a triple threat to your employment background screening program

(540) 338-7151 www.lowersriskgroup.com

REGULATION, LEGISLATION & LITIGATION

A Triple Threat to Your EmploymentBackground Screening Program

PRESENTED BY: VINCE PASCARELLA, ESQ., SPHR, FCRAA

VICE PRESIDENT


This presentation and the information contained herein are intended as general educational information only and are not to be construed as legal advise or legal

opinion.

Disclaimer


About Vince Pascarella

• Attorney, SPHR, FCRAA

• Employment screening, risk management, loss prevention industry executive since 1998

• Former general counsel (in-house)

• 2-term Co-Chair NAPBS Best Practices Committee

• JD, University of Colorado Law School

• BA, magna cum laude, Long Island University

http://www.linkedin.com/in/vincepascarella


Presentation Overview

• Regulatory Landscape Relating to Employment Screening

• Legislative Landscape Relating to Employment Screening

• Litigation and Class Action Lawsuits Relating to Employment Screening


Regulatory Landscape Overview

• Why All the Attention? – Cultural, Economic, and Demographic Workplace Shifts– Maturing Industry, Ubiquitous Use of Employment Screening

• Regulatory and Legislative Landscape Relating to Employment Screening


Cultural, Economic, and Demographic Workplace Shifts

• Globalization

• US - manufacturing to service economy

• “The Great Recession”

• Sustained high unemployment

• The long-term unemployed



– Source: US DOL BLS

> 8% unemployment

rate since February 2009.

> 12.7m

On average, unemployed

workers out of work for 39.7

weeks, or roughly 9 months.

> 5m or 42% out of work

for 6+ months. Nearly 1 in 3 of

those out of work for more than 1

year.


• Increased rates of arrest, conviction, and incarceration

• Racial arrest and conviction disparity

• Criminal history as barrier to employment



• 1991 - 1.8% had served prison time

• 2007 - 3.2%, or 1 in 31

• 6.6% of population born in 2001 will serve prison time in their lifetimes

• 92 million Americans have criminal record

Source: US DOJ BJS



• African Americans and Hispanics arrested 2-3x their proportion in the general population

• Likelihood of going to prison in lifetime

Source: US DOJ BJS


28% black males

16% Hispanic males

4% white males


Maturing Industry, Ubiquitous Use of Employment Screening

• 25-35 year old industry• Est. $2B industry (KPMG)• Significant consolidation• Increasingly a target for plaintiff’s bar (Part 2)• Significant growth in employment screening• % of employers doing background checks

– 1996 – 66%– 2010 – 92%

Source: SHRM

Employers Have Embraced

Background Checks

1996 2010


Regulatory Landscape Overview

• Regulatory Landscape Relating to Employment Screening

– Federal FCRA (FTC/CFPB) and state equivalents– Federal Title VII (EEOC) and state equivalents

FCRA

EEOC

State Equivalents


Fair Credit Report Act (FCRA)

• Employer FCRA and EEO Compliance Certification to CRA

• Applicant Disclosure and Authorization Requirements

• Adverse Action Requirements

• Social Media Background Screening


FCRA

• Employer FCRA and EEO Compliance Certification to CRA

– FCRA § 604(b)(1)(A)• Certify FCRA Compliance• Certify EEO Compliance

– Typically in CRA Service Agreement

FPO


FCRA

• Applicant Disclosure and Authorization Requirements

– FCRA § 604(b)(2)(A)• Prior to ordering background

check• Disclosure and Authorization• Disclosure stand alone

document/screen– can be combined with

Authorization, only

– Sample from CRA

FPO


FCRA

• Adverse Action Requirements

– FCRA §604(b)(3)(A)– FCRA § 615(a)– Adverse Action 2-Step– Can be Outsourced to CRA


FCRA

• FTC Adverse Action Enforcement

– Imperial Palace (2004)• $325K

– Quality Terminal Services/Rail Terminal Services (2009)• $77K


FCRA


– 2011 FTC Investigation/Letter

– FCRA applicable if done by 3rd party (e.g., CRA)

– And all FCRA requirements would apply, including - • Employer certification of EEO compliance• Employer Authorization/Disclosure prior to background check• Employer Adverse Action• CRA Dispute reinvestigation• CRA maximum possible accuracy


FCRA


– Hot Topic in US Congress and State Legislatures (Part 2)


Title VII of the Civil Rights Act of 1964

• Prohibits employment discrimination based on race, color, religion, sex, national origin

• Private employers, and federal, state, and local governments


Title VII

• EEOC

– E-RACE Initiative, Systemic Initiative, and Disparate Impact Discrimination

– Use of Credit Reports in Hiring

– Guidance on the Consideration or Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964


EEOC

• E-RACE Initiative, Systemic Initiative, and Disparate Impact Discrimination

– Eradicating Racism and Colorism in Employment• 2006/2007

– Systemic Initiative• Includes evaluating hiring processes,

selection, and testing practices


EEOC

• Use of Credit Reports in Hiring

– Current Guidance in review

– Current Guidance presumes disparate impact with use of credit report in hiring

– Freeman lawsuit (2009)

– Kaplan lawsuit (2010)


EEOC

• Guidance on the Consideration or Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964 (“EEOC 2012 Guidance”)


EEOC 2012 Guidance

• April 25, 2012 – New Guidance Issued

– Consolidates and “updates” 1987/1990 Guidance

– Effective immediately upon issue

– Comply now


EEOC 2012 Guidance

• Arrests versus convictions

• Disparate treatment

• Disparate impact

• Effect on conflicting Federal and state law

• EEOC’s Best Practices for Employers


EEOC 2012 Guidance

• Arrests versus convictions

– Use of arrest is per se disparate

impact

– Not job related or consistent with

business necessity

– Burden shift

– Can base decision on underlying

conduct

• Investigate

• Talk to individual

(individualized assessment)

– Pending cases not distinguished

Arrest Conviction?


EEOC 2012 Guidance

• Disparate treatment

– Treat criminal history differently based on race or national origin of applicant/employee


EEOC 2012 Guidance


– Neutral policy with disproportional impact based on race and national origin

– National data supports basis for investigation

– Guidance presumes disparate impact unless employer can show evidence

to contrary


EEOC 2012 Guidance


– Job related, and

– Consistent with business necessity

– No less discriminatorily impactful alternative

– Green v. Missouri Pacific Railroad, 523F.2d 1290 (8th Cir., 1975)• Nature and gravity of offense• Time since conviction/completion of sentence• Nature of job sought or held


EEOC 2012 Guidance

• Green factors – with new Guidance details

– Nature and gravity of offense• Harm caused• Legal elements of crime• Classification (F/M)

– Time since conviction/completion of sentence• Recidivism evaluation

– Nature of job sought or held• Not just job title• Specific duties, essential functions, environment


EEOC 2012 Guidance

• Job related and consistent with business necessity met by -

– Validation, or

– Targeted screen with individualized assessment

• No bright line rules


EEOC 2012 Guidance

• Validation

– Academic studies and expert testimony

– Correlating specific past criminal conduct to position-specific subsequent workplace performance or behavior

– Uniform Guidelines on Employee Selection Procedures

– Safety, security, and risk

– Recidivism


EEOC 2012 Guidance

• Targeted screen

– Green factors• Nature and gravity of offense• Time since

conviction/completion of sentence

• Nature of job sought or held


EEOC 2012 Guidance

• Individualized assessment

– Case-by-case, applicant-by-applicant analysis

– Whether the policy as applied to the individual, is job related and consistent with business necessity


EEOC 2012 Guidance


– Not required by Title VII

– Recommended by EEOC

– Criminal offense must have “demonstrably tight nexus to the position in question” to circumvent individualized assessment


EEOC 2012 Guidance


– Facts/circumstances surrounding

– Number of convictions

– Age at time of offense or release

– Rehabilitation

– Bonding

– Length/consistency of employment before and after

– Evidence same type of work post conviction without evidence of criminal behavior


EEOC 2012 Guidance

• No bright line rules

– No absolute bar

– “Ban the box” – recommended by EEOC

States with localities that have banned

the box


EEOC 2012 Guidance

• Federal law generally withstands Guidance• State and local law preempted

– Compliance problem for employers in state regulated industries• e.g., law enforcement, fire and emergency services, schools,

healthcare, eldercare, etc.


EEOC 2012 Guidance

• EEOC’s Best Practices for Employers

– No bright line policies

– Narrowly tailored written policy on use of criminal records, including matrices

– Document justification for policy and procedures, consultation, and research

– Train hiring staff on Title VII discrimination generally, and implementation of policy and procedure with regard to Title VII requirements

– Inquire only about past convictions that are job-related and consistent with business necessity

– Maintain confidentiality of criminal record information


Recent EEOC Title VII Investigations

• Pepsi settlement (2012)

– $3.13M use of criminal records in hiring

• Freeman lawsuit (2009)

– Pending in MD

– Use of credit reports and criminal records in hiring

• Peoplemark lawsuit (2011)

– EEOC ordered to pay nearly $800K


Legislative Landscape Relating to Employment Screening

US Congress

State Legislatures

LocalGovernment


Legislative Landscape Overview

Ban the Box

Social Media Background Screening

Title VII Discrimination

– Use of Credit Reports in Hiring– Use of Criminal Records in Hiring


State Legislatures & US Congress

Ban the Box

– Job application questions about criminal conduct



Ban the Box – States

– Passed• CA, CT, MN, NM• HI, MA

– Proposed• MD, NE, NJ, RI



Ban the Box

– Cities & Counties• CA - Alameda County, Berkeley, Oakland, San Francisco• CT - Bridgeport, Hartford, New Haven, Norwich• FL - Jacksonville• IL - Chicago• MA - Boston, Cambridge, Worcester• MD - Baltimore • MI - Detroit, Kalamazoo, Muskegon County• MN - Minneapolis, St. Paul• NC - Cumberland County• NJ - Atlantic City



Ban the Box

– Cities & Counties• NY - New York• OH - Cincinnati, Cleveland• OR - Multnomah County• PA - Philadelphia• RI - Providence• TN - Memphis• TX - Austin, Travis County• WA - Seattle• Washington, DC



Related to Ban the Box

– State and local prohibitions/restrictions on asking about non-convictions and certain types of conviction

• e.g., CA Labor Code Section §432.7 and §432.8




– Public vs. private

– Passwords and pretexting

– Violation of Terms of Service, Terms of Use, etc.




– Legal off duty conduct

– Discrimination

– Identity and Accuracy




– 37% of employers use social media to research candidates

• 65% - Facebook

• 63% - LinkedIn

• 16% - Twitter

Source: CareerBuilder Survey




– Why employers use social media in hiring

• 65% - whether presents professionally

• 51% - whether good fit for the company culture

• 45% - research qualifications

• 35% - research well-roundedness

• 12% - research reasons not to hire

Source: CareerBuilder Survey




– States

• Passed– MD

• User Name and Password Privacy and Exclusion Act

• Signed May 2, 2012; Effective October 1, 2012

• Proposed– CA, DE, IL*, MA, MI, MN, MO, NJ, NY, OH, PA, SC, WA

*awaiting Governor’s signature




– US Congress

• Stored Communications Act, and Computer Fraud and Abuse Act

– Senators requested US DOJ and EEOC investigation of possible employer violations




– US Congress

• House Bill - – Social Networking Online Protection Act (SNOPA)

• Illegal for employer to require applicants or employees to supply passwords to social media accounts




– US Congress

• Senate Bill - – Password Protection Act

• Extends protection to smart phones, private e-mail accounts and all information contained on an employee’s personal computer



Title VII - Use of Credit Reports in Hiring

– States• Passed

– CA, CT, HI, IL, MD, OR, VT*, WA

*effective July 1, 2012• Proposed

– DC, GA, IN, IA, KS, MA, MI, MN, MO, NE, NJ, NY, OH, OK, PA, RI

• Failed– CO, FL, WI




– US Congress

• Equal Employment for All Act– A prospective or current employer may not use a

consumer credit report for employment purposes or for making an adverse employment action




– US Congress

• Equal Employment for All Act– Exceptions:

• national security• FDIC clearance• state or local government agency requirement• supervisory, managerial, professional, or executive

position at a financial institution• otherwise required by law


Litigation and Class Action Lawsuits

Title VII Discrimination• Use of Credit Reports in Hiring• Use of Criminal Records in Hiring

FCRA Violations• Applicant Disclosure and Authorization

Requirements• Adverse Action Requirements

Negligent Hiring and Negligent Retention




• Use of Credit Reports in Hiring

– University of Miami School of Medicine Disparate Impact Class Action (2010)

• senior medical collector applicant, offer revocation




• Use of Criminal Records in Hiring

– Accenture Disparate Impact Class Action (2010)• 10 year old vehicular homicide• Offer revocation, termination as contract worker

– US Census Bureau Disparate Impact Class Action (2010)



FCRA Violations

• Capital One Class Action (2011, MD)– Applicant Disclosure and Authorization Requirements– Adverse Action Requirements

• Domino’s Pizza Class Action (2012, MD)– Applicant Disclosure and Authorization Requirements– Adverse Action Requirements

• First Student/First Transit Class Action (2009, IL)– Adverse Action Requirements– $5,900,000 Settlement (Pending Approval)



FCRA Violations

• If “wilful” violation, additional statutory punitive penalty of up to $1000 per violation

– Reckless disregard enough to show wilfulness• Safeco v. Burr, 127 S.Ct. 2201 (2007)

– More than negligence but less than actual knowledge




• Hiring or retaining an employee where:

– knew, or should have known, employee was dangerous, unfit, or not qualified, and

– foreseeable that injury or harm could result




• Heyl Logistics, LLC

– Truck driver coming off a crystal methamphetamine high and falling asleep at the wheel killed other driver

– Transportation broker, employer, and driver found liable– $5,200,000 jury verdict




• The Nurse Connection Inc. (2002)

– home health care worker murdered patient– prior burglary conviction– prior for-cause termination– $40,000,000 payout




• Average settlement - $1,000,000 Source: Human Resources Management

• Employers lose 79% of negligent hiring cases Source: Fortune


About Lowers Risk Group

Comprehensive enterprise risk management solutions.

• High-risk, highly-regulated environments

• Organizations that value risk mitigation–human capital risk management–specialized industry enterprise risk management

Protect people, brands, and profits from avoidable loss and harm.

www.lowersriskgroup.com


About Proforma Screening Solutions

Comprehensive employment screening services

• Background checks

• Drug tests

– drive compliance– enhance safety– boost performance

www.proformascreening.com


Questions or Feedback?

Vince Pascarella, Esq. SPHR, [email protected]

540.338.7151 Ext.1131

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