Colorado passed new legislation on April 19, 2013 which restricts an employer’s use of consumer credit information for employment purposes. The legislation is cited as the “Employment Opportunity Act.” The act takes effect on July 1, 2013.

Colorado’s new legislation prohibits an employer from using consumer credit information for employment purposes unless the information is substantially related to the employee’s current or potential job.  “Employment purposes” is defined in the Act as “evaluating a person for employment, hiring, promotion, demotion, reassignment, adjustment in compensation level, or retention as an employee.”

Additionally, an employer may not require an employee to consent to a request for a credit report that contains information about the employee’s credit score, credit account balances, payment history, savings or checking account balances, or savings or checking account numbers as a condition of employment. Consumer credit information includes a credit score but does not include the address, name, or date of birth of an employee associated with a social security number.

Exceptions to these restrictions include:

a.     The employer is a bank or financial institution;

b.     The report is required by law;

c.     (1) The report is substantially related to the employee’s current or potential job and (2) the employer has a bona fide purpose for requesting or using information in the credit report that (i) is substantially related to the employee’s current or potential job and (ii) is disclosed in writing to the employee.

A consumer credit report is considered “substantially related to the employee’s current or potential job” if the information is related to the position because:

(a) the position is either

(1) an executive or management position or
(2) professional staff to executive or management personnel and

(b) the position involves one or more of the following:

(1) Setting the direction or control of a business, division, unit, or an agency of a business,
(2) A fiduciary responsibility to the employer,
(3) Access to customers’, employees, or the employer’s personal or financial information other than information customarily provided in a retail transaction, or
(4) The authority to issue payments, collect debts, or enter into contracts.

A consumer credit report is also considered “substantially related to the employee’s current or potential job” if the information is related to the position because the position involves contracts with defense, intelligence, national security, or space agencies of the federal government.

If an employer relies on consumer credit information when taking an adverse employment action, it must disclose that and disclose the particular information it relied upon. The disclosure must be made to an employee in writing or to an applicant in the same medium as the application (e.g., electronically for an electronic application).

Civil penalties may be awarded up to $2,500 for injuries as a result of a violation of the Act.

The Act may be accessed here: http://www.leg.state.co.us/clics/clics2013a/csl.nsf/fsbillcont3/
5E2C07DC74DD73D687257AEE0057DC52?Open&file=018_enr.pdf

On January 31, 2013, the Office of Federal Contract Compliance Programs (OFCCP) issued a directive providing information to federal contractors and subcontractors and federally-assisted construction contractors and subcontractors (contractors) and to OFCCP personnel about complying with federal non-discrimination laws.

This directive gives notice that the OFCCP adopts the enforcement guidelines established by the Equal Employment Opportunity Commission (EEOC) on the use of arrest and conviction records in employment decisions on April 25, 2012. It contends that although individuals with criminal history records are not a protected group under the Title VII of Civil Rights Act of 1964, antidiscrimination laws may be violated when criminal records are being considered because it may lead to a disparate adverse impact on members of protected groups.

The OFCCP warns against (i) excluding people from employment based on the mere existence of a criminal history record that do not take into account other factors; (ii) placing job announcements that categorically exclude people who have any kind of conviction or arrest and of contractors that screen out job seekers with criminal records by stating that they will only accept applicants with so-called "clean" criminal records; and (iii) screening and refusing to make referrals because an applicant has a criminal history record. Covered entities are encouraged to analyze their policies and practices to ensure compliance with the guidelines.

The EEOC guidance states certain factors must be considered to determine whether criminal history information is relevant to an exclusion of employment. In determining whether criminal history information is "job related and consistent with business necessity," the employer must consider:
(a)  the nature and gravity of the offense or conduct;
(b)  the time that has passed since the offense, conduct and/or completion of the sentence; and
(c)  The nature of the job held or sought.

Additionally, the EEOC guidance strongly recommends that employers offer applicants an individualized assessment process through which they can provide additional information about the risks that they would pose to the employer.

The OFCCP also recommends other EEOC best practices, such as removing questions from applications that ask applicants to disclose their criminal history.

Finally, the OFCCP references the Employment and Training Administration’s (ETA) Guidance Letter dated May 25, 2012. The ETA’s letter is intended to help covered entities comply with their nondiscrimination obligations when serving the population of individuals with criminal records, and to ensure that exclusionary policies are not in violation of federal guidelines.

The OFCCP directive is effective immediately.

For more information, you may directly access:
OFCCP Directive No. 302: http://www.dol.gov/ofccp/regs/compliance/directives/dir306.htm
EEOC’s Enforcement Guidelines: http://www.eeoc.gov/laws/guidance/arrest_conviction.cfm
ETA’s Guidance Letter: http://wdr.doleta.gov/directives/attach/TEGL/TEGL_31_11_acc.pdf

backgroundchecks.com’s general counsel hosts a free webinar every other month on how to comply with the EEOC’s guidance. You can sign up for the webinar at: http://www.backgroundbiz.com/campaigns/2012-CCEEO-Webinar-Invitation.html

Seattle’s Public Safety, Civil Rights and Technology committee is expected to vote on the proposed Work Assistance ordinance in January 2013. If passed, the proposed “ban-the-box” regulation will ban the box on a job application that ask applicants to disclose arrest or conviction history, and substantially limit an employer’s use of criminal history when making employment decisions. 

The Work Assistance ordinance designates it an unfair employment practice for any employer within the City to discharge, refuse to hire, or take other adverse employment action because of a[n]:

1. arrest record,
2. conviction record, unless a direct relationship exists between the conviction record and the employment held or sought, or
3. pending criminal charge, unless a direct relationship exists between the pending criminal charge and the employment held or sought.

Additionally, employers would be prohibited from obtaining or considering information about an applicant’s arrest or criminal conviction record or pending criminal charge, including asking a job applicant to supply such information until the employer has given the applicant a conditional offer of employment.

The legislation considers a “direct relationship” exists when the nature of the criminal conduct in question has a direct bearing or connection to the employee’s or applicant’s fitness or ability to perform the job position sought or held, or when it is reasonably foreseeable that employing the applicant or employee will result in harm or injury to persons or property. Employers would be required to consider factors such as the:

1. seriousness and the number of criminal convictions or pending criminal charges;
2. number and types of convictions or pending charges;
3. amount of time that has elapsed since the conviction or pending charge, excluding
4. periods of incarceration;
5. verifiable information, if any, related to the individual’s rehabilitation or good conduct;
6. specific duties and responsibilities of the job position; and,
7. employer’s legitimate interest in protecting people, property, and its business reputation.

This proposed ordinance would apply to any person who has one or more employees within the City, or the employer’s designee, or any person acting in the interest of the employer.

However, if passed, it would not apply to any employer who (i) provides services to, houses, or has access to, or otherwise cares for any person who is under the age of 18, or vulnerable persons, or persons under the age of twenty-one and has been sentence to confinement; (ii) provides law enforcement, policing, crime prevention, security, or private investigator service; or, (iii) is expressly permitted or required under any federal or state law to inquire into, consider, or rely on information about an applicant’s or employee’s arrest or criminal conviction record or pending criminal charges for employment purposes.  Finally, it will not be considered an unfair employment practice for an employer to disqualify an applicant or employee whose criminal conviction record includes a conviction for, or who is under pending criminal charges for embezzlement, theft, fraud, or any other financial crime from employment in a position involving access to money, financial information, or personal identifying information of customers, employees, or members of the public.

backgroundchecks.com will continue to monitor this proposed legislation and will let you know if/when the City of Seattle decides to ban the box.

In October, backgroundchecks.com reviewed Newark, New Jersey’s new “ban-the-box” ordinance, which becomes effective November 18, 2012. At that time, we provided some of the details that employers need to comply with when conducting criminal background checks or when considering an applicant’s or employee’s criminal history.  The ordinance places restrictions on employers with five or more employees who use criminal background checks on prospective new hires, and requires employers to modify their background check processes. You can access a copy of our review at: http://www.backgroundbiz.com/compliance/complianceupdate_10262012.html

A specific question was asked about whether the ordinance applied to independent insurance agents or insurance producers.  That is, whether an employer, when contracting with independent agents or producers, is subject to the law’s restrictions and requirements pertaining to conducting criminal record checks and considering criminal history in the hiring and employment processes.  We look at the law again in an attempt to find answers.

The law does not explicitly refer to independent agents or any other kinds of contractors. Further, the law does not define “employee,” but it does define “employment” as “any occupation, vocation, job, work, or employment with or without pay, including temporary or seasonal work, contracted work, or contingent work, and work through the services of a temporary or other employment agency, or any form of vocational or educational training with or without pay,” if the physical location of the employment is in whole or in part with the City of Newark.

One argument is that independent agents and other contractors are subject to the law because the definition of employment includes the words “any occupation, vocation, job, work or employment” and “contracted work.” Also, Section III of the ordinance introduces each substantive prohibition with the words, “In connection with any decision regarding employment”, thereby including all professions because it uses the defined term “employment.”

On the flip side, the other argument is independent agents and other contractors are (at least partially) not subject to the law because Section III often applies its substantive prohibitions to “candidates,” who are defined as potential  employees, and the term “employee” is not defined. Because these prohibitions do not use the defined term “employment,” the ordinance is ambiguous, leaving the door open for interpretation.

So, the short answer to the question is we are unsure.  The first argument is probably stronger, in which case the ordinance would apply to independent agents and contractors, but we cannot be sure until either the Newark City Council or a court’s decision provides clarification.

A copy of the ordinance is available at: http://www.employmentlawalert.com/uploads/file/12-1630(1).pdf

If you have any other questions, please contact client services and we will be happy to address them.

Effective January 1, 2013, the Consumer Financial Protection Bureau (CFPB) has made updates to the Summary of Rights that the Federal Trade Commission previously created under the Fair Credit Reporting Act. Generally, a report that a background screening agency like backgroundchecks.com provides for use in connection with employment are “consumer reports” under the FCTA

The Summary of Rights is the document that explains to individuals what their rights are under the FCRA.  The FCRA requires you to provide this summary to individuals on whom you order consumer reports in two typical circumstances. First, you must provide it as a disclosure in connection with requesting “investigative” consumer reports, where the consumer reporting agency obtains information for you through interviews. Second, you must provide it before taking adverse action in connection with a consumer report for employment purposes.  Additionally, backgroundchecks.com provides this when we provide sample forms to customers, when we collect authorizations from consumers, when we provide dispute forms, when we send certain notices and disclosures, and when we close disputes.

Attached you will find a copy of this updated Summary of Rights.  It is also available at: http://www.backgroundbiz.com/compliance/Summary-of-Rights.pdf

It is recommended that you update this form by January 1, 2013.

Vermont has become the eighth state to limit an employer’s use of credit information in making employment decisions. On May 17, the governor signed Senate Bill 95, which prohibits employers from asking for or considering an applicant’s or employee’s credit information. The prohibition applies both to credit report and to credit history obtained from sources other than credit reporting agencies.

The new law appears to go into effect July 1.

The law creates the following exemptions:

a.     When the information is required by state or federal law or regulation.

b.     The position of employment involves access to confidential financial information, meaning sensitive financial information of commercial value that a customer or client of the employer gives explicit authorization for the employer to obtain, process, and store and that the employer entrusts only to managers or employees as a necessary function of their job duties

c.     The employer is a financial institution or a credit union defined under state law.

d.     The position of employment is that of a law enforcement officer, emergency medical personnel, or a firefighter as defined under state law.

e.     The position of employment requires a financial fiduciary responsibility to the employer or a client of the employer, including the authority to issue payments, collect debts, transfer money, or enter into contracts.

f.      The employer can demonstrate that the information is a valid and reliable predictor of employee performance in the specific position of employment.

g.     The position of employment involves access to an employer’s payroll information.

Even under these exemptions, the law prohibits employers from using the credit information “as the sole factor in decisions regarding employment, compensation, or a term, condition, or privilege of employment.”

The law also creates new procedural obligations for employers seeking credit information. When obtaining or acting on credit information, the employer must:

1.     Obtain the employee’s or applicant’s written consent each time the employer seeks to obtain the employee’s or applicant’s credit report.

2.     Disclose in writing to the employee or applicant the employer’s reasons for accessing the credit report.

3.     If an adverse employment action is taken based upon the credit report, disclose the reasons for the action in writing.

4.     Ensure that none of the costs associated with obtaining an employee’s or an applicant’s credit report or credit history are passed on to the employee or applicant.

5.     Ensure that the information in the employee’s or applicant’s credit report or credit history is kept confidential.

6.     If the employment is terminated or the applicant is not hired by the employer, provide the employee or applicant with the credit report or have the credit report destroyed in a secure manner which ensures the confidentiality of the information in the report.

The text of the law is available at http://www.leg.state.vt.us/docs/2012/Acts/ACT154.pdf.

Employers should immediately review their use of credit reports in Vermont.

The other states that have limited the use of credit reports for employment are Washington (2007), Hawaii (2009), Oregon (2010), Illinois (2010), Connecticut (2011), Maryland (2011), and California (2011). Additionally, the National Conference of State Legislatures (ncsl.org) tracks proposed laws relating to the use of credit reports in employment. The current link for 2012 information is http://www.ncsl.org/issues-research/banking/use-of-credit-info-in-employ-2012-legis.aspx.

Disclaimer: This is an alert to make you aware of a law that may affect your background screening program. This is not legal advice.

The Maryland House and Senate have passed, and the Governor is expected to sign, a bill prohibiting employers from requesting log-in information for an employee’s or applicant’s personal online accounts. This includes social media log-in information.

Additionally, the bill prohibits employers from

• taking, or threatening to take, disciplinary actions for an employee's refusal to provide such information; and
• failing to hire an applicant for refusing to provide such information

Employers are still allowed to require employees disclose the necessary information for accessing a non-personal account or service that provides access to the employer’s internal computer or information systems. Furthermore, employers can conduct investigations based on personal accounts if they are trying to abide by securities or financial laws or regulatory requirements or if the employer is looking into unauthorized downloading of proprietary or financial information to a given website or web-based account.

Many other states have similar bills proposed and even more are expected to propose similar bills soon. For more details on the Maryland bills, please click here for the House Bill and here for the Senate Bill.

Alabama Governor Robert Bentley has signed House Bill 658, a bill that is intended to simplify and clarify Alabama’s existing immigration law.

The revised version is intended to address various aspects of the original law, including provisions disliked by the business community. In announcing the signing, Bentley contended that the law “reduces burdens on businesses while still holding them accountable to hire legal workers.” Bentley had previously indicated that he might veto the bill because it did not do enough to change the original law.

Under the law, any contractor or subcontractor that does business with the state is barred from employing undocumented workers and must use the federal E-Verify system to ensure that all workers have the legal right to work in the United States. Contractors that knowingly hire undocumented workers will be found in violation of the law and will lose the contract. In addition, a court can then subject the employer to a three-year probationary period, during which time the employer must file quarterly reports with the state’s Department of Industrial Relations for each new employee hired.

Repeat violators may face a five-year probationary period, the loss of the contract, and the suspension of their business license, in addition to being required to terminate the employment of all undocumented workers. A third violation can result in the permanent loss of the business license.

The Maryland House and Senate have passed, and the Governor is expected to sign, a bill prohibiting employers from requesting log-in information for an employee’s or applicant’s personal online accounts. This includes social media log-in information.

Additionally, the bill prohibits employers from

• taking, or threatening to take, disciplinary actions for an employee's refusal to provide such information; and
• failing to hire an applicant for refusing to provide such information.

Employers are still allowed to require employees disclose the necessary information for accessing a non-personal account or service that provides access to the employer’s internal computer or information systems.  Furthermore, employers can conduct investigations based on personal accounts if they are trying to abide by securities or financial laws or regulatory requirements or if the employer is looking into unauthorized downloading of proprietary or financial information to a given website or web-based account.

Many other states have similar bills proposed and even more are expected to propose similar bills soon. For more details on the Maryland bills, please click here for the House Bill and here for the Senate Bill.

The Equal Employment Opportunities Commission has issued new enforcement guidance on employers' use of criminal history in employment decisions. The Commission adopted the new guidance by a vote of 4 to 1 on April 25. The new guidance and related documents are available on the EEOC's website at:

·         EEOC Press Release;

·         Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1984 (html);

·         Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1984 (pdf), and

·         Questions and Answers About the EEOC’s Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII.

Industry and legal commentary on the new guidance has generally found that the guidance does not prohibit employers use of criminal history and does not pose severe barriers. Thus far, commentary notes that employers will need to review their policies and processes and raises concerns about potential conflicts between state laws and the EEOC guidance. These commentaries include:

·         Commentary from a Human Resources Executive;

·         Detailed Commentary from Seyfarth Shaw;

·         Society for Human Resource Management Regulatory Alert, and

·         Commentary from the Society for Human Resource Management.