Criminal Background Checks in the Hiring Process: The Escalating RisksKevin J. WhiteLindsay B. VelardeDecember 9, 2015

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OfficesAtlantaAustinBangkokBeijingBrusselsCharlotteDallasHoustonLondonLos AngelesMcLeanMiamiNew YorkNorfolkRaleighRichmondSan FranciscoTokyoWashington

WELCOME

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• Title VII, EEOC Enforcement, Ban the BoxKevin J. White(Washington, D.C., Houston)

• Fair Credit Reporting Act, State and Local Equivalents

Lindsay B. Velarde(Washington, D.C.)

• Q&A

OVERVIEW

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Title VII, EEOC Enforcement, Ban the Box

Kevin J. WhitePartner, Labor & Employment

Washington, D.C.               

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Key Background Information• Being a criminal is not a protected category under Title

VII.• EEOC relies on national conviction data and the

disparate impact theory to bring the criminal conviction issue within Title VII.

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Key Background Information (cont.)• Disparate Impact

– An employer’s neutral policy or practice may not disproportionately screen out a protected group unless the policy or practice is job related for the position in question and consistent with business necessity.

• Neutral Policy or Practice:– High school diploma/GED– Number of years of experience

• Job related• Consistent with business necessity

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How Disparate Impact Theory Should Work:

• Plaintiff’s prima facie case: employer’s policy or practice causes a disparate impact on the basis of the individual’s race, color, religion, sex, or national origin.

• Burden shifts to the employer to demonstrate that the challenged practice or policy is job-related for the position in question and consistent with business necessity.

• Burden shifts back to the Plaintiff to determine whether an alternative, less discriminatory policy exists that would satisfy the employer’s business necessity without the disparate impact.

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Key Background Information• 1975 – Green v. Missouri Pacific RR Co., 523 F.2d 1290 (8th Cir.

1975). – 8th Circuit later affirmed injunction that allowed the use of criminal

convictions as a factor as long as the employer also considered:• The nature and gravity of the offense(s)• The amount of time since conviction or completion of sentence• Nature of the position

• 1987 – EEOC incorporates the Green factors into its policy guidance.

• 2007 – El v. SEPTA, 479 F.3d 232 (3d Cir. 2007) Rejected the Green test and the EEOC’s formulation of the business necessity defense in the criminal conviction context

• 2012 – EEOC issues revised guidance. Tries to address SEPTA.

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2012 Guidance• Restatement of existing guidance• Confirms rebuttable presumption of disparate impact• Employers will satisfy the business necessity defense

(and may rebut presumption) if they either:– Validate the policy per the Uniform Guidelines on

Employee Selection Procedures (“UGESP”) or– Apply for the Green factors and engage in an

“individualized assessment” of rejected applicants to determine whether the policy is, in fact, job related and consistent with the business necessity

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2012 Guidance (cont.)• Presumption of disparate impact that employer may rebut• The employer may rebut presumption with its own data.

For example, an employer may cite to regional or state conviction data for African American and Hispanic men or an employer may refer to its own applicant data.

• EEOC will probe whether applicant data is unreliable because the employer has a reputation in the community for excluding applicants with criminal convictions.

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Green factors + “individualized assessment”

• Notice to applicant• Opportunity to rebut, and• Consideration of:

– whether exception warranted, and– Business Necessity considerations

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Green factors + “individualized assessment” (cont.)

• First two individualized steps are standard action for third-party background checks (FCRA)

• Issues raised by “individualized assessment”:– Inaccuracies in criminal record – Number of offenses– Facts/circumstances– Age at conviction or release– Employment history– Rehabilitation efforts– References, etc.

• If applicant fails to respond to the individualized assessment, employer can proceed with decision

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Employer’s Other Defenses• Federal laws that prohibit hiring convicted criminals

are a valid defense• State laws are preempted by Title VII → no defense

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EEOC v. Pepsi Bottling Group – January 2012

Pepsi paid $3.13M and agreed to make “major” policy changes; Approximately 300 African American employees were affected; Pepsi’s criminal background checks policy excluded job applicants

(i) who had been arrested pending prosecution even if they had never been convicted of any offense, and (ii) who had been arrested or convicted of “minor offenses.”

EEOC v. J.B. Hunt Transport, Inc. – June 2013

Settlement amount not disclosed; The EEOC estimates 14,000 employees were affected; J.B. Hunt’s policy was a “blanket prohibition” that excluded

drivers based on criminal convictions unrelated to the duties of the job.

EEOC Enforcement Litigation – Settlements

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EEOC Enforcement Litigation – Settlements

EEOC v. BMW Manufacturing Co. (D.S.C.) – Sept. 2015

EEOC challenged criminal conviction background check policy that made applicants having “any convictions of a violent nature” subject to employment rejection, noting “there is no statute of limitations for any of the crimes,” and the policy “makes no distinction between felony and misdemeanor convictions.”

Settlement announced Sept. 8. BMW will pay $1.6 million and provide job opportunities to applicants and discharged employees

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EEOC v. Freeman• D. Md. August 2013 (“careful and appropriate use of criminal history

information is an important, and in many cases essential, part of the employment process of employers”)

• 4th Cir. 2015 (affirmed summary judgment to employer; stated EEOC’s expert analysis had a “mind-boggling number of errors” and was “utterly unreliable”)

EEOC v. Peoplemark• W.D. Mich. 2011 (awarding fees and costs to Peoplemark; “the complaint

turned out to be without foundation from the beginning”)• 6th Cir. October 2013 (“The [EEOC] [alleged] that Peoplemark had a

blanket, companywide policy of denying employment opportunities to persons with felony records and that this companywide policy had a disparate impact on African Americans. As it turned out, the alleged companywide policy did not exist.”)

EEOC Enforcement Litigation – Decisions

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EEOC Enforcement Litigation – Decisions

EEOC v. Kaplan Higher Education Corp.• D. Ohio January 2013 (“Because [EEOC] fails to present

admissible evidence showing that the use of credit reports ‘caused the exclusion of applicants ... because of their membership in a protected group,’ plaintiff cannot set forth a prima facie case of disparate impact discrimination.”)

• 6th Cir. 2014 (affirmed dismissal; EEOC brought this case on the basis of a “homemade methodology”)

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EEOC v. Dollar General (N.D. Ill.) – June 2013

EEOC alleges nationwide pattern or practice claims due to use of criminal background check “matrix” criteria that the EEOC alleges are not job-related or consistent with business necessity and do not provide for individualized assessments.

Dollar General ordered to turn over the contact information of its job applicants, even though that information did not contain any information about the race or criminal background of the job applicants.

Court denied request for disclosure of EEOC’s policies on background checks finding such policies would not be relevant to Dollar General’s defenses because it had not shown that “the functions performed by its employees are in any way comparable to those undertaken by the EEOC’s employees.”

EEOC Enforcement Litigation – Recent Cases

State Challenges to the EEOC’s Guidance

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State Attorneys General Letter – July 2013 Nine state attorneys general sent a letter to the EEOC to express concern

over recent lawsuits filed by the EEOC concerning employers using criminal background checks

The state attorneys general call the EEOC’s lawsuits “misguided and a quintessential example of gross federal overreach.”

State of Texas v. EEOC (N.D. Tex.) – November 2013 Claims the EEOC overstepped its statutory authority under Title VII and is

using its guidance to encroach on state rights to maintain and enforce laws and policies that place absolute bars on hiring felons by state agencies.

District court found guidance was not a final action that was judicially reviewable

Appealed to Fifth Circuit; oral argument heard in July

Best Practices – Criminal Background Checks

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• Evaluate your policy – avoid “stigmatizing” language (“ex-felons,” etc.).• Don’t implement blanket prohibitions for arrests.• Don’t implement blanket prohibitions for all criminal convictions.• Evaluate the job duties, the physical environment of the job, and the

accessibility of the job to those who are vulnerable.• Consider the amount of time that passed after conviction or release,

recidivism, gravity of the crime, mitigating factors, and age at time of crime.

• Seek information about the candidate’s conduct, employment history, and rehabilitation following conviction or release.

• Document the hiring or rejection rationale without mention of protected categories.

• If an applicant is rejected because of a criminal record, inform the applicant, and provide a reasonable chance to verify or challenge.

The Basics of “Banning the Box”

•“Ban the box” refers to a movement by civil rights advocacy groups seeking to have employers remove from hiring applications the “check box” that asks if applicants have a criminal record. •The stated purpose is to enable ex-offenders to display their qualifications in the hiring process before being asked about their criminal records. •The basic premise underlying the movement is that anything that makes it harder for ex-offenders to find a job makes it likelier that they will re-offend, which is bad for society.•Most “ban the box” laws only apply to the initial job application and sometimes the initial job interview.

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“Ban the Box” at the State Level

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At the present time, nineteen states (including D.C.) have adopted “ban the box” laws, with seven (*) applying to private employers:

California (2012, 2013), Colorado (2012), Connecticut (2010), Delaware (2014), Hawaii (1998),* Illinois (2013, 2014),* Maryland (2013), Massachusetts (2010),* Minnesota (2009 and 2013),* Nebraska (2014), New Jersey (2014),* New Mexico (2010), New York (2015), Ohio (2015), Oregon (2015)*, Rhode Island (2013),* Vermont (2015), Virginia (2015), and Washington D.C. (2014).

Some states have limited how and under what circumstances an employer may consider an applicant’s criminal record and make it illegal for employers to discriminate against applicants with conviction records, including:

New York,* Pennsylvania,* Washington, D.C.,* and Wisconsin.*

“Ban the Box” at the City and Local Level

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Nearly 150 cities and counties have adopted “ban the box” laws, including:

California (Berkeley, Oakland, San Francisco*), Connecticut (Bridgeport, Hartford,* New Haven*), Delaware (Wilmington), Florida (Jacksonville, Tampa), Georgia (Atlanta), Illinois (Chicago*), Indiana (Indianapolis*), Kentucky (Louisville*), Louisiana (New Orleans), Maryland (Baltimore*, Montgomery County*, Prince George’s County*), Massachusetts (Boston,* Cambridge*), Michigan (Detroit*), Minnesota (Minneapolis, St. Paul), Missouri (Columbia*, Kansas City), New Jersey (Atlantic City,* Newark*), New York (Buffalo,* New York,* Rochester*), North Carolina (Charlotte), Ohio (Canton, Cincinnati, Cleveland), Oregon (Portland*), Pennsylvania (Philadelphia,* Pittsburgh*), Tennessee (Memphis), Texas (Austin), Virginia (Alexandria, Norfolk, Richmond*), Washington (Seattle*).

“Ban the Box” and Major U.S. Corporations

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Target Corp. – removed criminal history box from applications in 2014• Target’s General Counsel stated “We’re interested in a safe workplace and shopping

environment, and we do want to take the appropriate steps to do that,” and noted it made sense to craft a uniform and consistent process nationwide, “given the number of people Target interviews and hires across the country.”

Bed, Bath & Beyond – removed criminal history box from applications in 2014• BBB’s Spokesperson stated “We are in agreement with the attorney general that

employment opportunities should remain open to individuals with criminal histories that have been rehabilitated.”

Wal-Mart – removed criminal history box from applications in 2010• Wal-Mart’s Spokesperson stated “The removal does not eliminate the background

check or drug test, but it offers those who’ve been previously incarcerated a chance to get their foot in the door.”

Best Practices – Employment Applications

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• Monitor “ban the box” developments and evaluate your application.• Consider removing inquiries about criminal convictions from the initial

job application.• Consider delaying inquiries into convictions (written forms, verbal

interviews) until after a conditional offer of employment.• Train Human Resources, hiring staff, and employee interviewers not to

make blanket statements (“no criminal convictions”) in job postings or during the hiring process.

• When you administer background checks, or alternatively criminal conviction inquiries, make decisions in accordance with criminal background check best practices.

• If an applicant is rejected because of a criminal record, inform the applicant, and provide a reasonable chance to verify or challenge.

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Fair Credit Reporting ActState and Local Equivalents

Lindsay B. VelardeAssociate, Labor & Employment

Washington, D.C.               

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Fair Credit Reporting Act (“FCRA”)• Applies when a “consumer reporting agency” conducts

the background check. • Ensures individuals are aware that consumer reports

may be used for employment purposes and agree to such use.

• Ensures individuals are notified promptly if information in a consumer report may result in a negative employment decision and if that information does in fact result in a negative employment decision.

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Consumer Reporting Agency DefinedA Consumer Reporting Agency (“CRA”) is an organization that collects information, compiles it in a Consumer Report and provides the Consumer Report to other people.• A criminal background check may be a consumer report.

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“Hot” Area of Litigation• FCRA sets out numerous procedural steps and

the plaintiffs’ bar is capitalizing on employer and CRA mistakes in ways similar to wage and hour lawsuits.

• In 2015, courts have approved settlements ranging from a total of over $800,000 to over $4 million.

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Disclosure and Authorization• Disclose that applicant’s/employee’s report might be

used for employment-related decisions.• Disclosure must be clear and conspicuous in a stand-

alone document.• Employer needs written authorization from the

applicant/employee that the employer may request the report.

• Ensure authorization is clear that employer will run background checks throughout employment.

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Pre-Adverse Action Notice• Adverse action includes failure to hire or promote.• Before adverse action is taken, employer must:

– Notify the employee that the employer intends to take the adverse action;

– Provide copy of consumer report to employee; – Provide a summary of consumer’s rights under the

FCRA to the employee (FTC website); and– Wait a reasonable time before taking the adverse

action.

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Post-Adverse Action Notice• After the adverse action, the employer must give a post-

adverse action notice that contains – Notice of the adverse action.– Information about the CRA, including name, address,

and telephone number.– Information about the individual’s right to dispute

directly with the CRA the accuracy or completeness of any information provided by the CRA.

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Post-Adverse Action Notice (cont.)– A statement that the CRA did not make the adverse

decision and is not able to explain why the decision was made.

– A statement setting forth the individual’s right to obtain a free copy of the report from the CRA if the individual requests it within 60 days of the notice.

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Penalties for FCRA Violations• Private right of action

– Actual damages or $100 to $1K per violation– Punitive damages– Court costs and attorney fees

• Criminal Enforcement– Willfully obtaining information under false pretenses– Fined – Imprisonment up to two years

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Exposure Variables

Whether the violation is “willful” greatly affects the scope of damages. A plaintiff must prove that the employer “knowingly” or “recklessly” violated the FCRA.

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Recent Settlements• In July 2015, court approved nearly $3 million settlement of claims on

behalf of nearly 60,000 class members that the defendant retailer failed to provide proper disclosures or pre-adverse action notifications.

• In November 2014, court approved nearly $7 million settlement of claims on behalf of about 90,000 class members that defendant retailer failed to provide proper disclosures.

• In October 2014, court approved over $5 million settlement of claims on behalf of over 180,000 class members that the defendant transportation company failed to provide proper disclosures.

• In June 2014, court approved a $18.6 million settlement of claims on behalf of nearly 550,000 class members that CRAs provided inaccurate criminal background reports to employers that caused the class to suffer adverse actions, and failed to notify them at the time defendants provided the consumer reports to prospective employers.

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The State and Local Twist• Increasing number of state and local laws impact FCRA-

required process• Often tag along with “ban the box” provisions• Pay attention to scope - some apply only to investigative

reports or credit information• Examples

– New York State– Rochester, NY– Buffalo, NY– New York City, NY

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New York State• Limits type of information that can be considered• Requires disclosure and authorization (investigative

only) before obtaining consumer report• Requires posting and provision of copy of N.Y.

Corrections Law Art. 23-A to applicants (investigative only)

• Must consider certain factors during evaluation• Provide written statement of reasons for denial

upon request

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Buffalo, Rochester, New York City• When inquiry can occur:

– After accepting an application - Buffalo– After initial interview or post-offer – Rochester– Post-offer – NYC

• When employers can consider information:– During initial interview or thereafter – Buffalo– After initial interview – Rochester– Post-offer - NYC

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New York City• Job advertisements cannot express any limitation based on

arrest or conviction record (e.g., no “criminal background check required”)

• Provide copy of inquiry to applicant• Solicit information necessary to perform analysis under Article

23-A• Perform analysis under Article 23-A and provide copy to

applicant (http://www.nyc.gov/html/cchr/downloads/pdf/FairChance_Form23-A_distributed.pdf)

• Allow reasonable time to respond (at least 3 business days) and hold position open

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Best Practices• Provide disclosure during hiring process• Obtain authorization during hiring process• Authorization should apply to hiring process and during

employment• Provide written pre-adverse and post-adverse action

notices• Wait a reasonable time before taking adverse action• Maintain forms for disclosure, authorization, and pre-

and post- adverse action notices

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Best Practices (cont.)• Review litigation record of CRA• Ensure strong indemnity language in contract with CRA• Ensure contract allows employer access to background

check data• Ensure contract clearly outlines CRA’s responsibilities

and processes• Separate compliance requirements for CRAs

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Your Questions….

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Please Contact Us …

Kevin J. White Washington, D.C., Houston (202-955-1886)

Lindsay B. VelardeWashington D.C. (202-955-1860)

We also invite you to visit the Hunton Employment & Labor Perspectives™ blog at www.huntonlaborblog.com.