On December 8, the Syracuse Common Council voted 8-1 to pass a “Ban the Box” ordinance.  If the ordinance is signed by the Mayor (or if the Mayor's veto is overridden by the Common Council), the ordinance would prohibit the City of Syracuse and persons or entities that provide goods or services under contract with the City from asking a job applicant about criminal convictions unless and until the applicant has already received a conditional job offer. In passing the ordinance, Syracuse joins at least 60 cities (including Buffalo and Rochester) and 13 states that have taken steps to remove the criminal history question on a job application and delay the background check until later in the hiring process.  The prohibition, in theory, will enable ex-convicts to exhibit their qualifications for a job before being asked about their criminal histories.  As a result, lawmakers hope that this will present opportunities for ex-convicts to obtain employment and thereby reduce the likelihood of criminal recidivism. Syracuse’s version, as mentioned above, applies only to the City itself and any "person, vendor, business enterprise or entity that enters into a service contract or concession agreement with the City, or otherwise supplies goods and/or services to, or on behalf of, the City."  Thus, under the ordinance, neither the City nor its contractors may inquire into an applicant’s criminal history until a conditional offer of employment has been extended.  After a conditional job offer has been extended, an applicant's criminal record can be investigated, but the job offer may be rescinded only if it is done in accordance with the provisions of Article 23-A of the New York Correction Law.  Thus, the City and its contractors may rescind a conditional job offer on the basis of a prior criminal conviction only if hiring the applicant would pose an unreasonable risk to property or safety, or if the conviction bears a direct relationship to the job. If a contractor subject to the ordinance is considering rescinding a conditional job offer based on the applicant's criminal record, the ordinance would require the contractor to send a notice to the applicant that includes the relevant Criminal History Report and highlights the convictions that warrant a rescission of the conditional offer.  If the applicant so chooses, within five days of receiving this notice, he or she can then submit a rebuttal, challenging the accuracy and relevance of the Report.  The contractor is then required to review the rebuttal, and any information contained within it, before making a final decision. The ordinance does not apply to the City of Syracuse Police Department or to any "police officer" and "peace officer" positions.  In addition, the ordinance would give the Mayor of the City of Syracuse the power to temporarily suspend the applicability of the ordinance to any contractor or prospective contractor for up to three months if there is a specific exigent circumstance or public emergency condition that justifies such an action. The incarnation of the ordinance that passed is markedly less sweeping than its failed predecessors, which would have applied the prohibition to all employers within the City of Syracuse.  Mayor Stephanie Miner has yet to say whether she will veto the ordinance.  If she does veto the ordinance, the veto could be overridden if at least six members of the Common Council vote to do so.  If the ordinance is ultimately approved, either with the Mayor's signature or an override of her veto, it will take effect 90 days after it is passed. The ordinance will have a significant impact on City of Syracuse contractors if and when it goes into effect, in no small part because of the civil action authorized by the ordinance against any contractors who are alleged to be in violation of the ordinance.  The ordinance also provides that the court may allow the party commencing such an action against a contractor to recover costs and reasonable attorneys' fees as part of the relief granted.  City of Syracuse contractors should fully acquaint themselves with the particulars of the ordinance, train all personnel involved in the hiring process to avoid once-standard criminal history inquiries until after the interview is complete and a conditional job offer has been extended, and review job applications and other documents used in the hiring process (including online questionnaires) to ensure compliance.

The City of Rochester recently unanimously enacted a “Ban the Box” ordinance, which prohibits employers from asking applicants about criminal convictions at any time before the employer has conducted an initial employment interview or made a conditional offer of employment.  This new ordinance takes effect on November 18, 2014.  It applies to all public and private employers and employment agencies that employ individuals within the City of Rochester, as well as any vendors, contractors, or suppliers of goods or services to the City of Rochester (regardless of their location). There are some exceptions to this general prohibition on inquiries about criminal convictions.  For example, the ordinance allows inquiries where the conviction would legally bar employment in that position or where inquiries into convictions are specifically authorized by another applicable law or by a licensing authority for licensed trades or professions.  Additionally, employers with less than four employees are not covered by the ordinance.  The ordinance also does not apply to applicants for positions in the City of Rochester Police Department, the Fire Department, or any other positions as “police officers” or “peace officers.” The ordinance provides for a private right of action for an aggrieved party to seek injunctive relief, damages, costs, and reasonable attorneys’ fees.  The City of Rochester’s Corporation Counsel may also initiate a court action seeking penalties of $500 for the first violation of the ordinance and $1,000 for each subsequent violation. Although this new ordinance does not prohibit employers from considering a criminal conviction after the candidate submits an application and attends a first interview, employers must be aware that Article 23-A of the New York Corrections Law protects an applicant from discrimination based on a past criminal conviction unless:  (1) there is a “direct relationship” between the criminal offense and the position sought; or (2) granting employment would pose an “unreasonable risk” to property or to the safety or welfare of specific individuals or the general public.  This analysis requires an employer to consider all of the following eight factors:

1. The public policy of the state to encourage the employment of persons previously convicted of one or more criminal offenses.
2. The specific duties and responsibilities necessarily related to the employment sought or held by the person.
3. The bearing, if any, the criminal offense or offenses for which the person was previously convicted will have on his fitness or ability to perform one or more such duties or responsibilities.
4. The time which has elapsed since the occurrence of the criminal offense or offenses.
5. The age of the person at the time of the occurrence of the criminal offense or offenses.
6. The seriousness of the offense or offenses.
7. Any information produced by the person, or produced on his behalf, regarding his rehabilitation and good conduct.
8. The legitimate interest of the public agency or private employer in protecting property and the safety and welfare of specific individuals or the general public.

To ensure compliance, any employers who are covered by this new ordinance should revise their employment applications to omit any questions about criminal convictions.  Covered employers should also train their human resources personnel, managers, supervisors, and any other employees who have contact with job applicants regarding the requirements of this new ordinance, as well as the limitations contained in Article 23-A of the New York Corrections Law.

As discussed in a previous blog post, the Fair Credit Reporting Act ("FCRA") expressly requires employers to provide applicants with a stand-alone disclosure and authorization form prior to obtaining a background check.  This form must be separate from the employment application, and cannot include any type of language attempting to release the employer from liability associated with obtaining the background check.  Unfortunately, many employers still fail to comply with this law by relying solely on a disclosure located on an employment application to inform applicants that they will be subject to a background check, or by attempting to include additional language on the disclosure.  A recent proposed class action lawsuit against Whole Foods Market California provides a reminder to employers to review their disclosure and authorization forms for FCRA compliance. The lawsuit accuses the employer of using an invalid form to obtain consent to conduct background checks during the employment application process.  Specifically, it is alleged that the employer relied on a background check consent that was included alongside several other consent paragraphs on an online employment application, and that the online consent form included a release of claims related to obtaining the background check.  If the employer is found to have used an invalid form, the consequences are significant, including invalidation of the consent, statutory damages in the amount of up to $1,000 for each applicant, costs and attorneys’ fees, and potential punitive damages. This lawsuit is a reminder that FCRA compliance makes good business sense, and that employers should periodically review their application and hiring forms and processes to ensure strict compliance.

As previously reported, the elimination of barriers in recruitment and hiring was identified as one of the Equal Employment Opportunity Commission’s six priorities in its 2013-2016 Strategic Enforcement Plan (“SEP”).  Accordingly, the EEOC is focusing its enforcement efforts and resources on eradicating both class-based intentional discrimination, as well as facially-neutral recruitment and hiring practices that have a discriminatory effect on particular groups.  To this end, the EEOC has been aggressively challenging employers’ use of criminal and credit background checks in recruitment and hiring, alleging that such practices have a disparate impact on certain applicants in protected classes.  However, in a significant victory for employers, the EEOC’s efforts were recently thwarted in a decision issued by the United States District Court for the District of Maryland. In EEOC v. Freeman, the EEOC challenged the defendant’s use of criminal background and credit checks, alleging that, although facially-neutral, the practice had a discriminatory effect on African-American and male applicants.  In granting the defendant’s summary judgment motion dismissing the complaint, the court held that the EEOC and their experts failed to identify a specific policy causing an alleged disparate impact and “something more, far more, than what is relied upon by the EEOC in this case must be utilized to justify a disparate impact claim based upon criminal history and credit checks.”  The court further admonished the EEOC’s lack of factual support, stating that:

[b]y bringing actions of this nature, the EEOC has placed many employers in the "Hobson’s choice" of ignoring criminal history and credit background, thus exposing themselves to potential liability for criminal and fraudulent acts committed by employees, on the one hand, or incurring the wrath of the EEOC for having utilized information deemed fundamental by most employers.

To further underscore the importance of background checks to employers, the court pointed out that ironically, even the EEOC conducts criminal background investigations as a condition of employment for all employees, and conducts credit background checks on approximately 90% of its positions. The Freeman court explained that it is not the “mere use” of background checks that presents Title VII concerns, but rather “what specific information is used and how it is used.”  Here, Freeman’s use of criminal and credit checks were not used as automatic exclusions and were conducted only for specific types of jobs.  The Freeman court held that the use of these screening tools is a “rational and legitimate component of a reasonable hiring process.” Although this decision is an important victory for employers defending their right to refuse to hire applicants whose backgrounds call into question their character and qualifications for employment, it is unlikely to stop the EEOC’s enforcement efforts completely.  The SEP, together with the EEOC’s April 2012 Enforcement Guidance on criminal background checks, make clear that the EEOC is determined to seriously limit the use of background checks, if not prohibit their use altogether.  Therefore, employers should consult with legal counsel to ensure that any use of background checks is both job-related and consistent with business necessity, and that such use does not result in automatic exclusions.  Background checks should also be limited only to those positions where there is a direct correlation between the background check and the job involved.

Recently, the City of Buffalo joined the “Ban the Box” club, enacting an ordinance amending Chapter 154 of the Code of the City of Buffalo to prohibit employers from inquiring about an applicant’s criminal convictions during the application process.  This means that employers are prohibited from including such inquiries on employment applications or asking questions about an applicant’s criminal convictions at any time prior to the first interview.  The ordinance applies to public and private employers located within the City of Buffalo, as well as any vendors of the City of Buffalo (regardless of location), with 15 or more employees.  The ordinance was initially set to go into effect immediately, but there is an amendment pending that would delay the effective date to January 1, 2014.  It is expected that the amendment will pass.

There are some exceptions to this general rule.  For example, the ordinance allows inquiries about a criminal conviction where such a conviction would bar employment in that position.  Further, the ordinance does not apply to any public or private school or to a public or private service provider that provides care to children, young adults, senior citizens, or the physically or mentally disabled.  The ordinance also does not apply to any Fire or Police Departments.

The ordinance provides for a private right of action for an aggrieved party to seek injunctive relief, damages, and attorneys’ fees.  Additionally, any individual, whether aggrieved or not, may file a complaint with the Commission on Citizens' Rights and Community Relations.  Upon a finding of probable cause, the Director of the Commission on Citizens' Rights and Community Relations may request that the Buffalo Corporation Counsel pursue an action against the accused employer seeking penalties of $500 for the first violation of the ordinance and $1,000 for each subsequent violation.

Although Buffalo’s “Ban the Box” legislation does not prohibit employers from considering a criminal conviction in the hiring process, employers must be aware that Article 23-A of the New York Corrections Law protects an applicant from discrimination based on a past criminal conviction unless:  (1) there is a “direct relationship” between the criminal offense and the position sought; or (2) granting employment would pose an “unreasonable risk” to property or to the safety or welfare of specific individuals or the general public.  This analysis requires an employer to consider all of the following eight factors:

1. The public policy of the state to encourage the employment of persons previously convicted of one or more criminal offenses.
2. The specific duties and responsibilities necessarily related to the employment sought or held by the person.
3. The bearing, if any, the criminal offense or offenses for which the person was previously convicted will have on his fitness or ability to perform one or more such duties or responsibilities.
4. The time which has elapsed since the occurrence of the criminal offense or offenses.
5. The age of the person at the time of occurrence of the criminal offense or offenses.
6. The seriousness of the offense or offenses.
7. Any information produced by the person, or produced on his behalf, regarding his rehabilitation and good conduct.
8. The legitimate interest of the public agency or private employer in protecting property and the safety and welfare of specific individuals or the general public.

Going forward, employers who are covered by the ordinance should revisit their application process and revise their employment applications to comply with the “Ban the Box” legislation.  Any hiring managers, supervisors, or other personnel who are involved in the hiring process should be trained concerning the ordinance as well as the limitations contained in Article 23-A of the New York Corrections Law.

Employers who engage third parties to perform background checks on employees or job applicants must provide the employees/applicants with an updated "Summary of Rights" form pursuant to new Fair Credit Reporting Act ("FCRA") requirements, which took effect on January 1, 2013.  The form is available here, at "Appendix K to Part 1022 -- Summary of Consumer Rights."

The revised form reflects the change in the agency responsible for administering the FCRA.  In 2010, President Obama transferred authority to administer the FCRA from the Federal Trade Commission ("FTC") to the Consumer Financial Protection Board ("CFPB").  The new form directs employees/applicants to contact the CFPB or to visit the CFPB's web site (instead of contacting the FTC or visiting the FTC's web site) for more information about their rights under the FCRA.

In addition to the recent changes, employers should note that the other long-standing requirements of the FCRA, including providing a written disclosure that a consumer report may be obtained for employment purposes and obtaining a written authorization to procure the report, remain in effect.  With regard to the written disclosure and authorization, employers should be aware that the U.S. District Court for the District of Maryland ruled last year, in Singleton v. Domino's Pizza, that it is a violation of the FCRA for an employer to include a liability release in its disclosure document.

Prior to obtaining a consumer report under the FCRA, an employer is required to provide the employee or applicant with a clear and conspicuous disclosure "in a document that consists solely of the disclosure."  The employer may, under the statute, include the written authorization in the disclosure document, but the statute does not expressly permit any other provisions to be included in the disclosure document.

In Singleton, the employer's disclosure document contained three paragraphs:  (1) disclosure of the employer's intent to obtain a consumer report; (2) the employee's/applicant's written authorization for the employer to obtain the report; and (3) the employee's/applicant's release of "any and all liabilities, claims, or causes of action in regards to the information obtained from" the consumer report.  The court ruled that the inclusion of the liability release in the disclosure document violated the FCRA's mandate that the disclosure be made "in a document that consists solely of the disclosure."

Although the U.S. District Courts in New York are not necessarily bound by the Singleton decision, there is a risk that the U.S. District Courts in New York may rely on Singleton as persuasive authority and may interpret the FCRA in a similar way.  Accordingly, employers in New York would be well-advised to limit the disclosure document only to an expression of the employer's intent to obtain a consumer report and the employee's/applicant's authorization to procure the report.  Any releases or other information should be contained in separate documents.

The use of credit histories in the hiring process is coming under increased scrutiny by the Equal Employment Opportunity Commission. On December 21, 2010, the EEOC filed suit against Kaplan Higher Education, alleging that Kaplan’s use of credit history as a selection device is discriminatory because it screens out a disproportionate number of black applicants. The suit seeks injunctive relief barring Kaplan from using credit histories, as well as lost wages, benefits and offers of employment for applicants who were not hired due to the practice.

The lawsuit is not surprising given the EEOC’s earlier attention to this issue. In October 2010, the EEOC held a public hearing on the topic to explore whether the practice is discriminatory. Critics of the practice describe it as a “Catch-22” for applicants: you cannot establish good credit unless you have a good paying job, but you cannot get hired if you have poor credit. The EEOC is concerned that minority groups typically have poorer credit, and therefore the practice has a disparate impact on those groups. There is also a question of whether credit histories have any real predictive value when it comes to employment.
 

The issue has the attention of Congress and state legislatures as well. In 2009, the Equal Employment for All Act was introduced in the House. This bill would prohibit an employer from using information regarding a person’s credit history or credit worthiness in employment decisions, with some exceptions. A similar bill was also introduced in New York in 2009. Several states already limit the practice, including Illinois, Hawaii, Oregon, and Washington.

In light of the position taken by the EEOC, employers should re-evaluate their use of credit histories. An across-the-board approach which uses credit checks for all applicants presents the greatest risk of a disproportionate impact claim, and it will be the most difficult to successfully defend. In a disparate impact suit like the one filed against Kaplan, the employer may have to show that the selection criteria is “job-related” and “consistent with business necessity,” and that there are no less discriminatory alternatives available. For that reason, employers should limit the review of credit history to positions where there is a strong nexus between a person’s credit history and the position for which he or she is applying. The most obvious examples are positions involving direct access to the employer’s or client’s funds, particularly for individuals in higher level positions such as a controller or store manager. Although such a limitation will likely make a lawsuit easier to defend, it may not be sufficient to avoid being sued. According to the Kaplan complaint, the company used credit checks only for employees whose responsibilities included financial matters, such as advising students on financial aid.

In addition, even in cases where it may be appropriate to review a credit history, that information should be used as a supplement to all the other information gathered in the interview and reference checking process. Employers should avoid making credit the determinative factor in denying employment.  Of course, all credit checks should be conducted in accordance with the requirements of the Fair Credit Reporting Act and similar state laws.
 

The percentage of employers conducting background checks as part of the hiring process has steadily increased. Background checks can be useful tools to uncover any misconduct or dishonest behavior at previous jobs or outside of work, and to determine whether the applicant possesses the positive traits desired in an employee. They can also be useful to avoid later claims of negligent hiring if things go wrong with a new hire. However, the decision to use background checks should be carefully considered and implemented. More than one employment law applies to use of this tool in the hiring process.

First, be sure to know and observe the requirements of both the federal Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681, and the New York Fair Credit Reporting Act, General Business Law Article 25. These state and federal statutes largely mirror each other, and both contain technical requirements regarding the collection and use of background check information. However, in certain areas, state law contains more restrictive requirements. For that reason, it is a mistake to assume a background check vendor has all the technical requirements covered, especially if it is an out of state vendor. Another common mistake is assuming the FCRA and the state equivalent only apply when an employer is seeking credit information. Even though the titles of both laws contain the term “Fair Credit Reporting,” they cover a much broader set of reports. For example, if a criminal background check is performed by an outside agency instead of by the employer, it is a “consumer report” and is covered by both laws. A third common mistake is relying solely on an employment application to inform applicants they will be subject to a background check. The FCRA requires employers to provide applicants with a stand alone authorization form. 15 U.S.C. § 1681b(b)(2)(A). These are just a few examples of the mistakes employers make when conducting background checks.  There are many more potential state and federal FCRA pitfalls. The bottom line: if you are running background checks, be sure you are fully versed on the details of the state and federal FCRAs.

Second, be aware of Article 23-A of the New York Correction Law. Most employers understand that it is unlawful to refuse to hire an applicant simply because of a prior conviction, except in certain circumstances. However, many employers may not yet recognize that pursuant to an amendment to the New York Fair Credit Reporting Act (General Business Law Section 380-c and 380-g) which took effect in February 2009, employers must provide applicants with a copy of Article 23-A whenever they obtain an investigative consumer report (a narrow subset of background investigations) or a criminal background check. (This same amendment includes a new posting requirement: Labor Law Section 201-f now requires all employers--not just those conducting background checks--to post a copy of Article 23-A in the workplace.)

Finally, be sure to apply any background check policy consistently. Cherry picking certain applicants for a background check, and/or skipping the process altogether for others, can expose an employer to claims of discrimination or negligent hiring.