Legal Risks involved in Background Checks & Other Pre-Hire Inquiries

Presented By: Joseph M. Gagliardo, Managing Partner

Jill P. O’Brien, PartnerLaner Muchin

515 North State Street, Suite 2800

Chicago, IL 60654

(312) 467-9800

jgagliardo@lanermuchin.com

jobrien@lanermuchin.com

www.lanermuchin.com

Today’s Program

• Practical considerations arising out of these LEGAL TRENDS related to Background Investigations.

• Do these Laws even apply to my organization?

• Should I conduct Background Checks in the First Place?

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What do others do?

• Recent statistics show that 92% of all employers conduct SOME form of a background investigation for all newly hired employees.

• Many of our clients are RECONSIDERING their Practices.

• Every employer is encouraged to consider the Pros/Cons involved?

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Why Reconsider Now?

• Costs involved in testing;• Legal risks of improper inquiries;• Even lawful inquiries can have Disparate

Impact on protected classes;• Delay in putting new employees to work;• Privacy concerns with retention and/or

misuse of the information obtained.

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Initial Considerations:

Q: Is there a JOB RELATED reason to obtain this information?

Q: Do I have a BUSINESS NEED to obtain the information?

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If “YES” then ask:

Q: Am I confident that the individuals on my team who gather this information are properly trained to obtain and use it?

Q: Do I have the proper tools in place to track criminal history or other vulnerable information that I obtain?

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An OPTION to consider…

Q: Should/can we conduct Background Checks for some but not all jobs?

A: YES!

Be consistent; treat SIMILARLY SITUATED EMPLOYEES similarly

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What questions can I ask?

The Illinois Human Rights Act has long prohibited employers and staffing/recruiting firms from making an INQUIRY or EMPLOYMENT DECISION based on:

– The FACT of an ARREST RECORD; or– a CRIMINAL HISTORY RECORD ordered

EXPUNGED, SEALED OR IMPOUNDED

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Outside the IHRA Prohibition

The IHRA does not prevent or limit employers or staffing firms from obtaining or relying on information which indicates that the person ACTUALLY ENGAGED IN THE CONDUCT for which the applicant was arrested.

Ex: admissions, witness statements,videos, photos, etc.

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Employment Applications

Drafting Tips based on the CURRENT laws:

1. Delete inquiries about ARREST RECORD alone.

2. Notify the candidate that he/she should NOT disclose information about a conviction that has been EXPUNGED or SEALED.

3. INCLUDE a DISCLAIMER MESSAGE: “A record of a conviction alone will not automatically disqualify any candidate from employment; we other job related circumstances surrounding the conviction.”

4. Be wary of “canned” applications from the internet.

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Change is Coming…

Governor Quinn has stated that he WILL SIGN into law:

The Illinois “Job Opportunities for Qualified Applicants Act” applicable to employers AND employment agencies with 15 or more employees.

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“Ban the Box”

The law will bar employers and employment agencies from soliciting criminal history information from an applicant until (with few exceptions):

(a) AFTER the employer has made a determination that the applicant is qualified for the position and notified the applicant he/she was selected for a job interview, or

(b) If there is no interview, AFTER the employer has made a conditional offer of employment to the applicant.

Anticipated effective date: January 1, 2015

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EEOC REGULATIONS

• The EEOC has taken the position that employers violate Title VII when they have a “blanket” prohibition of hiring applicants with criminal histories (few exceptions by industry).

• To comply: employers must conduct an individualized case-by-case assessment to determine if the conviction is JOB RELATED AND CONSISTENT WITH BUSINESS NEED.

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THE EXCEPTIONS

SOME EXCEPTIONS APPLY:• Jobs that involve dealings with

vulnerable citizens: children & elderly.• Nurses & caregivers can be held to

higher standard.• Teachers and others who work in

schools, etc.

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“INDIVIDUALIZED ASSESSMENT”

• The “GREEN FACTORS” include consideration of the following factors:

(1) the nature or gravity of the offense or conduct;

(2) the time elapsed since the conviction and/or completion of the sentence;

and,

(3) the nature of the job sought or held.

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RELEVANT FACTS ABOUT NATURE OF CONVICTION

• Amount of on-site supervision; • Amount of Contact with the public or

other employees;• Access to property or cash (if conviction

involves theft or destruction of property);• Prior employment history of candidate in

similar position (without incident);

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Retain the Info Gathered

1. Criminal history information relied on for hiring decisions is part of an employee’s “personnel file” under IL law.

2. Limited access to others/confidentiality of the information obtained.

3. How long will you retain the info AFTER the decision was made that the record of conviction was NOT job related?

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“Best Practices”

• ASG Staffing and Azimuth maintain a published policy and training program to educate their recruiters on what information can be gathered about a candidate’s criminal history record.

• ASG Staffing and Azimuth use a template document prepared to properly document the relevant factors considered when evaluating criminal history records of all candidates. (This establishes that an individualized assessment has occurred).

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The Decision maker:

Consider a Designated Decision maker who will review all recommendations about the disqualification of a candidate based on a criminal history record.

What evidence will you rely on if there is a challenge to one of your hiring decisions?

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MYTH #1 – not so fast…

• Employers cannot insulate themselves from liability by suggesting that their staffing firm engage in the unlawful recruiting practices (on their behalf).

• Several laws prohibit employment agencies from even “accepting a job order” which contains prohibited non-job related considerations.

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MYTH #2:

Employers CANNOT insulate themselves from the legal risks related to background investigations by using a Third Party Vendor to conduct the background evaluations.

In fact, there are enhanced legal responsibilities attach when 3d party vendors are used for this purpose.

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THE FAIR CREDIT REPORTING ACT

If an employer uses a third party vendor to conduct a background check on an applicant or employee, the employee is required to:• Disclose to the applicant that a consumer report/

background check will be performed;• Obtain the individual’s authorization to proceed with

the check; and• Provide notice to the individual if it will take adverse

action based on information discovered in the report.

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WHAT’S THE PENALTY?

• Employers have a variety of other obligations under the FCRA before and after taking any adverse employment action due to the background check results (such as rejecting a job application or revoking an offer of employment).

• Because the FCRA provides for statutory damages up to $1,000 PER VIOLATION, the potential for punitive damages, and the recovery of attorneys’ fees, plaintiffs’ attorneys have recently filed a wave of class action lawsuits alleging FCRA violations.

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FCRA Settlements

• Pitt v. K-Mart Corp., Case No. 11-CV-00697 (E.D. Va. May 2013): $3 million to resolve a class action settlement – Plaintiffs alleged that K-Mart willfully failed to comply with the FCRA’s disclosure and authorization requirements prior to obtaining consumer reports and prior to taking adverse actions against the class.

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Scary Stuff!

Singleton v. Domino’s Pizza, LLC, Case No. 11-CV-01823 (D. Md. Oct 2, 2013): $2.5 million to resolve a class action – Plaintiffs alleged that the consent form Domino’s used for procuring a consumer report violated the FCRA and that Domino’s took adverse actions against applicants without providing the required notices prior to the adverse action being taken.

Bell v. U.S. Xpress, Inc., 11-CV-00181 (E.D. Tenn. April 2013): $2.75 million to resolve a class action – Plaintiffs alleged that Xpress violated the FCRA because it: (a) did not ask candidates if they could obtain a consumer report as part of the application process, (b) based their decisions not to hire employees (in part) based on erroneous information in the report, and (c) they neglected to send the FCRA notices until after the decision were made.

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Ouch.. that stings!

Roe v. Intellicorp Records, Inc., Case No. 12-CV-288 (N.D. Ohio Nov. 2013): $18.6 million to resolve a class action – Plaintiffs accused two CRAs of providing inaccurate criminal background reports to employers that caused the applicants to suffer adverse actions, and of not notifying them at the time defendants provided the consumer reports to prospective employers.

Johnson v. Midwest Logistics Systems, Ltd., Case No. 11-CV-01061 (S.D. Ohio May 2013): $452,380.00 to resolve a class action – Plaintiffs alleged they were hired by defendant, pending a successful criminal background check, but did not receive a stand-alone consent form, as required by the FCRA, that the consumer report was inaccurate, and they were denied the position without proper notices.

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The Good Guys

• Before using a 3d party vendor, be sure that they are reputable and use the proper FCRA forms.

• Legal review of FCRA forms used by 3d party vendors is highly recommended.

• Review written agreements with vendors to be sure they assume appropriate responsibility for compliance with FCRA paperwork obligations.

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RECENT CREDIT CHECK LAWS

• Credit checks for hiring and employment considerations have come under attack in recent years, especially by the EEOC.

• Under the Employee Credit Privacy Act, Illinois employers cannot use an individual’s credit history to make hiring, firing, promotion or recruiting decisions. Further, employers are forbidden from inquiring on an applicant’s or employee’s credit history and obtaining a copy of their credit report.

• Industries such as banking, insurance, law enforcement, debt collectors and state and local agencies that require credit reports are exempt, and there are other exceptions as well.

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Prohibited Inquiries about Credit History

• Under Illinois law, for example, an employer covered under the Act is prohibited from the following acts:– (1) failing or refusing to hire or recruit, discharging, or

otherwise discriminating against an individual with respect to employment, compensation, or a term, condition, or privilege of employment because of the individual’s credit history or credit report;

– (2) inquiring about an applicant’s or employee’s credit history;

– (3) ordering or obtaining an applicant’s or employee’s credit report from a consumer reporting agency.

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Exceptions to the Law

Employees in the following positions are NOT covered by this law:

(1) the duties include custody of or unsupervised access to cash or assets valued at $2,500 or more;

(2) the duties include signatory power over business assets of $100 or more per transaction;

(3) the position is a managerial position which involves setting the direction or control of the business; or

(4) the position involves access to personal or confidential information, financial information, trade secrets, or State or national security information.

TIP: Document basis of request for credit history info when applicable.

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What would you do?

The owner of the business tells you she doesn’t care about the law….she will NEVER accept a temporary worker or interview any candidate that has been convicted of a FELONY of any kind in the PAST 7 YEARS.

Q: Does it matter if a felony or misdemeanor is involved? Is a 7-year prohibition reasonable?

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As if that were not enough…

ADDITIONAL LEGAL AND PRACTICAL CONSIDERATIONS

DURING THE HIRING & SELECTION PROCESS

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On Line Applications

• ADA reasonable accommodations (disabled employees must be offered effective way to participate in the application process.)

• Ensure that every candidate is required to complete an application that is IDENTICAL in form?

• Be sure that form states that “falsification or misrepresentation thru omission is grounds for termination (no matter when discovered)”

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Recruiting with Social Media

The #1 most frequently used recruiting tool for seeking candidates is LinkedIn. Consider:

• Are minorities sufficiently represented on LinkedIn?

• Are applicants age 40 and over sufficiently represented on LinkedIn?

• Are the unemployed sufficiently represented?• Does the site reveal a person’s age (graduation

year) or race (photos)?

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Privacy Rights

The “Illinois Privacy in the Workplace Act” makes it unlawful to refuse to hire, discharge or otherwise disadvantage an individual because the individual uses lawful products off the premises of the employer during non-working hours.

What would you do?

Your Facebook friend posts some Memorial Day vacation pictures labeled “What happens in Vegas…stays in Vegas”. You recognize one of your direct reports smoking cigarettes and drinking alcohol with a bedazzled lamp shade on his head.

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Workers’ Compensation History

This same Illinois privacy law makes it unlawful for employers to inquire in any manner of any prospective employee (or the prior employers of the candidate) whether the person has ever filed for benefits under the workers’ compensation laws.

What would you do?

You discover a picture on line which proves that your employee is not complying with the restrictions imposed by the doctors while on worker’s compensation leave of absence.

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Limited access to Sites

Consider a Designated Social Media “SCREENER” for recruiting purposes.

The screener should not participate in other aspects of the hiring/decision making process.

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Expansion of Privacy Law: PASSWORD PROTECTION

• Since 2012 Illinois employers have been limited in their ability to obtain an applicant’s or employee’s restricted social media accounts.

• Summary: Illinois law forbids employers from requesting or requiring log-in credentials for an applicant’s or employee’s social networking sites.

• The law also prohibits “shoulder surfing” or in other words, demanding that an employee or applicant show the employer their social media profile or account without revealing any log-in credentials.

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OTHER TRACKING RISKS

• Do you keep track of size, weight, strength, appearance factors when applicants are being considered for employment or promotions?

• For example: A manufacturing company prefers workers who can lift 50 pounds or more. How do you track “good lifters?”

• What would your records look like if there was a challenge?

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COMPASSIONATE USE OF MEDICAL CANNABIS PILOT PROGRAM ACT

• In January 2014, Illinois became the 20th state to legalize medical marijuana.

• The Act prohibits an employer from “penalizing” an individual (including refusing to hire) based solely for his status as a “registered qualifying patient” under the Act.

Q: Have you revised YOUR drug testing policy to conform to this new law?

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EMPLOYER RIGHTS

• An employer may discipline registered qualifying patients who demonstrate “specific articulable symptoms” of impairment from marijuana use while at work, as long as the employees are afforded a REASONABLE OPPORTUNITY to contest the determination.

• An employer may also discipline registered qualifying patients based on a GOOD FAITH BELIEF that they used or possessed marijuana while on the employer’s premises or during work hours.

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EMPLOYER RIGHTS CONT’D

• Employers may continue to enforce their “ZERO TOLERANCE” policies against use, possession or impairment of medical marijuana.

• Employers must apply policy consistently for medical marijuana and other drugs (including lawful drugs taken contrary to prescription).

• Employers do NOT need to permit an employee to work impaired even if the employee is a licensed patient who may lawfully possess or use marijuana for a qualified medical condition.

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WORKPLACE BULLYING

For NOW: • Unless the conduct is based on a legally “protected

category” not a violation of the anti-discrimination laws.

• Employees assume it is based on protected category when they are treated mean or unfairly (perception is reality)

• Consider: Expanding harassment policy to include this type of bullying. Also include a prohibition against “cyber bullying” even if off duty (private employers).

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CONSIDER AN HR AUDIT

AN HR AUDIT can include (among other things):– Review of application forms– Compliance with posting requirements– Review of FMLA compliance obligations (spot checking)– I-9 compliance checks– Wage/Hour compliance – exemptions; lunch breaks, rounding

practices reviewed– Leave policies drafted and implemented to avoid or minimize

disparate impact concerns.– Closure memos to all complaints of harassment or

discrimination or even bullying, etc.

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QUESTIONS?

Thank you for your participation today.

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