EmployeeScreenIQ Blog

The EEOC continued its crusade to fight discrimination by way of litigation this week. The agency has filed two lawsuits in federal courts in Illinois and South Carolina, accusing BMW and Dollar General of discriminatory use of criminal background checks. These lawsuits open a new chapter in the continued debate over the use of criminal background checks in the hiring process. The commission is claiming that both companies have implemented criminal background screening policies that have the effect of discriminating against black applicants.

Background on the EEOC Guidance

These cases are the first significant cases to test the commission’s new guidance for the use of criminal background checks. The guidance, issued in April of 2012, has sparked controversy and confusion over when and how criminal background checks can and should be used. The guidance came out on the heels of some substantial settlements, including a $3.1M payout by Pepsi, based on the EEOC’s theory that certain policies, while neutral on their face, have the effect of discriminating against blacks and other minorities. The agency announced earlier this year that it would continue to focus on enforcement of the guidance, suing big employers for systemic discrimination by filing “disparate impact” cases. And true to their word, here are two new cases to test their theories.

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Our friend Pam Devata at Seyfarth & Shaw blogged yesterday that Colorado became the ninth state to prohibit the use of employment credit reports in hiring. As Pam reports, Colorado’s law will prohibit employers from using “consumer credit information” for employment purposes.

Colorado joins eight other states–California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont and Washington—in restricting access to consumer credit in the hiring process. The rational for the state action is summarized in the bill’s introduction: [...]

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Nick, Jason and I were in Washington DC last week, just in time for some summer weather and a chance to see the last of the cherry blossoms. We were attending the National Association of Professional Background Screeners (NAPBS) Mid-Year 2013 Legislative Conference, a gathering of about 350 companies and clients taking our message about background checks to the Hill.  We had the opportunity to hear from Equal Opportunity Employment Commissioner Constance Barker, the only Commissioner who voted no on last’s year’s EEOC guidance on the use of criminal background checks in employment.

Barker had warned last April that “the only real impact the new Guidance will have will be to scare business owners from ever conducting criminal background checks. . . . The Guidance tells them that they are taking a tremendous risk if they do.”

A year has passed, and little has changed. Barker made it clear that the EEOC is still very committed to increased enforcement, and will continue to pursue “systemic” cases, where a pattern or practice has a broad impact on a large population though disparate impact theory.  As she put it, the EEOC criminal guidance starts with the premise that, if you are conducting criminal background checks, there is presumption that you are discriminating. Until this premise has been successfully challenged in court, employers need to be prepared to defend class action suits.    

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The debate about national background checks has been in the headlines every day since the tragic shooting at Sandy Hook Elementary School. The focus has been on background checks for gun purchases, but some of the same points that have been made in the context of guns carry over into our world—employment screening.  One of the biggest hiring concerns for any employer is an applicant’s criminal history, thus almost every background check includes a criminal component.  The most frequent questions we field from both clients and the public have to do with “national” background checks and criminal databases. Why is this topic so confusing? Well, it’s complicated.

The National Association of Background Screeners (NAPBS) recently published a paper to shine some light on the subject. The bottom line is this: there is no single source for a national criminal check. The FBI database is incomplete. For a record to be located and housed with the FBI’s Interstate Identification System (also known as “III”) it must have a fingerprint associated with it. But unfortunately, fingerprints aren’t associated with all criminal records indexed at county or state repositories. To complicate matters, while all states currently participate in submitting some records to the III, criminal record reporting is extremely irregular across counties and states. We know that not all state criminal records or fingerprints meet the FBI’s standards for inclusion in the III, and not all state records are submitted to the FBI.

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Shrinkage is a funny word. In the retail world, it has nothing to do with laundry. Rather, it’s another way of referring to internal employee theft, a huge concern for any retailer — and with good reason.  Workplace theft costs retailers about $15 billion per year according to the  National Retail Federation. They estimate that 44 percent of missing merchandise is due to employee theft. It’s not surprising that employers are taking the lead to protect themselves at a time when margins are thin and the economic recovery is still sluggish.

The New York Times recently reportedon a little known source used by some retailers—an extensive database that keeps track of employees who have confessed to or have been accused of stealing from their employers. The database called out by the New York Times is unique. It is not used in a traditional background check. It is a proprietary tool called Esteem that is owned by a private company and was built by contributions from the retailers themselves. It does not contain information from the public record; it is made up of self-reported incidents that are usually collected by a store’s loss prevention team. It does not replace a traditional employee background check, and most background screening companies do not have access to the database. Even if they could access it, I would guess that many companies would be reluctant to use it.

While I have not viewed an Esteem report, to the casual observer it sounds like something hatched from a Hollywood crime drama, where investigators type in a name, and up pops a photo with pages of information. While that image is not realistic, it has more than a few consumers, attorneys, and advocacy groups concerned. [...]

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The movement to “ban the box” shows no signs of slowing down. New Jersey, Rhode Island, North Carolina, Minnesota and Michigan are all considering new bills for statewide bans on the practice of asking applicants to check a box on their job application indicating whether they have a criminal conviction. We can hardly keep up with the influx of proposed new laws limiting criminal history in one way or another. Here is a run-down:

New Jersey
The most comprehensive and far-reaching proposal is in the State of New Jersey. On February 7, 2013, three New Jersey Senators introduced “The Opportunity to Compete Act,” (“OCA”) which would eliminate the check box that requires job applicants to disclose their criminal history and would also prohibit advertisements discouraging those with criminal records from applying. The bill is modeled after the recent ordinance that was passed in the city of Newark. The bill, as proposed, will significantly complicate the hiring process in the State of New Jersey.

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The social media privacy debate continues to rage – and now Congress has taken up the reins. Recently we blogged on a handful of states that have passed laws that restrict employers from accessing passwords to private social networking accounts. Now Representative Elliot Engel (D-N.Y.) has introduced H. R. 537, the “Social Networking Online Protection Act.”

Engel’s bill would make it illegal for employers to ask job applicants and employees for passwords to access their social networking sites and email accounts. If passed, it will address the concerns of 21 states that have similar legislation pending, and provide a national legal standard that has already been adopted in California, Delaware, Illinois, Maryland, Michigan, and New Jersey. [...]

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Another large background screening company  has agreed to pay a multimillion dollar settlement to end a class action alleging of violations of the Fair Credit Reporting Act (FCRA).  We told you about another case resulting in a hefty settlement here. The latest in a series of unfortunate attacks on background screening practices is Henderson v. Verifications Incorporated, and the defendant, a background screening company, has agreed to pay $3.8M to settle a class action filed in federal court in the Eastern District of Virginia. I learned about the settlement from a recent post on the legal blog Law 360.  The settlement includes an “incentive” payment of $3.75M and includes a big fat paycheck ($1.125M) for the plaintiff’s legal team, plus court costs and expenses.  In my opinion the result is disappointing, with no real upside for anyone involved.  Even if a company does everything right, they can still be sued. And in this case, nothing was actually “settled”.

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Is K-Mart, the mega retailer known for its blue light specials, seeing red? The company is paying out $3 million to settle a class action suit for alleged background screening violations.  The suit was settled in mediation, and if approved, it will certify a class of 64,506 people. I did the math, and that’s about $18.09 per person, after the named plaintiff gets his share of $5,000 and his lawyers take out their share—$900,000.

K-Mart is the latest corporation to settle claims based on FCRA violations in the background screening process, joining First Student, Domino’s Pizza and Capital One. [...]

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In some corners, data collection has become the Wild, Wild West: unruly and unregulated. Well, not anymore. As 2012 drew to a close, two federal agencies made it clear that they intended to continue their focus on web-based information providers—so-called “data brokers”. On December 14, 2012, The FTC issued orders for information from nine companies (Acxiom, Corelogic, Datalogix, eBureau, ID Analytics, Intelius, Peekyou, Rapleaf, and Recorded Future). The firms were asked to provide the FTC with information about how they collect and use data (namely criminal record data) about consumers:  The agency will use the information to make recommendations about the accuracy, collection and use of the information.

The FTC requested details about: [...]

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