A Triple Threat to Your Employment Background Screening Program

REGULATION, LEGISLATION & LITIGATION

A Triple Threat to Your Employment
Background Screening Program

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

(540) 338-7151 www.lowersriskgroup.com

Disclaimer

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.


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



> 12.7m > 5m
> 8% On average,
or 42% out of work for
6+ months.
unemployment rate unemployed workers
since February 2009. Nearly 1 in 3 of those
out of work for 39.7
out of work for more
weeks, or roughly 9
than 1 year.
months.

– Source: US DOL BLS



• 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

28% black males

16% Hispanic males

4% white males

Source: US DOJ BJS


Maturing Industry, Ubiquitous Use
of Employment Screening

• 25-35 year old industry Employers Have
• Est. $2B industry (KPMG) Embraced
Background Checks
• 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%
1996 2010
Source: SHRM


Regulatory Landscape Overview

• Regulatory Landscape Relating to Employment Screening

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

EEOC
FCRA
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
FPO

– Sample from CRA


FCRA


– 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 ?
Arrest Conviction
– Burden shift
– Can base decision on underlying
conduct
• Investigate
• Talk to individual (individualized
assessment)
– Pending cases not distinguished


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

State
Legislatures
US Congress
Local
Government


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

• Use of Criminal Records in Hiring

FCRA Violations
• Applicant Disclosure and Authorization Requirements

Negligent Hiring and Negligent Retention





– 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

• First Student/First Transit Class Action (2009, IL)
– $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, FCRAA
vpascarella@lowersriskgroup.com
540.338.7151 Ext.1131

Mention this presentation for a free copy of our
Employment Screening Survival Kit!


A Triple Threat to Your Employment Background Screening Program

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