About one year ago, on April 25, 2012, the EEOC issued revised enforcement guidelines on the use of criminal records in hiring decisions in compliance with Title VII of the 1964 Civil Rights Act. The big deal in the revisions was the recommended use of individualized assessments (IA) in hiring situations where a criminal record history might otherwise exclude an applicant (see our May 2012 post on the EEOC Guidance) from further consideration for employment.

A cottage industry has arisen for law firms trying to interpret these new guidelines in the absence of decisive court rulings. The essential problem with IA is that hiring managers are being asked to make objective judgments on applicants based on individual case factors where criteria are necessarily subjective.

Nevertheless, companies should establish clear and consistent policies for cases where individualized assessments are indicated. Not doing so may in itself create a liability – and a documented compliance schema will be useful in defense against some kinds of Title VII charges.

Why the EEOC Recommends Individualized Assessments

The central aim of the EEOC is to prevent discrimination in hiring against protected classes including race, national origin, sex, or religion. As one element in achieving this outcome, the EEOC seeks to ensure that applicants’ exclusions due to criminal conduct are both job-related and a business necessity rather than because the applicant is a member of a protected group.

The incidence of arrests and convictions is much higher among blacks and Hispanics than among whites. Therefore, the EEOC reasons, criminal background checks may exclude individuals from protected groups disproportionately. This is referred to as “disparate impact” where your racially neutral business process systematically discriminates against a protected group regardless of your business intent.

To guard against this form of discrimination, the EEOC recommends individualized assessments to drill deeper into the information about applicants who might be excluded by a criminal background check.

What is an Individualized Assessment?

Although individualized assessment was not a new concept, the EEOC went further than before in making it an important element of compliance. If a background check for an applicant indicates they have arrest or conviction records, an individualized assessment is recommended. Regarding arrest records, which are not conclusive evidence of wrong doing, it is especially important to give the applicant an opportunity in an individualized assessment to explain the circumstances of the arrest.

Where individualized assessments are appropriate, the so-called Green Factors (from the 1977 Green v Missouri Pacific Railroad case) that test whether an employment practice is job-related and a business necessity also indicate the broad outlines of the assessment. The factors are:

• 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; and
• The nature of the job held or sought.

Sometimes it is easy to connect the nature of an offense with the nature of the job. No one would argue it is reasonable to hire someone convicted of vehicular manslaughter a few months ago as a bus driver, and the EEOC recognizes that in such cases the conviction is sufficient to deny employment  without the need for an individualized assessment. However, one should tread lightly here and with the advice of competent legal counsel.

But in more difficult cases, you need to establish a process that allows you to reach a reasonable conclusion about an applicant. Writing in Martindale, Holly Cheong of Snell & Winter LLP provides an outline of the process:

• Notify the applicant that he or she is being screened due to criminal activity.
• Give the applicant a chance to respond.
• Provide the applicant a full explanation for the decision not to hire if that is the decision.

Within this process, evaluate the applicant’s background and circumstances more thoroughly.  Some of the elements you might consider include:

• The seriousness of the criminal activity with respect to risk in the prospective job.
• How much time has passed since the applicant was involved in a criminal activity.
• Whether the applicant has held similar jobs successfully in the past, or has had a sequence of jobs with long unaccounted breaks between.
• Evidence that the applicant has made good faith efforts to reform, e.g., through school or training or rehabilitation.
• Whether the applicant has references that substantiate dependable character.

When Should an Employer Conduct an Individualized Assessment

We do not recommend doing an individualized assessment for every applicant whose background check turns up a criminal record. If a scan of the background check results using the Green Factors indicates that the infraction was so minor, so far in the past without repetition, or so irrelevant to the job at hand that the applicant would not be rejected because of the criminal activity, no further investigation is warranted.

However, if you decide to exclude an applicant because of a criminal background check, we recommend doing an individualized assessment. Establish a policy to operationalize the process in the previous section, and initiate it as soon as possible. If you are hiring frequently or in large numbers at a time it is obviously important to have a routine that simplifies the process, but it is important for compliance to be able to show that the process produces valid outcomes.

Individualized assessments are a challenge for organizations. Over time, we hope the law or court cases add more clarity to the process. For now, it is important to conduct individualized assessments when appropriate to ensure your organization is in compliance with the revised EEOC guidelines.

Employment Screening Blog

In light of this law, Colorado employers should evaluate their current background screening procedures to ensure they will be in compliance regarding the use of credit information in employment decisions and the disclosure of that use to the employee.

The Colorado Law in a Nutshell

Here’s the essence of the law: Employers may not use credit-related information for hiring, promotion, demotion, reassignment, or any of a number of other employment actions.

The law was written broadly to cover all private sector employers with four or more employees, with limited exemptions summarized below. The law also expands requirements for disclosure to the employee for adverse actions based on a credit report or when a credit report is used because it is “substantially related” to a position. For a more detailed account, see the post by Pamela Devata and Natasha Riesco in the Seyfarth Shaw LLP blog.

Notable Exceptions to Colorado’s Ban on Employment Credit Reports

The law defines three classes of exempt employers:

1. Banks or financial institutions.
2. Companies who are legally required to check the credit standing of their employees.
3. Cases where a credit report is substantially related to the employee’s current or potential job.

“Substantially related” positions include executive or managerial jobs that involve the direction of a business unit or responsibility for financial operations of certain kinds, or involve contracts with federal agencies including defense, intelligence, national security, or space. However, to apply credit information to these positions, an employer must further have a “bona fide purpose” for using the information and disclose that purpose to the employee.

The law does not define “bona fide purpose.”

Adverse Action & Credit Reports

The law also states that an employer who uses a credit report as part of an adverse employment decision must disclose the specific information used in that decision to the candidate or employee. Adverse actions include denial of employment, demotion, termination, or a number of other employment actions.

A person who is the subject of an adverse action may file a complaint with the Colorado Division of Labor. Upon investigation, the Division may award up to $2,500 to the prevailing party.

Credit Reports Also on the Agenda of Other States

California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont, and Washington preceded Colorado in passing this type of law, and several other states are considering it. The EEOC has also expressed interest in the issue. Employers will face increasing pressure to ensure that the use of consumer credit reports is limited to well-justified applications.

So…What’s New?

What we find interesting about this and other legislation related to employment credit reports is that the information is not earth-shattering for reputable employment screening providers. Ethical and knowledgeable background screening companies (those who provide credit reports to employers for employment-related decisions) have long advised a policy of running credit reports for positions only where there is a clear corollary between job necessity and the characteristics that can be extrapolated from the credit history information.

For more on Proforma Screening Solutions’ perspective, we encourage you to read these recent posts:

• The Real Impact of Employment Credit Reports is Not What You Think
• Despite Rumors, Employment Credit Reports Still Not Prohibited by Federal Law

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The two groups are accusing Target of denying people with criminal records job interviews, “even when the alleged crime was old, expunged, or irrelevant to the prospective job.” Target officials deny any wrongdoing. Target spokeswoman, Molly Snyder, issued this statement:

“We explained that Target’s criminal background check process is carefully designed to ensure that we provide a safe and secure working and shopping environment for our team members and guests while treating all candidates fairly. The existence of a criminal record does not disqualify a candidate for employment at Target, unless it indicates an unreasonable risk to the safety and welfare of our guests, our team members or our property.”

State Rep. Raymond Dehn, DFL-Minneapolis called the problem “pretty widespread.”

In our view, this story requires a bit more wait and see. The use of criminal records in employment is a hot topic right now and the EEOC’s recent updated guidance on the use of criminal records places stringent responsibilities on employers to ensure their fair use. It will take more than mere accusations to resolve these complaints.

A Reminder to Employers about the EEOC’s Guidance

Back in April 2012, the EEOC issued its updated enforcement guidelines on employers’ use of criminal records (arrest and conviction records) in the employment screening process. This story offers a good reminder for employers to keep in mind the EEOC’s best practices, which include:

• Requiring an individualized assessment for individuals excluded by the results of the criminal records check;
• Developing a narrowly tailored written policy and procedures for screening for criminal records;
• Identifying essential job requirements and the actual circumstances under which the jobs are performed;
• Determining the specific offenses that may demonstrate unfitness for performing specific jobs;
• Refraining from inquiring about convictions on job applications;
• Limiting the criminal records inquiry to convictions that would be job-related for the position in question and consistent with business necessity;
• Keeping information about the criminal records of applicants and employees confidential (only using it for the purposes for which it was intended);
• Training managers, hiring officials, and decision-makers on how to implement the policy and procedures consistent with Title VII.

The EEOC has made it clear, through both its latest guidance and its defined strategic priorities, that employers’ hiring and employment screening practices will be on its radar. If your organization hasn’t taken a close hard look at its policies and procedures lately, now is the time. EEOC investigation activity is increasing and the last thing you want to do is find your organization in the headlines for the wrong reasons.

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These concerns center on the independent variables that comprise these models and their potential disparate impact on certain demographic groups. Disparate impact refers to the idea that a variable’s predictive power (i.e. the use of credit scores stemming from past credit history to predict future behavior) might arise from acting as a surrogate for group membership instead of from its ability to predict future performance within any demographic group.

Weeding Out the Down and Out?

In the employment realm, privacy and civil rights advocates argue that credit reports are used unfairly by employers to “weed out the down and out, especially people of color.” They contend that credit reports have a discriminatory disparate impact. Meanwhile, employers argue credit reports are a valuable mechanism by which to assess candidates for sensitive positions.

No Evidence of Disparate Impact by Race

Members of the Board of Governors of the Federal Reserve System recently set out to answer the question, “Does Credit Scoring Produce a Disparate Impact?” Their report debunks the commonly held belief that credit reports have disparate impact by race.  The authors state that their examination “yields no evidence of disparate impact by race (or ethnicity) or gender.”

However, the report did find limited disparate impact by age found to affect younger individuals who generally have no or very short credit histories and resultingly low credit scores. The results also indicate credit characteristics associated with length of credit history may have an inappropriately adverse effect on foreign born individuals, in particular on recent immigrants—again, due to their relatively short credit histories.

And perhaps this is where the vicious cycle comes together: those with short credit histories (regardless of the reason) pay more for credit, those who pay more for credit are worse off, those who are worse off have poor credit… and the cycle continues.

This study flies in the face of conventional anecdotal stories about credit reports. And while we certainly cannot say there isn’t any truth in the stories of African Americans, Hispanics, or other protected classes being adversely impacted by credit reporting requirements, the data in this study doesn’t support it as a statistical fact.

Take a Balanced Approach when Using Credit Reports for Employment

It’s important to recognize that credit reports must be viewed from a balanced perspective. There are shades of grey that must come into consideration.  As with any information an employer gathers related to the employment prospects of an individual, it’s important to take a holistic approach.  Credit histories are just one piece of information that can be used to paint a picture of an individual in order to predict their suitability for a given role.  The same can be said for criminal records, reference checks, and each component of a thorough employment background check.  Rarely is one single source of information enough to draw a hard conclusion.

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This growing and increasingly important segment of the workforce offers numerous benefits to companies, including the ability to provide flexibility, specialized skills, innovation, and labor cost control. On the flip side, like any traditional employee, these workers also bring with them a significant set of risks.

Still, studies have shown that a surprising majority of companies fail to uphold the same screening requirements of their contingent workers as they do of their traditional employees. According to some reports just 35% of companies require background checks of their temporary workforce. On the other hand, 90% of corporate America requires background screening of their traditional employees.

The reasons for this failure to screen are complex but can most commonly boil down to these three breakdowns:

1. Lack of clear responsibility

The assumption of many employers is that the responsibility for screening temporary workers rests with the placing organization—the temp agency, staffing firm, contractor, etc. In fact, many employers believe that they can bypass the threat of litigation for negligent hiring or tort liability by using workers who are screened elsewhere when, in reality, companies should assume that regardless of the party with ultimate responsibility for the acts of contingent workers, the company that worker is “representing” bears the most risk.

When an employer fails to ensure that the agency supplying its contingent workforce is diligently screening its workers, the liability for negligent hiring could transfer directly to the organization.

Furthermore, many organizations wrongly assume that when a staffing vendor says they’re doing background checks on their employees, they’re doing a thorough or accurate job. If an employer chooses to rely on background checks that are lacking in completeness, or fail to conform to best practices for accuracy and fairness, they are putting themselves at risk.

In a nutshell, employers should require the same screening of their contingent workers as they do of their regular full time workers and should take full responsibility for ensuring this level of screening takes place.

If allowing your staffing vendor to manage background screening for the workers they provide to your organization, it is important to establish a clear contractual obligation to ensure these workers are screened at the required level. Include your workforce screening policy in the agreement and require the vendor to provide proof that the required standards are being met.

2. Failure to acknowledge the risks

Occupational fraud, theft, workplace violence—these and a host of other risks all tend to begin and end with people; temporary workers are no exception since often times these workers have the same access to employee assets as any traditional employee would. Regardless of the party with ultimate responsibility for the acts of contingent workers, the company the worker is representing stands to lose in more ways than one.

One risk, in particular, is the risk of discriminatory hiring on the part of a company’s staffing vendor. Note that the hiring practices of a staffing vendor are often perceived as one and the same as the practices of the hiring organization. When those practices are intentionally or unintentionally discriminatory, they will reflect poorly on both the staffing vendor and the company the worker will ultimately represent.

Criminal records checks, in particular, are increasingly viewed as a barrier to employment that requires greater enforcement of civil rights and consumer protections. The EEOC has taken significant enforcement action around the use of criminal records in hiring because without proper practices and policies in place, an employer runs a high risk of discriminating against certain protected classes.

Close examination and oversight of outside vendor screening practices are needed to avoid intentional and unintentional discrimination.

3. Reliance on outdated policies

Simply put, many organizations simply fail to revisit their background screening practices at regular intervals in order to keep pace with changing workforce dynamics and risks.  However, the mindset of “this is how we’ve always done it” or “nothing bad has happened yet” just isn’t responsible. The rise of the extended workforce in recent years, coupled with increasing compliance-related enforcement activity by the EEOC, FTC, and others, makes it prudent for employers to evaluate and update their screening policies.  Questionable hiring practices just don’t slip under the radar like they used to and the damage to brand and reputation caused by outdated screening practices can be significant.

Conclusion

The extended workforce plays an increasingly important role in the employment landscape and organizations are recognizing that regardless of the payroll category a worker may fall under, it is a simple matter of smart risk management to make certain all workers in similar roles are held to the same screening criteria.

Closing the risk and security loophole by instituting a clear and well-managed extended workforce screening program can help your organization minimize the risks and reap the rewards of this flexible, skilled, and cost effective mode of staffing.

Employment Screening Blog

Employment credit reports

One argument being played out in the media today concerns the fact that credit reports can contain errors that could lead to unfair adverse action against a job candidate.

The FTC recently completed its first major study of credit reporting and scoring accuracy. It found five percent of consumers had errors on one of their three major credit reports that could lead to them paying more for products such as auto loans and insurance. These are the same credit reports used by employers in the hiring process for some jobs so the argument also exists these erroneous reports could impact a candidate’s job prospects.

No surprises here…

In our view, it should be no surprise credit reports have errors.  In fact, the Fair Credit Report Act and its adverse action/dispute resolution process exists because errors are assumed and inherent in the credit reporting process. The government’s “Free Annual Credit Report” program, which requires the three major reporting agencies to provide and encourages consumers to request copies of individual credit reports each year, is further evidence of this longstanding assumption.

Consider store credit card applications, job applications, and the many other instances in which credit-related information is entered from hand-written, often incomplete, applications into systems by human beings.  Consider also the intentional errors created by identity thieves, and reporting errors made by creditors who incorrectly or inconsistently report payments.

Credit reporting is known to be a process that has inherent error.

Employment credit reports still have value.

Yes credit reporting is imperfect, however it is also a valuable source of information for employers—particularly when hiring for certain sensitive financial or managerial positions.

The fact some reports can contain errors only highlights the need for employers to follow established protocol for adverse action notifications.  It also underscores the need for employers to take a holistic view of each individual.

Just as we take into account the gravity and nature of a crime when considering employment criminal records, we need to consider credit history data in context. Did the individual go through a recent divorce? Did he suffer losses as a result of a medical issue? Is she caring for an elderly person? Was his identity stolen?  Or, is she irresponsible, and /or living beyond her means?

These questions can only be answered when an employer takes time to assess each individual.

And that is precisely the point, and arguably the law.

It bears repeating that employers must consider the totality of an individual’s background and experience when making hiring decisions. A single blemish on a criminal record or a poor score on a credit report, in and of itself, should not necessarily disqualify an individual from employment. Instead, employers should individually assess and consider the sum of an individual’s background in determining their fitness for a particular role.

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In order to establish a prima facie case of employment discrimination based on a disparate impact theory, the EEOC would have had to: (1) identify a specific employment practice that is being challenged; and (2) establish, through statistical means, that the identified employment practice “caused the exclusion of applicants…because of their membership in a protected group.”

The Court found that the EEOC failed to provide reliable statistical evidence of discrimination and therefore, could not set forth a prima facie case of disparate impact discrimination. As such, the court ruled for summary judgment in favor of Kaplan without even having to consider Kaplan’s alternative (and in our minds, sound) arguments of job relatedness, and business necessity as grounds for the legal use of employment credit reports.

The Highlights

Here are a few of the more interesting highlights in this case:

“Race Raters”

In order to determine the race of some of the applicants for the statistical analysis, the EEOC assembled a team of five “race raters,” who were asked to review driver’s license photographs and determine whether the individual was “African-American,” “Asian,” “Hispanic,” “White,” or “Other.” Individuals considered “multi-racial” were adjudged “Other.” None of the race raters had prior experience in determining race via visual means and the EEOC failed to prove that the “race rater” methodology was statistically sound or scientifically valid.

A matter of personal dignity…

The Court noted that the EEOC did not contact the applicants directly and instead chose to assign a race to the applicants, a process which is inconsistent with the EEOC’s own policies promoting personal dignity. (The EEOC itself discourages employers from visually identifying an individual by race and indicates that visual identification is appropriate “only if an employee refuses to self-identify.”)

The EEOC itself runs credit checks on job applicants.

According to the EEOC’s Personnel Suitability and Security Program Handbook, credit checks are required for 84 of the 97 positions at the EEOC. The handbook bases the need for credit checks on the notion that “overdue just debts increase temptation to commit illegal or unethical acts as a means of gaining funds to meet financial obligations.”  This sounds reasonable and lawful to us. Never mind that the EEOC stated that it has never “unfavorably adjudicated employees based on their debt issues” because that just makes you wonder why they would require the reports if they don’t actually use them.

How about some common sense?

It’s worth considering this final point: Kaplan is doing work for the US Department of Education (DOE) and in doing so, Kaplan’s staff has access to sensitive DOE financial data. Understandably, there are data protection requirements as part of the business agreement with a government agency.  Kaplan had previously suffered at least one loss as a result of employee integrity and the misappropriation of student funds.  The use of a credit report as part of their screening methodology was implemented to reduce the risk of future loss. Isn’t this something any reasonable person would consider?

The Moral of the Story?

In the end, the question of whether the use of a credit report has disparate impact or not has not been answered in this case.  Rather, it underscores the difficulty the EEOC has in proving a prima facie case. These are very complex and difficult issues and the chance of any sort of landmark finding that has broad impact across a huge swath of employers looks increasingly less likely.

The real news here is that if you’re using employment credit reports you need to have your processes nailed down and documented. Employers must draw a tight corollary between the risk of a given role and the use of a credit report, and they need to have good evaluation criteria in place that include the ability to individually assess each applicant.

In our view, Kaplan is on the right track. How about your organization?

Employment Screening Blog

The FTC’s agreement containing consent order is the first of its kind by the agency against a mobile app provider.  The company in question marketed criminal background reports through a $.99 mobile app. The FTC alleges that the company did so without ensuring that the information they sold was accurate and would be used for legally permissible purposes. The FTC also alleged that the company neglected to notify users of their obligations under FCRA to notify consumers if an adverse action was taken against them on the basis of the information reported. These are all standard compliance measures that CRAs must take under the FCRA.

The company, its CEO, and the screening firm who supplied the criminal records were all named in the settlement and given a series of orders under which they must prove their compliance with FCRA guidelines in the future.

According to the FTC’s complaint, since at least 2010, the company had operated a series of mobile apps that it advertised consumers could use to conduct a “quick criminal background check for convictions” in specific states. The complaint went on to detail that the company represented that the apps could access hundreds of thousands of criminal records, and that users could conduct a search on potential employees. For example, marketing for the company’s Texas Criminal Record Search, included the following representation: “Are you hiring somebody and wanting to quickly find out if they have a record? Then Texas Criminal Record Search is the perfect application for you.”

But we had a disclaimer!

Both the company and its supplier of the records included a disclaimer in their “terms and conditions” stating that their respective products were not to be considered screening products for insurance, employment, loans, and credit applications, among other things. The disclaimer also stated that the companies were not compliant with the FCRA and anyone who used the information provided by the app “assumes sole responsibility for compliance with the Fair Credit Reporting act and all/any other applicable laws.”

If it looks like a CRA…

According to the FTC’s complaint, these disclaimers are not enough to avoid liability under the FCRA because the company advertised and expected that its reports could be used for employment purposes.  In short, the FTC outlined a sequence of arguments that essentially boil down to: if it looks like a CRA, and acts like a CRA… well, you know the ending.  In other words, in assembling or evaluating information on consumers for the purposes of furnishing a consumer report—defined as communications that include information relating to an individual’s character, reputation, or personal characteristics and are used or expected to be used for employment, housing, credit, or other similar purposes—a company is acting as a consumer reporting agency (CRA) and therefore will bear the responsibilities of a CRA, which include strict adherence to FCRA guidelines.

Despite the disclaimers, the fact that the app had been advertised for employment purposes means that they were “expected to be used” as a factor in determining a consumer’s eligibility for employment—a key definition of a consumer report.

What employers need to know:

From this case, there are three simple reminders here for employers who rely on criminal records for employment screening purposes:

Don’t assume.

Employers often assume that their background screening companies are following FCRA compliance obligations and employing sound strategies to ensure that the criminal background checks they provide are as complete, accurate and thorough as possible. But how can you be sure? Employers are wise to ask the right questions knowing that failure to comply on the part of the CRA will likely reflect back on the employer in a negative light.

It is your problem, too.

As the “end users” of consumer reports, employers are also subject to FCRA compliance requirements, including providing notice to individuals that they will be the subject of background screening and obtaining their authorization to perform such screening. If your background screening company/CRA is not following their side of the FCRA obligations, chances are they are not helping you maintain your side of the responsibility. Either way, the burden can easily and ultimately fall in your lap if a candidate or employee is the victim of a failed process.

There are no shortcuts.

Criminal records screening should not be undertaken lightly. As valuable as it has proven to be as an employment tool, it is also a process that brings a wide range of privacy, safety, and compliance issues that, if violated, are not taken lightly. Employers must appreciate what it means to conduct a criminal records check and that a “quick and cheap” database check simply cannot suffice.

We encourage you to engage in a dialogue with us to find out how we can help you create and maintain an efficient and effective background screening process.  Request a consultation.

Employment Screening Blog

Despite the potential downsides, employers also recognize that failure to conduct a reference check can open the organization up to negligent hiring claims and lawsuits.

3-in-10 References are Fake

A recent CareerBuilder survey brings criticism of the reference check process further into question as it revealed some startling statistics about the references job seekers are providing to prospective employers.

The survey, which included 2,494 hiring managers and human resource professionals and 3,976 workers across a variety of industries and company sizes, found that nearly 3 in 10 employers have caught a fake reference on a job application. 62% said a reference didn’t give positive feedback about the job candidate.

In our view, these findings suggest that reference checks still do deliver value to employers. The value of finding out that the candidate you’re considering has provided a fake reference or that a previous employer has a less than positive impression of the applicant you’re considering can indeed help employers better evaluate their candidates.

Of course, reference checks must be conducted with fairness and accuracy.

FCRA and Reference Checking

When an employment reference check involves asking questions that go beyond factual items of dates, position, salary, etc., the background report is considered an Investigative Consumer Report, governed by the Fair Credit Reporting Act (FCRA). Among other requirements, these investigative reports require written notice to the applicant that you may request or have requested an investigative consumer report, and require a statement that the person has a right to request additional disclosures and a summary of the scope and substance of the report.

Under the FCRA both employers and background screening companies (CRAs) have obligations to ensure the fairness and accuracy of the information used to make employment-related decisions. When the right steps are followed and paired alongside other background information, reference checks can help employers paint a useful picture of their applicants.

At Proforma, we have developed a powerful applicant-driven reference check and verification system that collects insightful feedback about prospective employees from the people who have supervised and worked with them.

Employment Screening Blog

1. Increased Enforcement of Criminal Records Screening Practices

The EEOC’s updated guidance on the use of criminal histories in employment background checks is officially in play and the EEOC is taking a strong enforcement posture when it comes to employers’ adherence to fair hiring guidelines. In particular, the EEOC is concerned with the potential adverse impact against African Americans and Hispanics when employers use arrest or conviction records in the hiring process.

Jon Hyman, partner at Cleveland’s Kohrman Jackson & Krantz and author of Ohio Employer’s Law Blog, explained that the EEOC’s updated guidance provides that in order for employers to consider criminal convictions they must perform a targeted screen that considers at least the nature of the crime, the time elapsed, and the nature of the job, and then the employer must provide an opportunity for an individualized assessment to determine if the policy as applied is job related and consistent with business necessity.

In its recently issued strategic plan for fiscal years 2012-2016, the EEOC further underscores its mission by naming the identification, investigation, and litigation of systemic discrimination a top strategic priority. Systemic discrimination cases involve a pattern or practice, policy, or class case where the alleged discrimination has a broad impact on an industry, profession, company or geographic area.

Examples of systemic practices, as provided by the EEOC, include:

• Discriminatory barriers in recruitment and hiring
• Discriminatorily restricted access to management trainee programs and to high level jobs
• Exclusion of qualified women from traditionally male dominated fields of work
• Disability discrimination such as unlawful pre-employment inquiries
• Age discrimination in reductions in force and retirement benefits
• Compliance with customer preferences that result in discriminatory placement or assignments

2. Stronger Enforcement of FCRA Requirements

Two recent high-profile class action cases make clear the need for employers to ensure, among other requirements, that the process used to gain consent from employees and candidates prior to initiating a background check is in line with FCRA rules.

When an employer hires a Consumer Reporting Agency (CRA) to perform background checks or verifications on a prospective or current employee, that employer has certain obligations under the FCRA. These can be summarized as follows:

• Provide FCRA and EEO Compliance Certification to the CRA — Employers must certify to its CRA/background screening provider that it will comply with FCRA and EEO laws. This straightforward certification is usually included as part of a CRA’s service agreement.
• Applicant Disclosure and Authorization Requirement – Employers must comply with pre-background check disclosures and authorization. Before ordering a background check the employer must provide a disclosure document that has specific language about the background check and obtain the signature/authorization of the applicant. It must be a standalone document or screen (in the case of an HRIS system).
• 2-Step Adverse Action Requirements — According to the broad definitions of the Fair Credit Reporting Act, a denial of employment constitutes an adverse action. Any decision that is adverse to the interests of the current or prospective employee would similarly fit the definition. Employers must provide notification to the applicant before and after the adverse action, allowing time after the pre-adverse action for the individual to respond to the findings or explain any inaccuracies. This can be a very low impact activity if you outsource to your CRA, yet it can be a very costly mistake to fail to comply fully.

3. Legislation and Scrutiny of Employment Credit Reports

Finally, as the Consumer Financial Protection Bureau (CFPB) takes over enforcement of laws that protect consumers from discrimination and other unfair treatment in consumer finance, employers are wise to evaluate their policies and practices related to the use of credit reports in hiring.  The CFPB’s stated role is to “prevent harm to consumers from unlawful financial practices and ensure that markets for consumer financial products and services are fair, transparent, and competitive.”

Credit reports have come under fire by legislators, as illustrated by the number of introduced or pending state legislation in the 2012 session related to the use of credit information in employment. As of November 2012, 40 bills in 19 states and the District of Columbia have been introduced or are pending in the 2012 legislative session. Out of the total 41 bills, 40 address restrictions on the use of credit information in employment decisions. The total number of states that limit employers’ use of credit information in employment is now eight.

With these 3 reasons in mind, there’s no time like the present to revisit your employment screening program and ensure that it continues to deliver the benefits of a safer and more productive workforce.  To learn more, we invite you to download our complimentary Employment Screening Survival Kit.  Get your copy now.

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