EmployeeScreenIQ Blog

A couple of weeks ago we posted about  California SB1384 –a fast moving bill that would expand the definition of a nationwide specialty consumer reporting agency and would require companies fitting that description to place a freeze on consumer files upon request by a consumer.

This bill is scheduled to be heard today, despite the many concerns and issues including those listed here:

•    Under California law, consumers already have a right to place a credit freeze with a consumer credit reporting agency.  Expanding that to include non-credit consumer information could have significant consequences to employers and consumers.
•    Consumers would be able to suspend access to non-credit consumer report information (i.e. his/her criminal history, evictions etc.) thereby denying business (end users of consumer reports) access to information critical in making risk and hiring decisions.
•    Freezing access to non-credit consumer reports may restrict or deny access to public information by businesses—even those that already have the consumer’s consent as mandated by the FCRA.
•    Before a freeze could be lifted, the business may have already moved on to an applicant whose history could be vetted more immediately.
•    11 states specifically prohibit freezing of non-credit consumer information; several other states specifically exempt non-credit consumer information from their credit freeze legislation.
•    Significant consumer protections already exist in California and under the Federal Fair Credit Reporting Act (FCRA) via oversight by the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB).

The bottom line is this– we foresee many unintended consequences that will negatively impact California business owners and consumers if this bill moves forward, unchecked.

If you agree, please contact the California Senators below by phone, email, fax or web form to urge them to oppose this bill.
Sen. Ron Calderon
Phone: (916) 651-4030
Fax: (916) 327-8755
Sen. Lou Correa
Phone(714) 558-4400
Fax: (714) 558-4111
Sen. Ed Hernandez
Phone: (916) 651-4024
Fax: (916) 445-0485
Sen. Ted Lieu
Phone: (916) 651-4028
Fax: (916) 323-6056
Sen. Gloria Negrete McLeod
Phone: (916) 651-4032
Fax: (916) 445-0128
Sen. Alex Padilla
Phone:  916-651-4020
Sen. Curren Price
Phone: (916) 651-4026
Fax: (916) 445-8899
Sen. Michael Rubio
Phone: (661) 395-2620
Fax: (661) 395-2622
Sen. Juan Vargas
Phone: (916) 651-4040
Fax: (916) 327-3522
Sen. Rod Wright
Phone: (916) 651-4025
Fax: (916) 445-3712
Sen. Leland Yee
Email: Senator.Yee@senate.ca.gov
Phone: (916) 651-4008

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California has a reputation for being the leader in introducing new and perplexing legislation that can set the tone for over eager copy-cat legislatures in other states. It was one of the first states to pass a law allowing consumers to place a “freeze” on their credit reports.  And now, California SB 1384 (Simitian), “Consumer Reports: Security Freeze”, attempts to extend that right to other types of consumer reports.
Existing laws in most states now permit a consumer to place and to remove a security freeze on his or her credit reports with the major credit bureaus. Consumers can essentially put their credit file on lock down, usually in an attempt to avoid identity theft.  This new bill in California would authorize a consumer to place a security freeze on consumer report, potentially including background checks pulled for employment or renting housing. The proposed law would presumably extend to national tenant screening agencies, some employment screening entities, as well as other companies that maintain “consumer files” as defined in statute. The full implications of this bill are still under review, but we will keep you up-to-date as new information is available.

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In an interesting twist, late last week the Consumer Financial Protection Bureau (CFPB) announced the selection of former EEOC Commissioner Stuart Ishimaru to head a newly formed department, the Office of Minority and Women Inclusion (OMWI). The newly formed office is required by the Dodd-Frank Act to develop standards to promote diversity at both the CFPB and the entities it regulates. The specific charge of the office, by statute, is to develop standards for:
•    Equal employment opportunity and the racial, ethnic and gender diversity of the workforce and senior management of the agency;
•    Increased participation of minority-owned and women-owned businesses in the CFPB’s programs and contracts; and
•    Assessing the diversity policies and practices of the CFPB’s regulated entities.

Ishimaru’s appointment is of interest to many of us who have been tracking the EEOC’s recent actions to quickly pass several new and somewhat controversial initiatives.  It’s likely that the EEOC was acting quickly to bring those initiatives to a vote prior to Ishimaru’s departure, at a time when a 3-2 favorable vote would be most likely.  The most recent meeting held April 25 included passage of new guidance on the use of criminal history in employment decisions by a 4-1 margin, but was passed without hearing, prior public disclosure or comment period, unleashing strong criticism from the Wall Street Journal and the US Chamber of Commerce among others.

Ishimaru’s prior stints include serving in senior positions in the Civil Rights Division at the Department of Justice, and the Commission on Civil Rights. President George W. Bush nominated Mr. Ishimaru to the EEOC in 2003. President Barack Obama named Mr. Ishimaru Acting Chairman of the Commission in January 2009 – a role he held until April 2010. A press release was issued April 30th, 2012, announcing Ishimaru’s appointment.

If you are one of the many entities under the supervision and/or enforcement authority of the CFPB, get ready for a new era of oversight—not only with the mechanics and supervision of consumer transactions, but also in assessing diversity policies and practices. While the full scope of Ishimaru’s new post is not clear, we do know that the Bureau has very broad rulemaking and enforcement authority, and we are standing by for more specifics on Ishimaru’s plan and priorities going forward. If the past is any indication, we will see an aggressive agenda from this new office.

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Now that we have had a chance to pour over all 52 pages including every end note and reference, we have compiled the ultimate summary of the new EEOC guidance on the use of criminal history in a nutshell, along with our own take on what it all means. In this instance, a nutshell turned out to be three pages long. It is not exhaustive, reasonable people can (and will) debate the interpretation of what it all means, and this is certainly not legal advice. But here it is, and we welcome your continued comments and questions. For those of you who missed the webinar we held last week on this topic you can download it here.

Introduction
The EEOC has long maintained that the use of credit and criminal history in hiring can lead to “disparate impact” discrimination.  Disparate impact claims rely on statistical information to prove that use of criminal history and credit information has an unintended discriminatory effect on a protected class—in this case, African Americans and Hispanics. New criminal history guidance, published April 25, 2012, supports the Commission’s commitment to put an end to systemic discrimination and its E-RACE initiative, Eradicating Racism and Colorism in Employment.  In the past year, the EEOC has filed a record number of class action lawsuits alleging that employer’s use of criminal history information amounts to discrimination, and Pepsi recently paid a very well publicized $3.13 million to settle a class action suit brought by the EEOC.
Technically speaking, the EEOC guidance is not binding on courts and carries no “official” legal weight. The EEOC does not have the authority to create statutes or issue non-procedural regulations under Title VII, unlike Congress.  In addition, because the EEOC did not allow for public comment prior to publication of the current guidance, it may be vulnerable to challenges in court.  In practice, however, courts rely heavily on agency policy statements and the EEOC guidance in particular.  Failure to heed the guidance may land you in Federal Court defending a class action claim. What follows is a summary of the Guidance, best practices, and some practical considerations for going forward.

The New Guidance
The new guidance supersedes the old policy statements issued by the EEOC in 1987 and 1990 on conviction and arrest records.  Job relatedness and business necessity remain the legal standard for an employer’s defense. The two times when this standard is met are defined:
1.    Validation Studies: “The employer validates the criminal conduct exclusion for the position in question in light of the Uniform Guidelines on Employee Selection Procedures”;
OR
2.    Targeted Screening with Individualized Assessments: “The employer develops a targeted screen considering at least the nature of the crime, the time elapsed, the nature of the job (the
Green factors). The employer’s policy then provides an opportunity for an individualized assessment for those people identified by the screen, to determine if the policy as applied is job related and consistent with business necessity.”
•    The nature and gravity of the offense or offenses;
•    The time that has passed since the conviction and/or completion of the sentence; and
•    The nature of the job held or sought
•    Individualized Assessment
Since validation studies are extremely difficult and expensive and the social science to support them is not well-evolved, the Guidance concedes that a targeted screening is the more likely option for the vast majority of employers who rely on a criminal background check.

Invidualized Assessment
As explained in the Guidance:  “Individualized assessment generally means that an employer informs the individual that he may be excluded because of past criminal conduct; provides an opportunity to the individual to demonstrate that the exclusion does not properly apply to him; and considers whether the individual’s additional information shows that the policy as applied is not job related and consistent with business necessity.”
“The individual’s showing may include information that he was not correctly identified in the criminal record, or that the record is otherwise inaccurate.”
Factors to consider for Individualized Assessment:
1.    Facts or circumstances surrounding the offense or conduct
2.    The number of offenses for which the individual was convicted
3.    Older age at the time of conviction, or release from prison
4.    Evidence that the individual performed the same type of work post-conviction, with the same or a different employer, with no known incidents of criminal conduct
5.    The length and consistency of employment history before and after the offense or conduct
6.    Rehabilitation efforts (e.g., education/training)
7.    Employment or character references and any other information regarding fitness for the particular position
8.    Whether the individual is bonded under a federal, state, or local bonding program

Best Practices identified in the Guidance:
•    Do not ask for criminal information on applications. Inquiries about convictions, if made, should be narrowly tailored and limited only to those that are job-related.
•    Develop a narrowly tailored written policy and procedure for screening applicants and employees for criminal conduct.
•    The policy should identify essential job requirements and the actual circumstances under which the jobs are performed.
•    The policy should also determine the specific offenses that may demonstrate unfitness for performing such jobs, and the duration of exclusions for criminal conduct.
•    Record the justification for the policy, procedures, and exclusions, including a record of consultations and research considered in crafting the policy and procedures.
•    Train managers, hiring officials, and decision makers on how to implement the policy and procedures consistent with Title VII.

Practical Implications for Employers
•    Eliminate policies that exclude applicants with any criminal record.
•    Review your paper job applications and pre-hire documents.  If you are using an ATS or web based applicant entry system, consider removing any inquires about criminal history from the application.
•    Limit inquiries about criminal convictions to those which are job related.
•    While individual assessment is not required by Title VII, the guidance implies that without it, you will have a more difficult defense. No examples are given of a scenario where an employer is successful without individualized assessment.
•    If an individual does not respond to an employer’s request for additional information, the employer can make a final decision without the additional information.  How long or under what circumstances an employer must wait is not clear.
•    If you use a third party CRA to conduct criminal screenings, review your packages and their reporting policies to ensure compliance.
•    If you use a third party CRA to adjudicate criminal results, consider building in a review process to comply with the individualized assessment recommendations.
•    Consider FCRA adverse action procedures and ways to incorporate the request for additional information needed for individualized assessments.
•    Note that simply having a reputation for discouraging applicants based on race may invite investigation by the EEOC.
•    Large applicant pools have greater potential for disparate impact, so big employers with high turnover should seek counsel in determining the best means of compliance.
•    Compliance with a Federal law/mandate that conflicts with the Guidance is a defense.
•    State and local mandates are NOT a defense.  They are pre-empted by Title VII if they “purport to require or permit the doing of any act which would be an unlawful employment practice” under Title VII.

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The Federal Trade Commission issued a report today addressing the privacy of consumers.  In the report, “Protecting Consumer Privacy in an Era of Rapid Change: A Proposed Framework for Businesses and Policymakers,” the FTC pushes Congress for general privacy legislation, data breach notification legislation, and data broker legislation.

Taking a look at the report, it is clear that the FTC is concerned about a few key areas—namely, data brokers, transparency, and mobile applications.  The report calls out data brokers for being in the business of buying and selling personal consumer information, claiming that they do so without a great deal of transparency or awareness as to how the process works or the purposes for which the information is used. In addition to calling for new legislation, the report recommends creating a centralized website where consumers could get information about their practices and “opt out” of data use. As for mobile technology, the FTC wants companies offering mobile apps to improve their privacy protections, including disclosures.

“Do Not Track” is still a key part of the FTC privacy strategy, but still missing in this report is any real guidance for a “Do Not Track” option for consumers—something that has been widely discussed but does not seem to be any closer to being defined or implemented. “DNT needs to mean ‘do not collect’, not just ‘advertise back,’” said Jon Leibowitz, Chairman of the FTC. “The industry recognizes that if a real DNT does not come to fruition by the end of the year, there will be a lot of support legislatively for DNT.”

That should be enough to motivate businesses–marketers in particular– to get on the stick to put DNT practices in place voluntarily.  Anyone who transacts business on the web has reason to fear new legislation, increased regulation of the internet and the unintended consequences that inevitably get rolled up into the process.

The vote approving the report was 3-1. Commissioner J. Thomas Rosch dissented from the issuance of the Final Privacy Report. His concerns: 1) in contravention of our promises to Congress, it is based on “unfairness” rather than deception; 2) the current state of “Do Not Track” still leaves unanswered many important questions; 3) “opt-in” will necessarily be selected as the de facto method of consumer choice for a wide swath of entities; and 4) although characterized as only “best practices,” the Report’s recommendations may be construed as federal requirements.

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I hope you aren’t tired of reading about class action lawsuits brought by the EEOC. The Commission is linking discrimination to background checks –specifically credit history and criminal records. So I’m not so surprised to see that the agency has more of the same planned for the next few years.  When the Commission announced their strategic plan for fiscal years 2012-2016 a couple of weeks ago, at least one message was clear–there is no intention to slow down the EEO express being driven by Chair Jacqueline A. Berrien.

While strategic plans from federal agencies can be painful to read, there are a couple of noteworthy points here. The plan was light on specifics, but the EEOC announced “the Plan serves as a framework for the Commission in achieving its mission by focusing on three strategic objectives: strategic law enforcement, education and outreach, and efficiently serving the public.” The main focus is on the first objective—enforcement.  “In keeping with the agency’s statutory mandate, the majority of the EEOC’s financial and human resources will be devoted to Strategic Objective I.”

Let me break it down. Translation= more litigation. That makes sense, considering the “No more Mr. Nice Guy” trend that we have been watching for past year. Targets have been large companies like Pepsi, Kaplan Higher Education and Panda Express.  The Commission will continue to focus on systematic discrimination—patterns, practices, policies, and class cases where the alleged discrimination has a bigger impact. Large employers take note.

One more interesting point:  the plan was approved 4-1, which means at least one commissioner wasn’t buying what the Commission was selling. On a Commission of five individuals with a shared goal of ending employment discrimination and promote equal opportunity, it’s pretty interesting that they did not have a unanimous vote.

Constance Barker, the sole Commissioner who voted against the plan, said that she hoped that the Commission would stop “evaluating professional lawyers on the basis of the number of lawsuits that they file.” Wow. She voted against the plan, saying that the EEOC is losing focus of its “core mission,” which is to “prevent discrimination from ever occurring,” not to stop nor to provide remedies once discrimination has occurred. “So to the extent that this plan does not provide that as its first and foremost strategic priority, the plan simply and profoundly misses the mark.”  Watch all of the action here.

Consider this–maybe it’s time to slow down the excessive litigation and zealous pursuit of multimillion dollar settlements that are not solving the problem, and quit just playing lip service to prevention. Agree or disagree–it’s nice to finally hear a different point of view being intelligently articulated. Thank you, Commissioner Barker.

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Last week California Assemblymember Roger Dickinson introduced AB 1831, a proposal to expand California’s “ban the box” policy for state public employees to city and county workers across the state. If it passes, the criminal background check requirement would be waived in the initial stages of hiring for all public workers at all levels in the state of California.

That’s right—no criminal background checks. I don’t know about you, but I might be reluctant to let the kids participate in the city parks and rec program in a world with no background checks. And what about the city building inspector who wants to come in to take a look at your plumbing? Public building custodians, museum workers, utility workers, workers at public golf courses and swimming pools –all jobs where background checks would potentially be waived.

Proponents claim that the “box” on employment applications asking about criminal history is a barrier to employment for ex-offenders. According to the supporters of the bill, one in four Californians have some level of arrest or conviction record. That’s twenty five percent! That’s a lot of people! With a troubled economy and continued high levels of unemployment, there is no doubt that a criminal history could eliminate you from consideration when there are so few open jobs.

Certainly giving ex-offenders and non-violent felons a better chance at stable employment is a cause that most people can get behind. It might even reduce recidivism. But is foregoing the screening process for hundreds of thousands of public employees the best way to accomplish that result? Especially when so many of those public employees are interacting with children, teens, and the elderly?

Ignoring a criminal past is a dangerous proposition—not to mention that the public is footing the bill. SMH.

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Ohio’s governor John Kasich is trying to make it easier for ex-cons to get on the State of Ohio payroll. As reported today by the Columbus Dispatch, the Kasich administration is working with private organizations to remove questions concerning criminal history from state job applications. According to the article, the state will still conduct background checks, but later in the process—after a candidate has been screened for qualifications.

The Governor was quoted as saying “We have rules that are overly punitive. That’s just not right.” As part of the proposed changes, the Ohio prisons director is also working with state lawmakers to ease requirements for some jobs that call for a clear criminal record. The argument is that laws preventing ex-offenders from becoming a teacher, getting a professional license, working as a security guard or in a casino are overly restrictive and are keeping ex-offenders from getting back to work.

While the article contained conflicting information as to whether the state would be removing the check box on state employment forms, the proposed changes certainly appear to be part of the growing trend to “Ban the Box”—a movement that is gaining momentum across the country in both the public and private sectors. Tell us what you think.

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Mobile apps that let you “look up before you hookup” or check on your cheating spouse are popping up everywhere. Yesterday the Federal Trade Commission (FTC) warned six companies that the use of their mobile apps to conduct background checks may violate the law. The FTC sent letters to Everify, Inc., marketer of the Police Records app, InfoPay, Inc., marketer of the Criminal Pages app, and Intelligator, Inc., marketer of Background Checks, Criminal Records Search, Investigate and Locate Anyone, and People Search and Investigator apps.

The agency warned that if the marketers of these apps have reason to believe that they are being used for employment screening, housing or credit, they must comply with the Fair Credit Reporting Act and related laws that protect consumers. Background screening apps usually include criminal records, which bear on an individual’s character and general reputation and are typically used in employment and tenant screening. If you are using an app for one of those specific or related purposes, you are subject to consent requirements, releases, notification requirements, and a whole bunch of other hoops that regulators enforce protect consumers.

“If you have reason to believe that your background reports are being used for employment or other FCRA purposes, you and your customers who are using your reports for such purposes must comply with the FCRA,” the FTC letters say. The agency stopped short of making any determination of violations, but it did urge the marketers of these services to be sure to comply with the FCRA. So before you reach for your iPhone to use that sleaze detector, make sure you know your obligations under the law. Right now, there is no app for that.

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Domino’s Pizza is the latest employer to find themselves in court facing a class action law suit alleging that their background check process violates the Fair Credit Reporting Act (FCRA).

The former employees claim that the company (1) ran background checks on employees without proper authorization; and (2) “systematically” failed to provide employees with copies of their background checks prior to taking adverse employment action against them.

This should not be news to employers. It’s Background Checks 101. So it is not surprising that last week, a Maryland US District Court judge allowed the case to move forward, denying Dominos motion to dismiss. In a long and critical opinion, the Court ruled that the plaintiffs properly alleged that Domino’s violations were “willful.” That means that the claims are putitive and if the Plaintiffs are successful, Domino’s pays an addtitional statutory penalty of $1000 per plaintiff. Ouch.

Sound familiar? It should. The Plaintiffs’ counsel– Minnesota firm Nicols Kastor, PLLP, filed a similar suit in December of last year against banking giant Capitol One. We told you about that case a few weeks ago. Plaintiff Kevin Smith accuses Capital One of violating the FCRA by combining it’s authorization with the company’s standard application. On this claim, Capital One may be liable to all employees and prospective employees who signed Capital One’s standard job application. Double ouch. The lawsuit also alleges that Capital One failed to provide copies of the reports when it used them to take adverse employment actions. Same story, different day.

Employers, these law suits are not going away. Review your adverse action process, and check your forms. If you need a compliant authorization form, you can get one from us.

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