EmployeeScreenIQ Blog

There have been a myriad of questions that have arise since Massachusetts governor Deval Patrick signed into law new reforms to the Commonwealth’s Criminal Offender Record Information (CORI) law that will have a significant impact on the state’s employers who conduct criminal background checks. To sort through the mess, we enlisted the help of Seyfarth Shaw labor and employment attorney, Pam Devata. Clearly, these reforms represent an effort to help those with criminal records find employment, but will this come at the expense of employers ability to make an informed hiring decision?

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Listed below are some of the most critical changes that will take effect February 6, 2012:

• Employers can no longer ask if an individual has been convicted of a crime on the initial job application (please note that this requirement is set to take effect November 4, 2010)
• Felony convictions older than or prison sentences completed more than 10 years ago will be removed from the system as will misdemeanors older the 5 years
• An employers can only take adverse action after they have presented the candidate with the CORI report
• Any employer that conducts five or more background checks on an annual basis must have a written criminal offender record policy
• Employers must dispose of an individual’s CORI report not more than 7 years after their last date of employment

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The FTC has announced that they are proposing revisions to the notices that consumer reporting agencies (such as employment screening firms) provide to consumers, and to users and furnishers of credit report information under the Fair Credit Reporting Act (FCRA).

The proposed changes seek to alter the consent and authorization form needed to conduct an employee check as well as the “Summary of Your Rights” document which must be provided to the job applicants before a background check can be conducted.

See notice from FTC below.

The Federal Trade Commission is proposing revisions to the notices that consumer reporting agencies provide to consumers, and to users and furnishers of credit report information under the Fair Credit Reporting Act (FCRA). The FCRA requires the FTC to publish model notices for several forms that must be provided by consumer reporting agencies. The proposed changes are designed to reflect new rules that the FTC and other financial regulators have enacted under the Fair and Accurate Credit Transactions Act of 2003, and to make the notices more useful and easier to understand.

In addition to revising the general Summary of Rights notice, which informs consumers about their FCRA rights, such as how to obtain a free credit report and dispute inaccurate information in credit reports, the FTC also is proposing improvements to the notices that credit reporting agencies provide to users and furnishers of credit report information. The User Notice and Furnisher Notice inform users and furnishers of their obligation to provide certain protections to consumers. The model notices were originally issued in 1997 and revised in 2004. The FTC is accepting public comments on the proposed changes until September 21, 2010. The Commission vote authorizing the Federal Register notice was 5-0. (The staff contact is Pavneet Singh, Bureau of Consumer Protection, 202-326-2252.)

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

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Yesterday, Illinois Governor Pat Quinn signed a bill that takes away the right of the state’s employers to review a job candidate’s credit report as part of the employment screening process.  Or does it? The new law will officially take affect on January 1, 2011, but is sure to create confusion because while it bans the use of credit reports for most, it allows their use for certain industries and positions.  Check out some of the exemptions: “those with management responsibility, signing authority over as little as $100 or access to personal, financial and confidential information. It exempts law enforcement and financial institutions and has no effect on other kinds of background checks.”  So is it illegal to run credit reports or not?

This move is sure to raise concerns in the business community among those who were using these reports responsibly to protect themselves and their customers alike.

This morning, the Chicago Tribune wrote a scathing editorial about the impact this has on Illinois businesses.

Quinn signed a bill making it illegal for them to use credit histories to evaluate job seekers.

Do companies need this information? That doesn’t matter now. The governor and legislators have substituted their judgment for the judgment of the companies that actually put people to work in this state.

Why would an employer want to run a credit report on you? A simple background check can make a difference. Some experts say there is evidence that workplace theft and fraud correlates with the financial distress indicated by bad credit. Moreover, it’s a useful tool for verifying work histories and other resume information.

The bill that Quinn has signed into law acknowledges as much. It allows employers to do credit checks in cases of hiring and promotion for many posts, including those with management responsibility, signing authority over as little as $100 or access to personal, financial and confidential information. It exempts law enforcement and financial institutions and has no effect on other kinds of background checks.

In practice, the new law will introduce a batch of red tape. It won’t create a single new job. It will simply curb the discretion of an employer who might prefer to hire someone who has paid his bills over someone who hasn’t.

Quinn says it will put a stop to the practice of denying jobs and promotions “based on information that is not an indicator of a person’s character or ability to do a job well.” Evidently, our governor thinks those responsible for hiring and promotion base their decisions on irrelevant criteria, and everybody else needs to be protected from them.

A few states have passed similar measures, and other legislatures are considering them, mostly on the theory that someone who fell behind on their bills during the terrible recession shouldn’t be barred from a job for that reason. Guess what? Employers know we had a terrible recession. They know that good people sometimes fall behind because of the loss of a job or a health crisis. But they are now prohibited from making such judgment calls.

There’s no reason why those recruiting workers shouldn’t do so with the additional confidence that credit reports might provide. Illinois, with 10.4 percent unemployment, is sending one more signal that it doesn’t trust the people who put people to work.

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On August 6, 2010 Massachusetts governor Deval Patrick signed into law new reforms to the Commonwealth’s Criminal Offender Record Information (CORI) law that will have a significant impact on the state’s employers who conduct criminal background checks.  Clearly, these reforms represent an effort to help those with criminal records find employment, but will this come at the expense of employers ability to make an informed hiring decision?

Listed below are some of the most critical changes that will take effect February 6, 2012:

• Employers can no longer ask if an individual has been convicted of a crime on the initial job application (i.e. Ban the Box programs)
• Felony convictions older than or prison sentences completed more than 10 years ago will be removed from the system as will misdemeanors older the 5 years
• An employers can only take adverse action after they have presented the candidate with the CORI report
• Any employer that conducts five or more background checks on an annual basis must have a written criminal offender record policy
• Employers must dispose of an individual’s CORI report not more than 7 years after their last date of employment

For more depth of information about these reforms please check out Seyfarth Shaw attorney, Pam Devata’s legal alert.

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On July 22, 2010 the Department of Homeland Security published a final rule on the acceptance of electronic signatures and storage of the Form I-9.  The rule, scheduled to take effect August 23, 2010, allows employers to prepare, sign, scan and store the form electronically as long as certain criteria is met.  See below.

In this final rule, DHS makes minor modifications to 8 CFR 274a.2 to clarify certain provisions that:

• Employers must complete a Form I-9 within three business (not calendar) days;
• Employers may use paper, electronic systems, or a combination of paper and electronic systems;
• Employers may change electronic storage systems as long as the systems meet the performance requirements of the regulations;
• Employers need not retain audit trails of each time a Form
• I-9 is electronically viewed, but only when the Form I-9 is created,completed, updated, modified, altered, or corrected; and
• Employers may provide or transmit a confirmation of a Form I-9 transaction, but are not required to do so unless the employee requests a copy.

SHRM’s Allen Smith, J.D. writes that, “Several commenters on the interim final rule requested guidance on the storage of ancillary documents used to verify an employee’s identity and eligibility to work in the United States. DHS clarified that employers may, but are not required to, copy or make an electronic image of a document used to comply. It cautioned, though, that employers should apply consistent policies and procedures for all employees to avoid discrimination.

DHS noted that the Form I-9 and verification documentation may be stored in a separate Form I-9 file or as part of an employee’s other employment records. In addition, only the pages of the Form I-9 containing employer- and employee-entered data need be retained. Other pages of the current form are instructions for completing the Form I-9 and need not be retained.

DHS agreed with comments that suggested that it is unnecessary to require an audit trail to record every time a Form I-9 is simply viewed or accessed but not modified. When the Form I-9 is created or modified, though, a secure and permanent record must be created establishing the date of access, the identity of the individual who accessed the electronic record and the particular action taken.

In response to comments, DHS also amended the interim final rule to require an employer to provide or transmit a confirmation of the transaction only if an employee requests it. Several commenters had objected to the interim final rule’s requirement that a printed transaction record be given to the employee even absent a request.
One commenter noted that some companies process thousands of new employees annually; another noted that in the modern work environment many employees work off site. These commenters expressed concern that requiring paper receipts could be a significant burden to businesses. DHS officials did not think the requirement was unduly burdensome but amended the interim final rule in response to the comments.

If requested, a receipt when completing an electronic record should be provided within a reasonable period of time, but it need not be provided at the time of the transaction.

But DHS cautioned that providing the option of electronic preparation and storage does not alter the requirement that the employer physically examine any documentation provided by the employee in the presence of the employee prior to completing the Form I-9.”

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Utah-based employers with 15 or more employees should take note that effective July 1, 2010 they must use a “status verification system” to verify the employment eligibility of new employees. Utah S.B. 251 makes mandatory the use of the government’s E-Verify portal which determines legal right to work status through the Social Security Administration and Department of Homeland Security.

For more information on the Electronic Employment Eligibility process, please visit us at http://employeescreen.com/employmenti9.asp

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This is a reminder to all employers in the state of Oregon that Senate Bill 1045 that restricts an employer’s use of credit history in employment screening decisions goes into effect July 1, 2010.

Seyfarth Shaw labor and employment attorney, Pam Devata was kind enough to pass on an important guide on who this law affects and how to comply.  See below.

You may recall that Oregon Revised Statute 659A.885 specifically prohibits an employer from obtaining or using credit history for employment purposes of an applicant or employee unless that credit history information is “substantially job-related, and the employer’s reasons for the use of such information are disclosed to the employee orprospective employee in writing.”

The regulations provide guidance on the following:

- The regulations define “employer” to mean “any person who in this state, directly or through and agent, engages or uses the personal service of one or more employees, reserving the right to control the means by which such service is or will be performed.”  Thus, the law likely only applies to employers in Oregon.

-The burden of proving that the employer disclosed its reasons for the use of credit information is solely on the employer.

-”Substantially job-related” is defined as:

(a) An essential function of the position at issue requires access to financial information

not customarily provided in a retail transaction that is not a loan or extension of credit;

(b) Financial information customarily provided in a retail transaction includes

information related to the exchange of cash, checks and credit or debit card numbers; or

(c) The position at issue is one for which an employer is required to obtain credit history

as a condition of obtaining insurance or a surety or fidelity bond.

-Employers may not retaliate against applicants or employees claiming a violation of the law

-It is also an unlawful employment practice for any person to “aid, abet, incite, compel or coerce the doing of any of the acts in violation of OL 2010. Ch. 102.”  As such, CRAs should be careful about assisting employers with adjudication guidelines or hiring criteria dealing with the use of credit information in Oregon.

Interestingly, the regulations do not give any guidance on when an employer has to give the required disclosure of the reasons for the use of credit information, only that the employer bears the burden of doing so.

Oregon has provided a Technical Assistance for Employers hotline at 971-673-0824. The new rules are available online at http://www.oregon.gov/BOLI/LEGAL/docs/RulesSoS0052010.pdf.

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Connecticut governor Jodi Rell has vetoed a bill that would have barred the state from conducting a criminal background check on employees until the last step of the hiring process.  And while the state has only 55,000 employees, the governor’s actions will set a positive precedent for the state’s employers.

Proponents of the bill said that finding a job these days is hard enough and that those with criminal records are unfairly discriminated against at the onset of the hiring process.  They say that conducting the background check after the best candidate has been identified will decrease the chance that a criminal record will have an adverse affect on the person’s job prospects.  Maybe so, but the other side of that argument is that you’ve gone down the long and costly road of identifying  the right candidate only to find that they have something in their past that would prohibit their employment and now you are back at step one.

“Applicants are already protected by statutory provisions which prohibit the denial of employment solely based on a conviction,” Rell said, adding there is no evidence managers are inappropriately using the information in their hiring decisions.

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The FTC’s “Red Flag” mandate to curb identity theft was set to take effect today, June 1, 2010, a year and a half after the original policy was to be enforced. Creditors and Financial Institutions were to develop and implement a written Identity Theft Prevention Program.  This time at the 12th hour, it was announced that they will again delay enforcement until December 31, 2010.

According to the FTC, “Congress needs to fix the unintended consequences of the legislation establishing the Red Flags Rule – and to fix this problem quickly. We appreciate the efforts of Congressmen Barney Frank and John Adler for getting a clarifying measure passed in the House, and hope action in the Senate will be swift,” FTC Chairman Jon Leibowitz said. “As an agency we’re charged with enforcing the law, and endless extensions delay enforcement.”

According to the FTC, “The Rule was promulgated under the Fair and Accurate Credit Transactions Act, in which Congress directed the Commission and other agencies to develop regulations requiring ‘creditors’ and ‘financial institutions’ to address the risk of identity theft. The resulting Red Flags Rule requires all such entities that have ‘covered accounts’ to develop and implement written identity theft prevention programs to help identify, detect, and respond to patterns, practices, or specific activities – known as ‘red flags’ – that could indicate identity theft.”

Full FTC Release

Further, all employers that conduct background checks are supposed to have a policy in place to handle “Red Flag” Address Discrepancy Notifications from the National Consumer Reporting Agencies (mainly credit bureaus). This rule has been in effect since November, 2009 and we are still unclear what such notifications will look like when and if they occur.

For more information on these guidelines and how to comply check out:

FTC Delays Red Flags Rules Again . . . and Again

Users of Consumer Reports Have New Responsibilities as of November 1
EmployeeScreenIQ Offers Free Webinar on New FTC Guidelines

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We’ve written extensively about the many holes in the FBI’s criminal record database.  Past studies have shown that it includes only 55% of all criminal records from across the county and the FBI is the first to admit that the database was not created our intended for employment screening purposes.  However, some organizations and industries are required to perform criminal background checks through this resource.  In addition to the fact that the database is incomplete, it also contains information that cannot be used in a hiring decision such as arrest records, charges that do not result in convictions, etc.

According to NextGov.com Bobby Scott, D-Va., chairman of the House Judiciary Subcommittee on Crime, Terrorism and Homeland Security, introduced the 2010 Fairness and Accuracy in Employment Background Checks Act in response to a June 2006 report from the attorney general that showed nearly 50 percent of criminal records maintained in the NCIC database failed to note court decisions to dismiss arrests.

See the story below:

Bill Would Require FBI to Fill in Gaps in Criminal Records Database

A bill introduced in the House would strengthen the accuracy of the FBI’s criminal records database by requiring the U.S. Attorney General’s Office to verify that crime data is up to date. Employers rely on the database to conduct background checks on potential hires.

The 2010 Fairness and Accuracy in Employment Background Checks Act would require the attorney general to find out from court offices, including those in state and local jurisdictions, the outcome of arrests whenever an employer requests a background check, and update that record in theNational Crime Information Centerdatabase. In cases where the attorney general discovers an arrest was dismissed in court, he has 10 days to update the record before responding to the employer’s request.

Employers often consult the NCIC database to conduct background checks on individuals applying for jobs in law enforcement, homeland security or organizations where they’d be working with vulnerable populations, such as children and the elderly. Typically only public sector entities can request FBI background checks, though certain private sector companies — such as those supporting federal homeland security efforts — can as well.

Bobby Scott, D-Va., chairman of the House Judiciary Subcommittee on Crime, Terrorism and Homeland Security, introduced the bill on May 13 in response to a June 2006 report from the attorney general that showed nearly 50 percent of criminal records maintained in the NCIC database failed to note court decisions to dismiss arrests.

“In the current economy, neither employers nor workers can afford employment background records that are inaccurate or incomplete,” Scott said in a statement e-mailed to Nextgov.

The legislation would give job applicants the opportunity to obtain a copy of records provided to a potential employer and challenge their accuracy and completeness. If the records are challenged, the attorney general would have 30 days to complete an investigation, make changes or deletions, and report those changes to the applicant and the employer.

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