Employer Compliance with EEOC Guidance and FCRA Provisions ... · April 25, 2012 : New EEOC...

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Employer Compliance with EEOC Guidance and FCRA Provisions Related to Background Checks

Presenters

Colleen P. Lewis, Esq. Cincinnati [email protected]



EEOC Enforcement GuidanceApril 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 inlight of statistics showing that they are convicted at a rate disproportionately greater than theirrepresentation in the population.

� Consequently, the EEOC’s position was that such a policy or practice is unlawful under Title VII in theabsence that the exclusion was a job related business necessity .

� Business Necessity� To define “business necessity” the EEOC adopted the “Green” factors from


� To define “business necessity” the EEOC adopted the “Green” factors fromGreen 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 thata 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 andConviction Records over the past 20 years, which has had a disparateimpact on Blacks and Hispanics.

� EEOC points out that in 1991, 1.8% of the adult population had served timein prison, but that number jumped to 3.2% by 2007.

� African Americans and Hispanics are arrested at a proportion of 2 to 3 timesthat of the general population.


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 EEOCdecide to update its policy on this issue”

� Technology : Over the past 20 years, technology has made more criminalhistory information more readily available to employers.

� El v. Southeastern Pennsylvania Transportation Authority: The EEOCadmits that it also began to re-evaluate its policy statements after the ThirdCircuit Court of Appeals noted that the Commission should provide more in-depth 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 disparateimpact on minorities.

�CONVICTION RECORDS:


�CONVICTION RECORDS:�New Guidance reiterates the EEOC’s position that employment policies

that exclude applicants based upon criminal convictions have adisparate impact on minorities.

�New Guidance insists that an employer must still establish a job-related“business necessity” to justify exclusions based upon criminalbackground checks.

�New Guidance continues to endorse the “Green” factors to establish a job related “business necessity.”


�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.


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 criminalconduct, and its dangers, with the risks inherent in the duti es of aparticular position .” (from El v. SETA).

�The new Guidance indicates that there are only two ways in which theCommission believes employers will consistently meet the “job relatedand consistent with business necessity” defense


�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 theposition in question per the Uniform Guidelines on Employee Selection


position in question per the Uniform Guidelines on Employee SelectionProcedures (Uniform Guidelines) standards (if data about criminal conductas related to subsequent work performance is available and such validationis possible).

2. TARGETED SCREEN AND INDIVIDUALIZED ASSESSMENT: Theemployer develops a targeted screen considering at least the nature of thecrime, the time elapsed, and the nature of the job (the three Green factors),and then provides an opportunity for an individualized assessment forpeople excluded by the screen to determine whether the policy as appliedis job related and consistent with business necessity.


1. VALIDATION: The employer validates the criminal conductscreen for the position in question per the UniformGuidelines on Employee Selection Procedures (UniformGuidelines) standards (if data about criminal conduct asrelated to subsequent work performance is available andsuch validation is possible).� Problem : The EEOC admits that “although there may be


� Problem : The EEOC admits that “although there may besocial science studies that assess whether convictions arelinked to future behaviors, traits, or conduct with workplaceramifications, and thereby provide a framework for validatingsome employment exclusions, such studies are rare at thetime of this drafting .”


2. TARGETED SCREEN AND INDIVIDUALIZED ASSESSMENT: Theemployer develops a targeted screen considering at least the nature of thecrime, the time elapsed, and the nature of the job (the three Green factors),and then provides an opportunity for an individualized assessment forpeople excluded by the screen to determine whether the policy as appliedis 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


within a defined time frame, considering the Green factors is a“targeted exclusion.”

� Individualized Assessment: “Generally means that an employerinforms the individual that he may be excluded because of pastcriminal conduct; provides an opportunity to the individual todemonstrate that the exclusion does not properly apply to him; andconsiders whether the individual’s additional information shows thatthe policy as applied is not job related and consistent with businessnecessity.”

EEOC Enforcement Guidance� Individualized Assessment:

� An individual’s showing may include information that hewas not correctly identified in the criminal record, or thatthe record is otherwise inaccurate. Other relevantindividualized 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


conviction, with the same or a different employer, with no knownincidents of criminal conduct;

• The length and consistency of employment history before and afterthe 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 berequired when someone is excluded by a targetedscreen. The Guidance is not clear about what to dowhen a criminal conviction is just one of several factorsin an employment decision.


in an employment decision.

• Cost• Many large employers receive numerous applications

each day. To have to send out a letter each time anapplication is screened out and then review theresponses would create a significant cost.

• Litigation Risk• Sending an applicant a letter informing them that

they are being excluded based upon a criminalconviction creates a litigation risk.


Lawsuit Against Wal-Mart Goes To Trial

(Richland) April 24, 2006 - A jury was selected Monday and opening arguments areexpected Tuesday in the lawsuit claiming Wal-Mart doesn't protect children from sexualpredators by doing background checks on its employees. A Fairfield County mother, MariaHollins, sued the company in 2001 after an off duty employee Bobby Devon Randall wascaught on tape touching her daughter, who was 10 at the time. Randall was a registeredsex offender at the time, but store officials say he lied about his criminal history on hisapplication. He pleaded guilty and received a 10-year sentence. Hollins says, "He pleadedguilty to it. He apologized to Wal-Mart, including me and my family." Randall died in jail of a


guilty to it. He apologized to Wal-Mart, including me and my family." Randall died in jail of aheart attack after six months.

Wal-Mart has been around since 1962, but did not began checking the criminal history ofthe people it hired until 2004. Since that time, sex offenders have been removed from thestores.

Hollins' case isn't the only one. Similar lawsuits were filed in Arizona, Houston and just thispast August, another one in South Carolina.

EEOC Enforcement GuidanceWal-Mart Sued After Employee Knifing

August 5, 2008 - The victim of a violent crime in a Gainesville Wal-Mart parking lot is suingthe global corporation for damages in a trial that started Monday, alleging the companynegligently hired a teenager with a history of violence. The case draws into question thehiring practices of the nation’s largest retail chain. Tiffany Simmons, 19, took the standtoday at the Alachua County civil courthouse, recounting an ordeal that took place almosttwo 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. Aftera 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 properbackground check when Stacy was hired, which would have turned up juvenile arrestrecords on the Florida Department of Law Enforcement Web site.

Ginnette Childs, the attorney defending Wal-Mart, said in her opening statement: “Thiscase is not about anything that has to do with Wal-Mart. This is a fight that happenedbetween two people. Somehow these people knew each other before this incident everhappened.” Childs said that Wal-Mart uses a formalized hiring process that is uniformacross the country to ensure that employees in each state are treated the same. Thatprocess includes two interviews, two reference checks, a drug test and a backgroundcheck — all “for a $7-an-hour cart collector in Wal-Mart,” Childs said.


Wal-Mart Withholds Background Check Info, Suit Says

New York (May 25, 2012 -- Wal-Mart Stores Inc. was on Thursday suedin New Jersey federal court by a proposed class of potential workerswho allege the retail giant violated consumer protection law by failing toproperly disclose information related to the criminal background checksit runs on job applicants.


it runs on job applicants.

Jerry Landry and Joey Haynes said in their putative class action thatWal-Mart maintains a companywide policy of failing to give itsprospective employees either the necessary disclosures related to itsbackground checks or an opportunity to dispute the findings.


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 OpportunityCommission (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 byPepsi’s overly broad policy, which denied employment to those arrested or convictedof minor offenses.


of minor offenses.

During the EEOC’s investigation, Pepsi adopted a new criminal background checkpolicy. 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 qualifiedto work.

Pepsi also will supply the EEOC with regular reports on its hiring practices under itsnew 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.


� 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 youhave 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 validdefense.

• Adopting a policy to comply with state law “does not shield theemployer 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


� 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.


�Other Issues:�Social Networking and Google Background Checks:

�Facebook: Some employers are asking for passwords

�Several states have legislation pending to ban thispractice. Maryland has already passed legislation.

�Searching Public Profiles:�Employers Must Exercise Caution :


�Employers Must Exercise Caution :• Even viewing the public Facebook profile of the

applicant or “Googling” them might expose theemployer to information they are prohibited fromconsidering 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 orgarnishment, refusal or cancellation of bonding, car


garnishment, refusal or cancellation of bonding, carownership, rental or ownership of a house, length ofresidence at an address, charge accounts, furnitureownership, or bank accounts generally should beavoided because they tend to impact more adverselyon minorities and females . Exceptions exist if theemployer can show that such information is essential tothe 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


consumer reporting agency is accurate�Concerned with ensuring that applicants are not

denied jobs or promotions because of inaccurate or incomplete information

�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



�Credit Worthiness, Standing or Capacity�Character�General Reputation�Personal Characteristics�Mode of Living


�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


�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/credit-reports.html


�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


�Notice and Disclosure, and Authorization�Certification�Adverse Action Notification


�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


�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


�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


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


�Special Notice and Disclosure Issues�Medical information:

�Consumer Reporting Agency will not furnish medical information unless:�Furnished for employment purposes and


�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


�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


�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


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


�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


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


�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


�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


�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. §


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 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

Employer Compliance with EEOC Guidance and FCRA Provisions ... · April 25, 2012 : New EEOC...

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