If an adverse impact is demonstrated, the burden shifts to the employer to show that its policy is “job-related and consistent with a business necessity,” and based on an individualized assessment, considering factors such as:

  • the nature and gravity of the offense or conduct
  • the time passed since the offense was committed and/or completion of the sentence
  • the nature of the job sought or held

Recommendations:
Employers in California should review their policies on the use of criminal history information in employment decisions and modify any practices to ensure compliance with the new Regs, the FCRA, analogous state law, and applicable local ban-the-box ordinances.

June 27th, 2017|Criminal Activity, Employment Decisions, Legislation, Risk Management|

New Legislation Prohibits New York City Employers From Inquiring About Applicants’ Salary History

What this is about:
New York City Mayor Bill de Blasio signed a new bill (Int. No. 1253-A) prohibiting private employers from inquiring about an applicant’s salary history during all stages of the employment process.

Effective date:
October 31, 2017

What is prohibited:
Once the law becomes effective, it will be an unlawful discriminatory practice for an employer (which includes employment agency, or employee or agent thereof) to:

  • Inquire about the salary history (current and prior) of a job applicant
  • Rely on the salary history of an applicant in determining the salary, benefits or other compensation for such applicant during the hiring process, including the negotiation of a contract

“To inquire” means to communicate, in writing or otherwise, any question or statement to an applicant or an applicant’s employer (current, prior or agent thereof) or to conduct a search of publicly available records or reports for the purpose of obtaining an applicant’s salary history.

What is allowed:
An employer may, without inquiring about salary history, discuss the applicant’s salary, benefits and other compensation expectations. This includes, but is not limited to, unvested equity or deferred compensation that an applicant would forfeit by resigning from the current employer. Also, if an applicant voluntarily and without prompting discloses salary history, the employer may consider such information in determining salary, benefits and other compensation, and may verify the applicant’s disclosure.

Exceptions:
The law provides exceptions where federal, state or local law requires disclosure or verification of salary history for employment purposes, internal transfers or promotions, and public employee positions governed by a collective bargaining agreement.

Enforcement:
The New York City Commission on Human Rights, the agency charged with enforcing the NYC Human Rights Law, will be enforcing this law. Civil penalties of up to $125,000 for an unintentional violation, and up to $250,000 for a “willful, wanton or malicious act” may be imposed.

May 9th, 2017|Employment Decisions, Risk Management|

Additional Guidance and Forms Issued for City of Los Angeles’ Fair Chance Initiative for Hiring Ordinance

As reported in our previous alert, effective January 22, 2017, the Fair Chance Initiative for Hiring (“LAFCIH”) ordinance prohibits employers (with 10 or more employees) from inquiring about an applicant’s criminal history until a conditional job offer has been extended and imposes significant compliance obligations. The Department of Public Works Bureau of Contract Administration (the “BCA” or the “Department”), which bears administrative responsibilities for the LAFCIH, in addition to its rules and regulations published In February, has now provided forms and further guidance to help covered employers (and city contractors/subcontractors) meet their compliance requirements.

The forms and guidance include the following:

It is recommended that all covered employers and city contractors/subcontractors review the materials provided by the BCA.  Penalties and fines for violations of the LAFCIH will be imposed starting July 1, 2017.

February 10th, 2017|Employment Decisions, FCRA, Legislation, Privacy, Risk Management|

New Guidance Regarding City of Los Angeles’ Fair Chance Initiative for Hiring Ordinance

 

 

What is this about:

As reported in our previous alert, effective January 22, 2017, the Fair Chance Initiative for Hiring (“LAFCIH”) ordinance prohibits employers from inquiring about an applicant’s criminal history until a conditional job offer has been extended and imposes significant compliance obligations.

The Department of Public Works Bureau of Contract Administration, which bears administrative responsibilities for the LAFCIH, in addition to its rules and regulations (the “Regs”) to guide covered employers (and city contractors/subcontractors) in meeting compliance requirements published last month, has now posted an “individualized assessment and reassessment form.” It is unclear whether the Department expects employers to use this form as provided or whether modifications are permitted. Certain other items in the Regs also remain unclear, and the Department has yet to issue anticipated further guidance.

 

Notable amplifications and clarifications:

  1. “Applicant” means an individual who submits an application or other documentation for employment to an employer regardless of location.
  2. “Employee” means any individual who performs at least two hours of work on average each week within the geographic boundaries of the City for an employer. Average week is determined by the last four complete weeks before the position is advertised
  3. An individual who lives in the City and performs work for an employer from home, including telecommuting, is an employee.
  4. An individual who works from a home that is outside of the City is not an employee even if he/she works for a Los Angeles-based company, unless the individual also works at least two hours on average per week within the geographic boundaries of the City.
  5. The LAFCIH applies to employees regardless of an employer’s designation of an employee as an independent contractor, and labeling a worker as an independent contractor is not conclusive for the purpose of the LAFCIH.
 

Criminal history:

According to the Regs,

“A conviction shall include a plea, verdict, or finding of guilt regardless of whether sentence is imposed by the court. In the State of California, an employer is prohibited from asking about any arrest information, unless it results in a conviction, and otherwise specified.”

Note: the definition above cites California Labor Code §432.7(a)(1). The first sentence is correct; however, the second sentence is not, as that statute expressly allows inquiries about pending cases,stating that “nothing [in this section] shall prevent an employer from asking… about an arrest for which the employee or applicant is out on bail or on his or her own recognizance pending trial.”

Nevertheless, the Regs, in a section titled “Employer Assessment of Criminal History,” go on to state that “arrests cannot be considered in employment decisions.”

 

Other guidance items:

The Regs amplify other definitions and aim to explain the various employer requirements. This includes, but is not limited to: the application and interview procedure, assessment of criminal history, the “Fair Chance” process, notice and posting, record-keeping, enforcement and exceptions.

See above the above post for links regarding this new guidance.

February 9th, 2017|Employment Decisions, FCRA, Legislation, Privacy, Risk Management|

The Swiss-U.S. Privacy Shield Framework is approved

The Swiss-U.S. Privacy Shield Framework (the “Framework”) made its debut on January 12, 2017 without much fanfare when Swiss federal councillor Johann Schneider-Ammann announced the Framework’s approval as a valid legal mechanism to comply with Swiss requirements for transferring personal data from Switzerland to the United States. The Framework, designed by the U.S. Department of Commerce (the “DOC”) and the Swiss government to align with the EU-U.S. Privacy Shield, will immediately replace the U.S.-Swiss Safe Harbor. The DOC will begin accepting self-certifications starting April 12, 2017 to give organizations ample time to review the new Framework’s principles and compliance requirements. For more of Scherzer International’s coverage of the EU-U.S. Privacy Shield, click here.

February 2nd, 2017|Business Transactions, European Union, International, Legislation, Privacy, Risk Management|

City of Los Angeles’ “Fair Chance Initiative for Hiring” goes into effect January 22, 2017

The City of Los Angeles passed the “Fair Chance Initiative for Hiring (LAFCIH),” a new “ban-the-box” legislation that goes into effect January 22, 2017, with monetary fines for non-compliance starting July 1, 2017. The LAFCIH applies to most private sector employers that (1) are located in or doing business in the City of Los Angeles; and (2) employ 10 or more people. The law covers both applicants and incumbent employees in virtually any type of employment situation.

The ordinance prohibits covered private employers from inquiring about an applicant’s criminal history until a conditional offer of employment has been extended, and imposes significant compliance obligations, including a requirement that before making an adverse decision based on a criminal record, the employer “performs a written assessment that effectively links the specific aspects of the applicant’s criminal history with risks inherent in the duties of the employment position sought by the applicant.” At a minimum, the employer must consider factors identified by the Equal Employment Opportunity Commission in its 2012 Enforcement Guidance and any other factors that may be required by rules or guidelines promulgated by the city’s Department of Public Works, Bureau of Contract Administration [Department] which will be administering the LAFCIH.

The employer must then engage in a “fair chance process,” allowing the candidate to provide information or documentation regarding the accuracy of the criminal record or other information that the employer should consider, such as evidence of rehabilitation or other mitigating factors. The proposed position must be held open for at least five business days after the candidate has received the employer’s notification and assessment. If the candidate provides additional information or documentation, the employer is required to consider the new information and perform a written re-assessment.

Additionally, the LAFCIH provides that all covered employers include the following language in any advertisement or solicitation seeking applicants:

“The employer will consider for employment qualified applicants with criminal histories in a manner consistent with [the Los Angeles Fair Chance Initiative for Hiring].”

There is also a notice posting requirement, which must be in a conspicuous place at every workplace, job site, or other location in the City of Los Angeles under the employer’s control that is visited by applicants. Copies of the notice must be sent to each labor union or representative of workers that has a collective bargaining agreement or other agreement applicable to employees in Los Angeles.

Employers are required to maintain all records and documents related to an individual’s application for employment, including any written assessments and re-assessments for a period of three years after the receipt of the job application.

As with other “ban-the-box” legislation, the LAFCIH makes it unlawful for an employer to retaliate or otherwise take adverse action against an individual who has complained about the employer’s non-compliance or anticipated non-compliance; opposed any practice made unlawful by the ordinance; participated in any proceedings related to enforcement of the law, or otherwise sought to enforce or assert his/her rights under the LAFCIH.

The LAFCIH does not apply in the following circumstances: (1) when the employer is required by law to obtain information regarding an applicant’s criminal convictions; (2) when the applicant will be required to possess or use a firearm in the course of his/her employment; (3) when the applicant is prohibited by law from holding the position sought due to a conviction, regardless of whether the conviction has been expunged, sealed, eradicated, or dismissed; or (4) when the employer is prohibited by law from hiring an applicant who has been convicted of a crime.

With this new ordinance, Los Angeles joins the fast-growing list of localities (Austin, Baltimore, Buffalo, Chicago, Columbia (MO), District of Columbia, Montgomery County (MD), New York City, Philadelphia, Portland, Prince George’s County (MD), Rochester, San Francisco, and Seattle) and nine states (Connecticut, Hawaii, Illinois, Massachusetts, Minnesota, New Jersey, Oregon, Rhode Island, and Vermont) that have enacted similar laws for private employers.

Companies covered by the LAFCIH should immediately review and revise, if applicable, their applications, offer letters, background check forms, and notices, and ensure that their employment screening policies incorporate the ordinance’s pre-adverse and adverse action procedures and documentation, and record keeping requirements.

Since “ban-the-box” legislation is gaining momentum at a rapid pace, all nationwide employers may want to conduct an assessment of their employment screening practices to ensure their compliance with applicable laws and regulations.

January 10th, 2017|Employment Decisions, Legislation, Risk Management|

New Employment Background Screening Legislation for 2017

“Ban-the-box”

“Ban-the-box” measures, which generally prohibit employers from inquiring about a candidate’s criminal history (including performing background checks) until later in the hiring process, and impose significant compliance requirements, will soon be the norm rather than an exception. The city of Los Angeles, with its new Fair Chance Initiative for Hiring ordinance, is just the latest to join the fast growing list of localities (Austin, Baltimore, Buffalo, Chicago, Columbia – MO, District of Columbia, Montgomery County – MD, New York City, Philadelphia, Portland, Prince George’s County – MD, Rochester, San Francisco, and Seattle) and nine states (Connecticut, Hawaii, Illinois, Massachusetts, Minnesota, New Jersey, Oregon, Rhode Island, and Vermont (effective July 1, 2017)) that have enacted similar laws  for private employers.

Juvenile criminal record checks   

Effective January 1, 2017, AB 1843 amends Section 432.7 of the Labor Code to prohibit California employers from inquiring about and considering information regarding “an arrest, detention, process, diversion, supervision, adjudication, or court disposition” that occurred while the candidate was subject to the process and jurisdiction of a juvenile court. Certain employment situations are exempted from these requirements, such as a prohibition by law from hiring an applicant who has been convicted of a crime.

Criminal background checks for transportation network companies

Effective January 1, 2017, under California’s AB 1289, a transportation network company (“TNC”) such as Uber, is required to perform criminal background checks on all drivers. The bill also prohibits a TNC from contracting with a driver who is registered on the DOJ’s national sex offender website or has been convicted of specified felonies, or misdemeanor assault or battery, domestic violence, or driving under the influence of drugs or alcohol within the past seven years.

Credit check restrictions

The District of Columbia is the latest jurisdiction to pass a law that prohibits private employers, with certain exceptions, from conducting credit checks on job applicants. The Fair Credit in Employment Amendment Act, which amends the Human Rights Act of 1977 to include credit information as a protected trait will take effect following approval by Mayor Bowser and other enactment actions. Similar to the laws already in effect in ten states for private employers (California – AB 22; Colorado – The Employment Opportunity Act; Connecticut  – SB 361; Hawaii – HB 31 SD1; Illinois  – HB 4658; Maryland  HB 87;  Nevada – SB 127; Oregon – SB 1045; Vermont – Act No. 154 (S. 95); Washington – RCW 19.182 and  RCW 19.182.020) and at least two cities (New York City – Stop Credit Discrimination in Employment Act and Philadelphia – Bill No. 160072), it restricts checking an applicant’s credit history except in circumstances where a credit screen is justified by the position’s responsibilities or is required by law.

Wage history inquiries

Pay equity initiatives include California’s AB 1676, which effective January 1, 2017, prohibits employers from using a candidate’s prior salary as the sole basis to justify a pay disparity. California, however, has decided not to follow the Massachusetts provisions (described below) of banning inquiries regarding a candidate’s wage history.

Massachusetts was the first jurisdiction to pass a law that prevents employers from asking job candidates about their salary history. The commonwealth’s Pay Equity Act goes into effect July 1, 2018, and in addition to equal pay requirements, it makes it illegal, among other things, to: (1) require that an employee refrain from inquiring about, discussing or disclosing information about his or her wages, or any other employee’s wages; (2) screen job applicants based on their wages; (3) request or require a candidate to disclose prior wages or salary history; or (4) seek the salary history from a current or former employer, unless he/she provides express written consent, and an offer of employment, including proposed compensation, has been extended.

Effective May 23, 2017, the city of Philadelphia with its Fair Practices Ordinance: Protections Against Unlawful Discrimination will make it unlawful for employers to inquire about a candidate’s wage history during the hiring process, unless a federal, state, or local law specifically authorizes the disclosure or verification of wage information.

Drug testing – marijuana

According to the National Conference of State Legislatures (NCLS), 31 states/jurisdictions (Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Guam, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington) have public medical marijuana and cannabis programs, while several states (Alaska – Ballot Measure No. 2; California – Proposition 64; Colorado – Amendment 64; District of Columbia – Initiative 71; Maine – Question 1; Massachusetts  – Question 4;  Nevada – Question 2; Oregon – Measure 91; and Washington Initiative 502) have passed laws allowing for the recreational use of marijuana by adults.  Since the legal landscape for marijuana use is changing rapidly, employers should review and update their substance abuse policies, including drug-testing. Notably, marijuana remains a Schedule I drug under the federal Controlled Substances Act.

Work authorization verification

California’s SB 1001 is a revival of the 2015  AB 1065, which effective January 1, 2017, makes it unlawful for employers to:

  1. Request additional or different documents than those required under federal law to verify that an individual is not an unauthorized immigrant
  2. Refuse to accept documents provided by the applicant that reasonably appear to be genuine
  3. Refuse to honor documents or work authorization based on specific status or term that accompanies the authorization to work
  4. Attempt to reinvestigate or re-verify a candidate’s authorization to work using an unfair immigration-related practice.

Effective January 1, 2017, Tennessee’s SB 1965 requires that companies with 50 or more employees use the federal E-Verify program to confirm new employees’ work authorization.

As a reminder, starting January 22, 2017, all employers must use the new Form I-9, which is dated November 14, 2016 (the edition date is on the bottom of the form).  Employers that fail to use the new form may be subject to civil penalties.

January 2nd, 2017|Employment Decisions, FCRA, Legislation, Risk Management|

SEC considers background check rule proposed by FINRA

Financial institutions could face expanded obligations to conduct background screening of applicants for registration pursuant to a rule proposed by the Financial Industry Regulatory Authority (FINRA) to the Securities and Exchange Commission (SEC).

As currently drafted, the National Association of Securities Dealers (NASD) Rule 3010(e), the Responsibility of Member to Investigate Applicants for Registration, provides that a firm “must ascertain by investigation the good character, business reputation, qualifications and experience of an applicant before the firm applies to register that applicant with FINRA,” the regulator explained.

Seeking to “streamline and clarify members’ obligations relating to background investigation, which will, in turn, improve members’ compliance efforts,” FINRA proposed the addition of background checks to the Rule for the SEC’s consideration.

The change would mandate that firms verify the accuracy and completeness of the information in an applicant’s Form U4 (Uniform Application for Securities Industry Registration or Transfer) for first-time applicants as well as transfers. Written procedures for conducting the background check – including a public records search – must also be established.

While the rule is prospective, FINRA announced that it would take a look at currently registered representatives. The financial regulator intends to begin its efforts with a search of all publicly available criminal records for the roughly 630,000 registered individuals who have not been fingerprinted within the last five years; going forward, FINRA will periodically review public records “to ascertain the accuracy and completeness of the information available to investors, regulators and firms,” the agency said.

To read the Federal Register notice: click here.

December 3rd, 2014|Fraud, Risk Management|

Risk-based approach to employment screening rates high on value chain

In today’s world just about every company knows that an effective employment screening program is invaluable for hiring qualified individuals, reducing turnover, deterring fraud and other criminal actions, and avoiding or mitigating litigation.

Recognizing that a “bad” hire is a threat to the bottom line, many companies, from investment bankers to law firms, are taking a risk-focused approach to background investigations and deciding what is appropriate or how much should be done to ensure organizational success. For example, obtaining a credit report or checking civil records for an entry-level applicant with low risk responsibilities may be of limited use, while reviewing such record histories for someone who will handle money or have access to sensitive information may be imperative in assessing his/her suitability for a position of trust.

Best practices in both the government and in the private sector indicate that a risk designation should be determined for every position, based on its description of duties and responsibilities. The risk grade should be commensurate with the employee’s assigned trust level, financial accountability, access to sensitive and confidential information and critical data systems, autonomy, discretionary authority, and potential opportunity for misconduct.

To be effective and non-discriminatory, employment screening policies need to specify a uniform set of background investigation elements for all position/assignment levels, including new hires, temporary workers, interns, transferred and promoted employees, contractors and volunteers.

SI has a full suite of employment background investigation products. Please visit our website at http://www.scherzer.com/ to learn more or order an investigation.

September 13th, 2011|Educational Series, Employment Decisions, Risk Management|