Recent Development in the Hiring Process

2013 Winter Meeting
Recent Developments in the Hiring Process – Adverse
Action to Social Media
How to Avoid the Pitfalls of Using Credit Reports, Criminal Background
Checks, and Social Media in Hiring.
Presented by:
Paul Kennedy
[email protected]
(202) 414-6855
Ashley Sims
[email protected]
(202) 423-2153
 Criminal Background
 Credit Reports
 Social Media
Why Check?
Legal Requirement: health care, financial services, child and
elder care, education, security services
Best Practices: “Background verification checks on all
candidates for employment, contractors, and third party
users” with access to sensitive information (Int’l Organ. For
Standardization, Info. Security Std. 27002, §8.12)
Customer Demands: Routinely required in vendor contracts
and business associate agreements
Negligent Hiring Liability:
– “Family of bus victim gets $9.5M award” – Driver had 31 criminal
convictions and a suspended license (Daily News Jan. 2012)
– “$1 million awarded in camp lawsuit” concerning the “choking game” –
Counselor’s MySpace page: “Be quiet. This is going to hurt.”
(Charleston Post & Courier Jan. 2012)
Criminal Background
Employers’ Use Of
Criminal History Checks
 More than 90% of employers conduct criminal
history checks
 Job categories: fiduciary responsibilities (78%); access
to highly confidential employee information (68%); senior
executive (58%)
 Crimes most likely to disqualify: violent felony (95%);
non-violent felony (74%); violent misdemeanor (58%)
 Reasons for checking: safe work environment for
employees (61%), reduce legal liability for negligent
hiring (55%); reduce/prevent criminal activity (39 %)
(SHRM Study Jan. 2010)
Updated EEOC
Enforcement Guidance
Updated Enforcement Guidance -- Approved 4-1 on April
25, 2012:
 “EEOC Enforcement Guidance on the Consideration of
Arrest and Conviction Records in Employment Decisions
Under Title VII of the Civil Rights Act of 1964”
 Accompanying “Questions and Answers About EEOC’s
Enforcement Guidance”
See and
Reasons for Updated
2012 Guidance
Reasons for EEOC Revising Guidance:
 Criticism of prior EEOC guidance from 1987 by
Federal Appeals Court in El v. Southeastern
Penn Transport Auth (3rd Cir. 2007)
 Concerns about accuracy of criminal
background checks (e.g. “incomplete” and
 Public policy concern of integrating
ex-offenders into workforce
 Not a sea change – “the Commission will
continue its longstanding policy approach”
Disparate Impact Discrimination
 Starting Point: EEOC suspicious of all
background check policies
 EEOC Analysis: National data demonstrates
that African Americans and Hispanics are
arrested and convicted at disproportionate rates
 EEOC Conclusion: Excluding candidates
based on criminal records likely has disparate
impact on African Americans and Hispanics
(a facially-neutral policy that has a disproportionate
impact on a protected group)
Arrest Records
 Updated guidance does not change
prior approach
 Excluding candidates based on arrests
not job related or consistent with
business necessity
 However, employer can conduct an
investigation of the conduct underlying
the arrest and decide that the conduct
makes the candidate unfit for the job
Conviction Records
 Unlike arrests, the EEOC acknowledges that
a conviction is sufficient evidence that the
person engaged in the conduct alleged but
concern re: record errors and outdated
records (as well as disparate impact issues)
 Therefore, an employer needs to show that a
conviction record screening policy
“effectively link[s] specific criminal conduct
and its dangers with the risks inherent in the
duties of a particular position.”
Job Related/Business
Necessity Defense
 Two ways to accomplish:
– Validation Study: But, EEOC acknowledges “such
studies are rare at the time of this drafting”.
– “Targeted Screen”/Individualized Assessment: Two
• “Starting point” – “Green” Factors (nature of offense, time elapsed
and nature of job). Green v. Missouri Pacific RR (8th Cir. 1975)
• Plus, provide candidate opportunity to appeal decision not to hire
and to demonstrate why the exclusion based on criminal record
should not apply to him/her.
• “Although Title VII does not require individualized assessment in all
circumstances, the use of a screen that does not include
individualized assessment is more likely to violate Title VII.”
A Bump In the Road for the
 EEOC v. Kaplan Higher Education Corp.
– On January 28, 2013, a Northern District of Ohio federal judge
dismissed the Commission’s Title VII disparate impact class action
challenging Kaplan’s criminal and credit background check process
because the Commission did not meet its threshold burden to show that
class members were adversely affected by Kaplan’s background check
– This loss is an embarrassment for the Commission because the court
excluded the Commission’s expert on the grounds that his use of “race
raters” to determine an applicant’s race from a driver’s license photo
was “unreliable.”
– Additionally, Kaplan successfully argued that the EEOC, in prosecuting
the case against Kaplan, ignored its own guidelines and internal policies
frowning on race identification based on appearance.
What Does Kaplan Mean for
 Employers still must be wary:
– The Ohio district court’s decision is not technically
binding precedent.
– The Commission will hone its evidence in future
• The court in Kaplan noted that the data would have been
more reliable had the EEOC simply contacted the class
members to ascertain their race.
 Federal Contractors Can’t Rely On Kaplan
– Federal contractors are required to gather and retain
applicant and employee race data.
Individualized Assessment Factors
1. Type of offense: The facts or circumstances
surrounding the offense or conduct;
2. Number of offenses: The number of offenses for
which the individual was convicted;
3. Age of offender: Older age at the time of
conviction, or release from prison;
4. Good work: 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;
Individualized Assessment Factors
5. Employment History: The length and
consistency of employment history before and after
the offense or conduct;
6. Rehabilitation: Rehabilitation efforts, e.g.,
7. References: Employment or character references
and any other information regarding fitness for the
particular position; and
8. Bonding: Whether the individual is bonded under
a federal, state, or local bonding program
Compliance with Federal and/or
State Laws
 Federal Laws and/or Regulations
Defense to charge of discrimination:
Positions subject to federal prohibitions and/or
Federal licenses
 State Laws and/or Regulations
– “Preempted” by Title VII
Practical Suggestions/“Best Practices”
 Do not rely on arrest records
 Eliminate blanket exclusions “based on any criminal record”
 Develop narrowly tailored written policy/procedures
excluding individuals from particular jobs based on a
criminal history record – not so easy
Identify essential job requirements
Identify specific offenses tied to “unfitness” for job
Identify time limits applicable to exclusion
Document research/consultations to support policy/procedures
 Conduct an individualized assessment before final hiring
decision, including an appeal process
Additional EEOC Recommended
“Best Practices”
 When asking questions about criminal records, limit
inquiries to records job related/consistent with
business necessity
 Make inquiries of criminal record – post application
(e.g. “ban the box” approach)
 Train managers, hiring officials, and decisionmakers on how to implement the policy and
procedures consistent with Title VII.
 Maintain confidentiality of criminal records
 The EEOC Guidance is NOT law.
State and Local Law
 Various state laws impose the following:
– (1) workplace notice and posting obligations
– (2) limitations on when, during the hiring process, employers
may ask applicants about their criminal records
– (3) limitations on what records employers may ask applicants
– (4) restrictions on when employers may rely on criminal records
to disqualify applicants from consideration.
 2012 Legislation:
 States: Indiana, Massachusetts,
Vermont and Ohio
 Local: Newark, New Jersey and
Philadelphia, Pennsylvania
Ban the Box Laws
 Three jurisdictions now
prohibit employers from
requesting criminal
history information in
the employment
 Hawaii, Massachusetts,
and Philadelphia,
Credit Reports
Statistics On Credit Checks
Whose credit is being checked?
 47% of respondents conduct credit checks on
selected applicants vs. 13% on all applicants
 Positions most commonly checked:
Fiduciary/financial responsibilities (91%);
Senior executives (46%);
Access to highly confidential employee information (34%);
Access to company’s or customer’s property (30%)
(SHRM Study 8/24/10)
Purpose of FCRA
 Historically enforced and interpreted by the Federal
Trade Commission, the new federal Consumer
Financial Protection Bureau is charged with primary
enforcement and interpretation authority
 Fundamentally, FCRA regulates the scope and flow
of the exchange of consumer information
 Regulates public records, including criminal records,
and is not limited to true credit reports
 Does not regulate purely in-house
investigations, such as reference
FCRA Compliance
1. Employers must obtain
informed consent for
consumer background
checks from job applicants
and employees
2. Issue "adverse action" letters
if the background check will
result in disqualification –
“adverse action” against an
applicant or employee is
broadly construed
Pre-Adverse Action Notice
 Generally, if adverse action is
intended, an employer must
provide the applicant/employee
with: 1) an advance copy of the
consumer report and 2) the
"Summary of Your Rights"
– Purpose is to allow consumer the
opportunity to dispute with the CRA any
inaccurate or incomplete information
– NOTE: Must start using new CFPB
“Summary of Your Rights” document by
January 1, 2013
Adverse Action Notice
 If adverse action is taken, an
employer must provide the
applicant/employee with:
– the CRA contact information,
– confirmation that the CRA did not made
the decision,
– notice of the consumer’s right to obtain
the report from the CRA, and
– notice of the consumer’s right to dispute
with the CRA the accuracy or
completeness of the report
State Law 7-Year Rules
 The FCRA does not restrict CRAs from
reporting any conviction records (just arrests
over 7 years old)
 However, various state laws prohibit CRAs
from reporting even conviction records that
pre-date the background check report by
more than 7 years
– State law prohibitions
vary considerably
State Laws
 Eight states currently have laws restricting and/or
limiting use of credit reports/history in employment:
California, Connecticut, Illinois, Maryland, Oregon,
Hawaii, Washington, and Vermont
 Many other states with pending legislation, in
addition to the “Equal Employment for All Act”
pending at the federal level
 Restrictions generally do not apply to financial
 2011 FTC Staff Report: 40 years of experience with the
– Reiterated basic points (e.g., FCRA is not limited to credit
– Emphasized –
Authorization form must be a stand-alone document
"Adverse action" is a broad concept
Employers must wait to take adverse action
FCRA protects contractors and volunteers
– Did not address –
• On-line application procedures and whether electronic signatures
• Waiting time for pre-adverse action notices (presumptively 5 business
Class Litigation
 Increase in class action filings
against employers
– FCRA disclosure and authorization
– FCRA adverse action notices
– State equivalents
 Several multi-million dollar
settlements in nationwide class
 SOL: earlier of two years after
discovery of violation, or five
years from date of violation
Social Media Checks:
Background Investigations
Use Of Social Media Checks By
Recruiters and Hiring Managers
 More than 92% of recruiters and hiring managers use, or plan
to use, social media for recruiting
– Facebook (66%); Twitter (54%); LinkedIn (93%)
 73% of recruiters have successfully hired a candidate who
was introduced or identified through a social network
 78% had a negative reaction to illegal drug references; 66% to
posts of a sexual nature; 61% to profanity; 54% to spelling or
grammatical errors.
– 89% LinkedIn; 26% Facebook; 15% Twitter
(Jobvite Social Recruiting Survey Results 2012)
Online Searches By Employers
 In 2011, 26% of organizations
used online search engines to
screen applicants in the hiring
– A decline from 2008, when 34%
reported using online search engines
for this purpose.
 64% have never used online
search engines to screen
applicants or used them in the
past but no longer do so.
SHRM 2011 Survey of Employers
Media Coverage Sparks A Wave of State Laws
 Use of social media in conducting applicant background
checks was a “hot button” media issue in 2012.
 Media outrage at the common practice of requesting an
applicant’s social media log-in/passwords to conduct preemployment background check.
– ACLU v. Maryland Department of Corrections
 Sparked a wave of state laws preventing employers from
asking for such information:
– Maryland, Illinois, California, and Michigan enacted legislation pertaining
to employers.
– California, Michigan, New Jersey and Delaware enacted legislation
pertaining to academic institutions.
– Other states introduced legislation that could resurface in 2013:
Massachusetts, Minnesota, Missouri, New York, Ohio, Pennsylvania,
South Carolina, and Washington.
No Federal Law (Yet)
 There is no federal law preventing employers from
requesting log-in and password information from
employees and applicants, but...
– Legislation was introduced in 2012 in both the House and
• Social Networking Online Protection Act (SNOPA),
H.R. 5684 and S. 3074
 Will likely be reintroduced in 2013. However, Littler’s
forecast is that such legislation is unlikely to pass
with the Republican-controlled House.
 For 2013, employers should focus on such laws in
states where they operate.
Additional Littler
Littler Reports
Criminal Background Checks: Evolution of the EEOC’s Updated Guidance and
Implications for the Employer Community – May 2012
Annual Report on EEOC Developments: Fiscal Year 2011, An Annual Report on
EEOC Charges, Litigation, Regulatory Developments and Noteworthy Case
Developments – January 2012
The FTC Staff Report on “40 Years of Experience with the Fair Credit Reporting
Act” Illuminates Areas of Potential Class Action Exposure for Employers –
December 2011
An Employer’s Guide to EEOC Systemic Investigations and Subpoena
Enforcement Actions – August 2011
Recent EEOC Developments Involving Disqualification of Applicants Based on
Criminal History – March 2011
State Law ASAPs
Vermont Becomes the Eighth State to Restrict the Use of Credit Reports for
Employment Purposes – June 2012
Indiana Passes New Legislation Restricting Criminal History Information
Reported in Background Checks – June 2012
Massachusetts Employers Face New Obligations When Conducting
Background Checks Involving Criminal History Records – March 2012
California Joins States Restricting Use of Credit Reports for Employment
Purposes – October 2011
Use of Credit Reports by Employers Will Soon Be Restricted in Connecticut –
July 2011
Legislation Roundup: Maryland Law Restricts Use of Applicant’s or Employee’s
Credit Report or Credit History – April 2011
Massachusetts Becomes the Second State to “Ban the Box” on All
Employment Applications – October 2010
Paul Kennedy, Esq.
[email protected]
Ashley Sims, Esq.
[email protected]

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