Employer Compliance with EEOC Guidance and FCRA Provisions Related to Background Checks
Presenters Colleen P. Lewis, Esq. Cincinnati 513.977.8426 colleen.lewis@dinsmore.com
EEOC Enforcement Guidance April 25, 2012: New EEOC Enforcement Guidance on Background Checks Controversy: It is the first new Guidance regarding criminal background checks in more than 20 years. Policy statement in 1987 regarding use of conviction records. Policy statement in 1990 regarding use of arrest records. The new Guidance was issued with limited public debate or comment. There was a concern that the new Guidance would include a policy on credit checks. EEOC has long held that credit checks have a disparate impact, on minorities. It was rumored that an original draft of the Guidance included a section regarding credit checks, but this was later removed. FCRA and Dodd-Frank provisions related to credit checks still apply. These will be covered later in the presentation.
EEOC Enforcement Guidance Prior Guidance: 1987: Dealt only with criminal convictions. The EEOC took the position that an employer s policy or practice of excluding individuals from employment on the basis of their conviction records had a disparate impact on Blacks and Hispanics in light of statistics showing that they are convicted at a rate disproportionately greater than their representation in the population. Consequently, the EEOC s position was that such a policy or practice is unlawful under Title VII in the absence that the exclusion was a job related business necessity. Business Necessity To define business necessity the EEOC adopted the Green factors from Green v. Missouri Pacific Railroad Company, 523 F.2d 1290 (8th Cir. 1975). Green Factors (to determine business necessity ) The nature and gravity of the offense or conduct; The time that has passed since the offense or conduct and/or completion of the sentence; The nature of the job held or sought. 1990: EEOC Issues Policy Guidance on Arrest Records. The EEOC pointed out that criminal conviction records constitute reliable evidence that a person engaged in the conduct alleged since the criminal justice system requires the highest degree of proof ( beyond a reasonable doubt ) for a conviction. In contrast, arrests alone are not reliable evidence that a person has actually committed a crime.
EEOC Enforcement Guidance New Guidance: WHY NOW? According to the new Guidance itself, the reason for the new Guidance is based upon the increase in the number of individuals with Arrest and Conviction Records over the past 20 years, which has had a disparate impact on Blacks and Hispanics. EEOC points out that in 1991, 1.8% of the adult population had served time in prison, but that number jumped to 3.2% by 2007. African Americans and Hispanics are arrested at a proportion of 2 to 3 times that of the general population. 1 in 17 White men expected to serve prison time during their lifetime compared to 1 in 6 Hispanics and 1 in 3 African Americans. Other Reasons: According to the Question and Answers About the EEOC Enforcement Guidance, the EEOC poses the question why did the EEOC decide to update its policy on this issue Technology: Over the past 20 years, technology has made more criminal history information more readily available to employers. El v. Southeastern Pennsylvania Transportation Authority: The EEOC admits that it also began to re-evaluate its policy statements after the Third Circuit Court of Appeals noted that the Commission should provide more indepth legal analysis and updated research on this issue.
EEOC Enforcement Guidance What is new with the EEOC Guidance? First, what is the same? ARREST RECORDS: New Guidance reaffirms the EEOC s position that policies which exclude applicants on the basis of arrest records have a disparate impact on minorities. CONVICTION RECORDS: New Guidance reiterates the EEOC s position that employment policies that exclude applicants based upon criminal convictions have a disparate impact on minorities. New Guidance insists that an employer must still establish a job-related business necessity to justify exclusions based upon criminal background checks. New Guidance continues to endorse the Green factors to establish a job related business necessity.
EEOC Enforcement Guidance What is new with the EEOC Guidance? What has Changed? ARREST RECORDS: New Guidance hammers home the idea that arrest records should not be relied upon to exclude applicants from employment. The new Guidance points out that according to DOJ statistics, nearly 1/3 of people arrested later have the charges dismissed. CONVICTION RECORDS: In order for an employer to establish a job-related business necessity, the New Guidance puts the focus on linking the specific criminal conduct, and its dangers, with the risks inherent in the duties of a particular position. (from El v. SETA). The new Guidance indicates that there are only two ways in which the Commission believes employers will consistently meet the job related and consistent with business necessity defense
EEOC Enforcement Guidance What is new with the EEOC Guidance? Two ways to consistently meet the job related and consistent with business necessity defense: 1. VALIDATION: The employer validates the criminal conduct screen for the position in question per the Uniform Guidelines on Employee Selection Procedures (Uniform Guidelines) standards (if data about criminal conduct as related to subsequent work performance is available and such validation is possible). 2. TARGETED SCREEN AND INDIVIDUALIZED ASSESSMENT: The employer develops a targeted screen considering at least the nature of the crime, the time elapsed, and the nature of the job (the three Green factors), and then provides an opportunity for an individualized assessment for people excluded by the screen to determine whether the policy as applied is job related and consistent with business necessity.
EEOC Enforcement Guidance 1. VALIDATION: The employer validates the criminal conduct screen for the position in question per the Uniform Guidelines on Employee Selection Procedures (Uniform Guidelines) standards (if data about criminal conduct as related to subsequent work performance is available and such validation is possible). Problem: The EEOC admits that although there may be social science studies that assess whether convictions are linked to future behaviors, traits, or conduct with workplace ramifications, and thereby provide a framework for validating some employment exclusions, such studies are rare at the time of this drafting.
EEOC Enforcement Guidance 2. TARGETED SCREEN AND INDIVIDUALIZED ASSESSMENT: The employer develops a targeted screen considering at least the nature of the crime, the time elapsed, and the nature of the job (the three Green factors), and then provides an opportunity for an individualized assessment for people excluded by the screen to determine whether the policy as applied is job related and consistent with business necessity. Targeted Screen: Excluding individuals for specified criminal conduct within a defined time frame, considering the Green factors is a targeted exclusion. 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.
EEOC Enforcement Guidance Individualized Assessment: An individual s showing may include information that he was not correctly identified in the criminal record, or that the record is otherwise inaccurate. Other relevant individualized evidence includes, for example: The facts or circumstances surrounding the offense or conduct; The number of offenses for which the individual was convicted; Older age at the time of conviction, or release from prison; 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; The length and consistency of employment history before and after the offense or conduct; Rehabilitation efforts, e.g., education/training; Employment or character references and any other information regarding fitness for the particular position; and Whether the individual is bonded under a federal, state, or local bonding program. The employer may make its employment decision without the information if the individual does not respond.
EEOC Enforcement Guidance Individualized Assessment: Problem(s): Vague The individualized assessment only seems to be required when someone is excluded by a targeted screen. The Guidance is not clear about what to do when a criminal conviction is just one of several factors in an employment decision. Cost Many large employers receive numerous applications each day. To have to send out a letter each time an application is screened out and then review the responses would create a significant cost. Litigation Risk Sending an applicant a letter informing them that they are being excluded based upon a criminal conviction creates a litigation risk.
EEOC Enforcement Guidance Lawsuit Against Wal-Mart Goes To Trial (Richland) April 24, 2006 - A jury was selected Monday and opening arguments are expected Tuesday in the lawsuit claiming Wal-Mart doesn't protect children from sexual predators by doing background checks on its employees. A Fairfield County mother, Maria Hollins, sued the company in 2001 after an off duty employee Bobby Devon Randall was caught on tape touching her daughter, who was 10 at the time. Randall was a registered sex offender at the time, but store officials say he lied about his criminal history on his application. He pleaded guilty and received a 10-year sentence. Hollins says, "He pleaded guilty to it. He apologized to Wal-Mart, including me and my family." Randall died in jail of a heart attack after six months. Wal-Mart has been around since 1962, but did not began checking the criminal history of the people it hired until 2004. Since that time, sex offenders have been removed from the stores. Hollins' case isn't the only one. Similar lawsuits were filed in Arizona, Houston and just this past August, another one in South Carolina.
EEOC Enforcement Guidance Wal-Mart Sued After Employee Knifing August 5, 2008 - The victim of a violent crime in a Gainesville Wal-Mart parking lot is suing the global corporation for damages in a trial that started Monday, alleging the company negligently hired a teenager with a history of violence. The case draws into question the hiring practices of the nation s largest retail chain. Tiffany Simmons, 19, took the stand today at the Alachua County civil courthouse, recounting an ordeal that took place almost two years ago when she approached a Wal-Mart cart collector looking for her cell phone. The cart collector, Darius Stacy, was 18 at the time of the incident in December 2006. After a brief altercation, Stacy used a box cutter-like tool and cut Simmons. Attorney Robert Stripling, representing Simmons, said that Wal-Mart failed to run a proper background check when Stacy was hired, which would have turned up juvenile arrest records on the Florida Department of Law Enforcement Web site. Ginnette Childs, the attorney defending Wal-Mart, said in her opening statement: This case is not about anything that has to do with Wal-Mart. This is a fight that happened between two people. Somehow these people knew each other before this incident ever happened. Childs said that Wal-Mart uses a formalized hiring process that is uniform across the country to ensure that employees in each state are treated the same. That process includes two interviews, two reference checks, a drug test and a background check all for a $7-an-hour cart collector in Wal-Mart, Childs said.
EEOC Enforcement Guidance Wal-Mart Withholds Background Check Info, Suit Says New York (May 25, 2012 -- Wal-Mart Stores Inc. was on Thursday sued in New Jersey federal court by a proposed class of potential workers who allege the retail giant violated consumer protection law by failing to properly disclose information related to the criminal background checks it runs on job applicants. Jerry Landry and Joey Haynes said in their putative class action that Wal-Mart maintains a companywide policy of failing to give its prospective employees either the necessary disclosures related to its background checks or an opportunity to dispute the findings.
EEOC Enforcement Guidance Pepsi Settles Dispute Over Criminal Background Checks for 3.3 Million Jan. 11, 2012 -- Pepsi will revise an overly broad criminal background check policy, provide training and pay $3.13 million to settle an Equal Employment Opportunity Commission (EEOC) claim that the policy violated Title VII, according to Julie Schmid, acting director of the EEOC s Minneapolis area office. The EEOC investigation found that more than 300 black applicants were excluded by Pepsi s overly broad policy, which denied employment to those arrested or convicted of minor offenses. During the EEOC s investigation, Pepsi adopted a new criminal background check policy. In addition to the monetary relief for black applicants who were not hired, Pepsi will offer employment to those excluded by the former policy who are qualified to work. Pepsi also will supply the EEOC with regular reports on its hiring practices under its new policy and conduct Title VII training for hiring personnel and all of its managers.
EEOC Enforcement Guidance Other new Guidance: Compliance with federal law remains a defense to a charge of discrimination. Certain federal laws exclude people with particular convictions in both the public and private sector. Ex. Banks may not employ anyone who has a conviction for financial or fraud related crimes within the past ten years. New Guidance suggests, however, that in some situations, employers should try to seek a waiver in the above given example. Compliance with a state law is not a valid defense to a charge of discrimination. Certain state laws prohibit hiring people with particular convictions. Ex. In Ohio, by state law, you cannot be employed by children services if you have been convicted of any crime of violence, sex crime, drug crime, etc. Ex. In Ohio, by state law, you cannot be employed as a nurse or a physical therapist for a home health agency that cares for children or older adults if you have been convicted of an offense of violence, sex crime, drug crime, burglary, child endangering, carrying a concealed weapon, menacing, etc. New Guidance states that compliance with a state law is not a valid defense. Adopting a policy to comply with state law does not shield the employer from Title VII liability.
EEOC Enforcement Guidance New Guidance Offers Some Best Practices Eliminate policies or practices that exclude people from employment based on any criminal record. Train managers, hiring officials, and decision makers about Title VII and its prohibition on employment discrimination. Develop a narrowly tailored written policy and procedure for screening applicants and employees for criminal conduct. Identify essential job requirements and the actual circumstances under which the jobs are performed. Determine the specific offenses that may demonstrate unfitness for performing such jobs. Identify the criminal offenses based on all available evidence. Determine the duration of exclusions for criminal conduct based on all available evidence. Include an individualized assessment. Record the justification for the policy and procedures. Note and keep 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 When asking questions about criminal records, limit inquiries to records for which exclusion would be job related for the position in question and consistent with business necessity. Keep information about applicants and employees criminal records confidential. Only use it for the purpose for which it was intended.
EEOC Enforcement Guidance Other Issues: Social Networking and Google Background Checks: Facebook: Some employers are asking for passwords Several states have legislation pending to ban this practice. Maryland has already passed legislation. Searching Public Profiles: Employers Must Exercise Caution: Even viewing the public Facebook profile of the applicant or Googling them might expose the employer to information they are prohibited from considering in the hiring decision (age, disability, national origin, political affiliation, etc).
EEOC Enforcement Guidance Other Issues: Credit Reports: Guidance does not address disparate impact of credit reports. EEOC has indicated, however, that: Inquiry into an applicant's current or past assets, liabilities, or credit rating, including bankruptcy or garnishment, refusal or cancellation of bonding, car ownership, rental or ownership of a house, length of residence at an address, charge accounts, furniture ownership, or bank accounts generally should be avoided because they tend to impact more adversely on minorities and females. Exceptions exist if the employer can show that such information is essential to the particular job in question. http://www.eeoc.gov/laws/practices/inquiries_credit. cfm
Employer Compliance with the Fair Credit Reporting Act What is the purpose of the FCRA? Designed to protect privacy of consumer report information Intended to guarantee that information supplied by a consumer reporting agency is accurate Concerned with ensuring that applicants are not denied jobs or promotions because of inaccurate or incomplete information
Employer Compliance with the Fair Credit Reporting Act What is a Consumer Report? Communication issued by a Consumer Reporting Agency that contains information about one or more of the following: Credit Worthiness, Standing or Capacity Character General Reputation Personal Characteristics Mode of Living
Employer Compliance with the Fair Credit Reporting Act Why do employers use Consumer Reports? Heightened Security Risks Increased Workplace Violence Increased Negligent Hiring Lawsuits Employers use criminal court records, driving records, and other consumer reports to screen employees
Employer Compliance with the Fair Credit Reporting Act A 2010 SHRM report indicates that 92% of employers use background checks Access has increased due to the internet Some problems can emerge: Mismatch subject of report with another person Reveal sealed or expunged records Omit information about resolution or disposition Misleading information Mischaracterizations of seriousness For more info go to www.nclc.org/issues/creditreports.html
Employer Compliance with the Fair Credit Reporting Act What are the employer s obligations under the FCRA? Sections 604, 606 and 615 of the FCRA articulate employer responsibilities: Notice and Disclosure, and Authorization Certification Adverse Action Notification
Employer Compliance with the Fair Credit Reporting Act Notice and Disclosure with Authorization Prior to background check, applicant must be notified in writing that employer may obtain a consumer report and must authorize employer to get consumer report If an investigative consumer report and/or medical information are to be obtained, the disclosure must so specifically indicate Have applicant sign notice and authorization and retain signed document Notice must be in its own document, even if part of an employment applicant packet
Employer Compliance with the Fair Credit Reporting Act Special Notice and Disclosure Issues Investigative Consumer Reports An investigative consumer report is a type of consumer report based on personal interviews with an individual s neighbors, friends, associates, or others with whom the individual is acquainted who may have knowledge concerning the individual s character, general reputation, personal characteristics, or mode of living. Disclosure Requirements: Clear and accurate disclosure that this information is being sought Include a written summary of the consumer s rights Include statement that individual has the right to request additional disclosures Mailed or delivered to the individual no later than 3 days after the date on which the report was first requested
Employer Compliance with the Fair Credit Reporting Act Special Notice and Disclosure Issues Medical information: Consumer Reporting Agency will not furnish medical information unless: Furnished for employment purposes and Information is relevant to process or effect of the employment Consumer provides specific written consent Information is subject to restrictions
Employer Compliance with the Fair Credit Reporting Act Certification to consumer reporting agencies Employer must certify they are FCRA compliant and will not misuse screening information Must agree to abide by EEOC regulations Many consumer reporting agencies provide certification documentation to employers
Employer Compliance with the Fair Credit Reporting Act Adverse Action Notification If employer makes decision not to hire employee based either in whole or in part because of the consumer report, the employer must notify the applicant Before ultimately making decision, must send pre-adverse action disclosure Preliminary notice to applicant that employer intends to take adverse action and that the action is based, in whole or in part, on consumer report Notice must contain the name and phone number of the employer s contact person who will field questions Should be placed in writing Must include a copy of the consumer report and A Summary of Your Rights Under the FCRA document
Employer Compliance with the Fair Credit Reporting Act Adverse Action Notification A reasonable time after sending a pre-adverse action notice, employer may then send notice denying employment Provide notification within 3 days of taking adverse action Must inform of adverse action and that action is based, in whole or in part, on consumer report Inform of Credit Reporting Agency s name, address, and telephone number Inform that Credit Reporting Agency did not make decision and will not be able to provide specific reasons for decision Inform that individual may obtain a free copy of report from Credit Reporting Agency if requested in 60 days and can dispute accuracy of report with Credit Reporting Agency
Employer Compliance with the Fair Credit Reporting Act Requirements for Disposing of a Credit Report Flexible and allows the employers to determine what measures are reasonable (sensitivity of the information, costs and benefits of disposal methods, changes in technology) Establish and comply with policies to: Securely dispose of the report and any information you gathered from it Burn, pulverize, or shred paper documents and dispose of electronic information so that it can't be read or reconstructed Conduct due diligence and hire a document destruction contractor
Employer Compliance with the Fair Credit Reporting Act What is the potential liability for non-compliance with the FCRA? Individual cause of action to sue for damages in federal or state court Individual entitled to recover court costs and legal fees Allows individuals to seek punitive damages for deliberate violations The Consumer Financial Protection Bureau (CFPB) and states may bring an action against employers for noncompliance and seek civil penalties
When Not Using A Third Party The federal law governing background reporting entities recognizes that many employers conduct their own, internal verification and contains a special exemption for such internal reviews. See 15 U.S.C. 1681a(d)(2)(A) Using its own staff to verify an applicant's prior work history allows the employer to avoid the mandatory notices and disclosures that must otherwise be provided to applicants under the FCRA
2012 Dodd-Frank Wall Street Reform and Consumer Protection Act Transferred rulemaking authority for the FCRA from the Federal Trade Commission to the Consumer Financial Protection Bureau (CFPB) The CFPB has released the following updated forms: A Summary of Your Rights under the FCRA Notice to Users of Consumer Reports Available at: http://www.gpo.gov/fdsys/pkg/fr-2012-11- 14/pdf/2012-27581.pdf
2012 Dodd-Frank Wall Street Reform and Consumer Protection Act In addition to the notice and disclosure obligations under the FCRA previously discussed, an employer utilizing a credit score, in whole or in part, to take an adverse action must disclose: The numerical credit score used by the employer to make the decision; The range of possible credit scores under the model used; The key factors adversely affecting the individual s credit score; and The date on which the credit score was created the name of the person or entity that provided the credit score Consult state law before using credit information Some states have laws limiting an employer s ability to use credit history or credit-related information