|What is this about:||The Department of Public Works Bureau of Contract Administration (the “Department”), which bears administrative responsibilities for the Fair Chance Initiative for Hiring (“LAFCIH”) issued its rules and regulations (the “Regs”) to guide covered employers (and city contractors/subcontractors) in meeting compliance requirements. As reported in our previous alert, effective January 22, 2017, the LAFCIH prohibits inquiring about an applicant’s criminal history until a conditional job offer has been extended and imposes significant compliance obligations.|
|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 the 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 remind employers that “arrests cannot be considered in employment decisions.”|
|Other guidance items:||The Regs amplify other definitions and aim to explain the various employer requirements, including, but not limited to, the application and interview procedure, assessment of criminal history, the “Fair Chance” process, notice and posting, recordkeeping, enforcement, and exceptions. See below for some links regarding this new guidance:Read the Regs here
Access the notice to applicants/employees regarding the LAFCIH here
The Department’s sample letter to rescind a job offer here.
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.
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), the 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.
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.
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.
Prime bank schemes generally claim that investors’ funds will be used to purchase and trade “prime bank” financial instruments on clandestine overseas markets, and generate huge returns. However, neither these instruments, nor the markets on which they allegedly trade, exist. To legitimize the schemes, the promoters distribute documents that appear complex, sophisticated and official. They frequently tell investors that they have special access to programs that otherwise would be reserved for top financiers on Wall Street, or in London, Geneva and other world financial centers. Possible profits of 100% or more with little risk also are touted.
The fraudsters target individuals and entities, including municipalities, charitable associations and other non-profit organizations. They advertise in national newspapers, such as USA Today and The Wall Street Journal, and often avoid using the term “prime bank note” in their spiel. In fact, investors are told that the programs do not involve prime bank instruments so that they appear legitimate.
The Office of the Comptroller of the Currency (OCC) posted the following warning signs of “prime bank” investment fraud:
- Excessive guaranteed returns
Promises of unrealistic returns, of 20% to 200% monthly, at no risk, are the hallmarks of prime bank fraud.
- Fictitious financial instruments
Despite credible-sounding names, the “financial instruments” at the heart of any prime bank scheme simply do not exist. Fraudsters frequently claim that the offered financial instrument is issued, traded, guaranteed, or endorsed by the World Bank (Department of Institutional Integrity or Operations Evaluation Department), International Monetary Fund (IMF), Federal Reserve, Department of Treasury, International Chamber of Commerce (ICC), or an international central bank.
- Extreme secrecy
Fraudsters maintain that the transactions must be kept confidential by all parties, making client references unavailable. They describe the transactions as the best-kept secret in the banking industry, and assert that, if asked, bank and regulatory officials would deny knowledge of such instruments. Investors may be prompted to sign nondisclosure agreements.
- Exclusive opportunity
Fraudsters claim that the investment opportunities are by invitation only, available to a handful of special customers, and historically reserved for the wealthy elite.
- Complex presentations
Explanations often are vague about who is involved in the transaction or where the money is going. Fraudsters cover up the lack of specificity by stating that the financial instruments are too technical or complex for non-experts to understand.
Members of the Financial Community
FM: Larry Scherzer, President, Scherzer International
RE: Background Investigations in the Current Economic Environment
Ladies and Gentlemen,
As a part of its Risk Management Program, one of our financial services clients asked us to conduct a Prospective Client Background Investigation. This is a well-accepted best practice for protecting the firm’s reputation and minimizing legal liabilities.
SI’s investigation in 2006 revealed that the subject company and its principal were involved in dubious business practices. As you may have guessed, based on this initial discovery, our client declined the engagement.
Recent headlines have now verified, years after our investigation, that the prospective client had, in fact, been running what can best be described as a long-standing Ponzi scheme.
This experience demonstrates the benefits of obtaining background investigations that provide comprehensively researched and analyzed information as a key element in your Risk Management Program.
Please visit www.scherzer.com or telephone 800-SC-FACTS to find out more about managing business risk for pennies on the dollar… because we never take integrity for granted
Larry S. Scherzer