February 2017 Screening Compliance Update


February 2017 Screening Compliance Update

Federal Developments

CFPB Barred, For Now, From Naming Company Under Investigation
Feb. 17: The CFPB is barred from announcing the name of a company under investigation (National Law Journal). Another financial-sector company is fighting to keep its name secret as it challenges the power of the Consumer Financial Protection Bureau to bring an enforcement action. The company, identified only as “John Doe” in a Washington federal trial court, offers pension advance products that allow consumers to receive a lump-sum payment in exchange for a portion, or all, of their future pension. A judge Friday temporarily blocked the consumer agency from revealing any identifying information about the company.

FTC Settles Charges for False Privacy Policies
On February 22nd, the FTC announced that it settled charges with three U.S. companies for allegedly deceiving consumers about the companies’ participation in the Asia-Pacific Economic Cooperation (APEC) Cross-Border Privacy Rules (CBPR) system. According to the complaints, the FTC alleged that Sentinel Labs, Inc., SpyChatter, Inc., and Vir2us, Inc. falsely represented in their online privacy policies that they participated in the APEC CBPR system, in violation of the FTC Act. The CBPR system facilitates cross-border data transfers between APEC member economies through a mechanism which certifies companies as being compliant with APEC CBPR program requirements. To be part of the system, companies must undergo a review by an APEC recognized accountability agent, but none of the companies went through the certification process. The settlement prohibits the three companies from “misrepresenting their participation, membership or certification in any privacy or security program sponsored by a government or self-regulatory or standard-setting organization.”

DHS Data Breach Notification Guidance
On February 21st, the Department of Homeland Security’s (DHS) Data Privacy and Integrity Advisory Committee released guidance on the best practices for large-scale data breach notifications. The DHS guidance advises organizations to: Conduct risk analysis about the nature of the data, the data’s sensitivity, the data subjects’ vulnerability, the type of harm, and the data usability; Notify affected individuals in writing and by posting a notice on the company’s website; Avoid over-notification so consumers take data breaches seriously; and Supplement data breach notifications with additional materials and customer support services.

Court Cases

New York Court of Appeals to Consider Scope of Law Prohibiting Discrimination Based on a Criminal Conviction
The United States Court of Appeals for the Second Circuit recently certified three questions to the New York Court of Appeals for guidance on who may be held liable under N.Y. Exec. Law § 296(15) of the New York State Human Rights Law (“NYSHRL”). See Griffin v. Sirva, 835 F.3d 283 (2d Cir. 2016). Section 296(15) creates liability for violations of Article 23-a of New York’s Corrections Law, which prohibits discrimination based on a criminal conviction, unless the person deciding takes certain factors into account, such as:

  • the nature and gravity of an candidate’s criminal conviction;
  • its bearing, if any, on the specific responsibilities of the job sought;
  • the time that has elapsed since the conviction;
  • the age of the candidate at the time when the offense was committed; and
  • evidence of rehabilitation.

New York Correction Law §§ 752, 753. The primary issue in the case is whether entities other than direct employers may be held liable under this law. The New York Court of Appeals’ determination on how broadly to interpret the NYSHRL could potentially have a great effect on background screening companies and credit reporting agencies. In the underlying case, Astro Moving and Storage Company (“Astro”) terminated two employees based on past criminal convictions that were uncovered by a criminal background check. Astro provided moving services for Allied Van Lines, Inc. (“Allied”) pursuant to an agency contract. Part of the contract required Astro to conduct criminal background checks for any employees working on Allied jobs. As alleged in the complaint, certain serious convictions, for things like sexual offenses, kidnapping, murder and armed robbery, permanently disqualified a worker from Allied projects. As the two employees’ convictions were for felony sexual offenses, they were disqualified from working on Allied projects and terminated by Astro. The terminated employees sued Astro, Allied, and Sirva, Inc., a holding company for Allied, for violations of the NYSHRL. They alleged that the Allied policy that permanently disqualified employees convicted of specific crimes from performing jobs for Allied violated Section 296(15) because it did not consider all the Article 23-a factors. The district court granted summary judgment in favor of Sirva and Allied. The district court determined that the NYSHRL’s criminal conviction provision, Sec. 296(15), applied only to “employers” and that neither defendant had any direct employment relationship with the plaintiffs. The district court also held that Sirva and Allied were not “joint employers,” nor did they “aid and abet” any violation by Astro. Griffin and Godwin appealed to the Second Circuit Court of Appeals. On appeal, the Second Circuit found that the “question of who may be held liable under Section 296(15) is an unresolved question of New York State law.” As such the Second Circuit certified the following questions to the New York Court of Appeals:

  • Does Section 296(15) of the New York State Human Rights Law, prohibiting discrimination in employment based on a criminal conviction, limit liability to an aggrieved party’s “employer”?
  • If Section 295(15) is limited to an aggrieved party’s “employer,” what is the scope of the term “employer” for these purposes, i.e. does it include an employer who is not the aggrieved party’s “direct employer,” but who, through an agency relationship or other means, exercises a significant level of control over the discrimination policies and practices of the aggrieved party’s “direct employer”?
  • Does Section 296(6) of the New York State Human Rights Law, providing for aiding and abetting liability, apply to §296(15) such that an out-of-state principal corporation that requires its New York State agent to discriminate in employment based on a criminal conviction may be held liable for the employer’s violation of §296(15)?

The New York Court of Appeals has accepted the certified questions and oral arguments are scheduled for March 21, 2017.

On January 20th, the U.S. Court of Appeals for the Ninth Circuit ruled that companies cannot place a liability waiver on its application disclosure forms. According to the compliant, Plaintiff Sarmad Syed applied to oilfield services company M – I, LLC and was provided a background check disclosure form, but the form also allegedly included a waiver that released the company from any liability associated with the use of the form, in violation of the Fair Credit Reporting Act (FCRA). Syed argued that the inclusion of the liability waiver violated the FCRA’s requirement that background check disclosures consist only of the federally mandated disclosure. The Court ruled that a liability waiver in an employment background check disclosure is a willful violation of the FCRA and that it results in a concrete harm that satisfies standing requirements under Article III of the Constitution. The case is Sarmad Syed et al. v M-I, LLC et al., case number 14-17186, in the U.S. Court of Appeals for the Ninth Circuit.

Pa. Judge Says Google Must Turn Over Foreign Server Data
Philadelphia (February 6, 2017) — A Pennsylvania federal judge on Friday ordered Google to comply with search warrants in two criminal investigations demanding the company turn over data stored on overseas servers, breaking with a recent decision in the Second Circuit over data Microsoft stored outside of the U.S. U.S. Magistrate Judge Thomas Reuter said that the warrants under the Stored Communications Act were legitimate because the invasion of the data owner’s property would not take place out of the U.S. — where it would be barred by the statute.
https://www.justice.gov/opa/blog/important-court-opinion-holds-lawful-warrants-can-be-used-obtain-evidence-us-internet (Department of Justice)

UPS Faces FCRA Suit Over Employment Background Checks
UPS was hit with a proposed class action in Florida federal court Monday alleging that it violated the Fair Credit Reporting Act by using background checks to make employment decisions without providing workers or candidates with the results.

Bare Statutory Violation of FCRA Fails to Satisfy Standing Requirements Post-Spokeo, Says District of New Jersey in Suit Over Michaels Employment Disclosures
Michaels escaped a potential class action alleging Fair Credit Reporting Act (“FCRA”) violations late last month when a federal judge found the United States Supreme Court’s recent decision in Spokeo, Inc. v. Robbins, 136 S. Ct. 1540 (2016) foreclosed the plaintiffs’ claim for a bare statutory violation not resulting in concrete damages. The recent ruling in In re: Michaels Stores, Inc., Fair Credit Reporting Act (FCRA) Litigation confirms the significance of the Spokeo decision and provides FCRA defendants with additional ammunition to use in fighting statutory violation claims where damages are lacking. The Michaels suit was based upon the consolidation of three proposed class actions alleging the store failed to clearly and conspicuously announce its intent to obtain background checks in a separate document containing only that disclosure, which was in violation of the FCRA. Instead of providing a standalone document, Michaels did disclose that it would be obtaining such checks as part of its online employment application. The complaints in the class pointed to 15 U.S.C. § 1681b(b)(2)(A), which directs that an employer may not procure a consumer report for employment purposes without providing a “clear and conspicuous disclosure…in a document that consists solely of the disclosure…”

The Michaels court, however, did not find this to be enough. The court termed this a violation of “the purely formal requirements of FCRA” and observed that the plaintiffs “do not actually allege any harm aside from the statutory violation itself.” Accordingly, that was insufficient for an injury-in-fact to satisfy the Article III standing requirement and the court said it was compelled to “join the ranks of the courts that have so held.” Plaintiffs also tried to avoid a standing-based dismissal by asserting that the FCRA violations resulted in two types of concrete harm, “informational injury” and invasion of privacy. The court rejected both attempts. First, the court found there was no informational injury because Plaintiffs were not deprived of any information Michaels was required to disclose; rather, the information was provided, just in a means other than that described in the statute. Such a deviation from a statutorily specified form of information that did not result in failure to disclose the information, though, did not constitute a concrete harm.

Second, the Plaintiffs did not suffer an invasion of privacy, as the incorrect format of the disclosure did not mean that any background check the retailer procured would be unauthorized. Where no disclosure is provided and thus a background check is obtained without consent, an invasion of privacy could occur, however, because Michaels provided the necessary disclosure – albeit in a different format than that specified in the FCRA – the background checks it obtained were authorized by the candidates. Plaintiffs conceded receiving a disclosure, and in the absence of allegations that, for example, they did not know what they were authorizing, the formatting issue was “precisely the type of ‘bare procedural violation’ that is insufficient to confer standing,” said the court. As the court pointed out, “Plaintiffs’ position amounts to a contention that a violation of a standalone requirement automatically implies” any obtained report is unauthorized. But such an argument would elevate every technical statutory violation to the level of a “major substantive harm,” a “leap too far [that] is directly contradicted by Spokeo,” the court reasoned. The Michaels decision from the District of New Jersey is just one more ruling that helps define the concrete harm requirement and one upon which defendants may find useful to rely in future dismissal bids, particularly in the context of the FCRA – the statute which triggered the seminal Spokeo ruling. Indeed, the standing analysis for FCRA claims is unique to the statute. Additionally, some courts have also found that the Spokeo standing requirements are not a stumbling block. For example, in Syed v. M-I, LLC, (9th Cir. Jan. 20, 2017), the U.S. Court of Appeals for the Ninth Circuit ruled that the plaintiff had alleged more than a bare procedural violation in a suit based on the inclusion of a liability waiver in a background check disclosure, which the FCRA directs is to be in a stand-alone document free of any other information.

State Developments

New Orleans Mayor Signs Executive Order Prohibiting Wage History Inquires
On January 25, 2017, New Orleans Mayor Mitch Landrieu signed Executive Order MJL17-01, which prohibits questions about salary history during the application process for persons seeking employment with the City of New Orleans. The order further requires the Civil Service Commission to conduct a pay disparity study among city employees and submit the study to the mayor and chief administrative officer.

According to a study conducted by Newcomb College Institute of Tulane University, the New Orleans gender pay gap is 21 percent. The “gender gap” results in an average of $9,567 less income for women each year. Some authorities believe salary history inquires during the hiring process perpetuate wage disparities for women. The ban on salary history has been enacted by other cities, such as Philadelphia, and states, including Massachusetts. This order signals New Orleans’s interest in addressing pay equity issues in the workplace.

The order is part of a larger equal pay strategy to address the perceived wage gap between men and women throughout the state of Louisiana, according to several Louisiana elected officials. New Orleans Councilman Jared Brossett introduced two ordinances to address pay equity on January 26, 2017: (1) an ordinance that establishes a nine-member equal pay advisory committee to advise the council on pay equity issues and (2) an ordinance that bans pay discrimination for city workers and employees of city contractors.

The City of Los Angeles Adopts “Ban the Box,” Prohibiting Criminal Conviction Inquiry Prior to Job Offer
Effective July 1, 2017, the Los Angeles Fair Chance Initiative for Hiring (the “Ordinance”) imposes a host of new unlawful hiring practices upon private employers regarding inquiries into criminal convictions. Chief among them, an employer may not ask about an candidate’s criminal history, use any mode of communication, nor conduct a criminal background check until after extending a conditional offer that is only conditioned on the result of the check.

The Ordinance applies to any private employer that employs at least 10 individuals, including the owner(s), management, and supervisors, who perform at least two hours of work on average each week within the geographic boundaries of the City: the so-called “Covered Employer.” The Ordinance also covers job placement and referral agencies and other employment agencies.

“Employment” is defined broadly to include temporary or seasonal work, part-time, contracted or contingent work, work on commission, work through the services of a temporary or other employment agency or any form of vocational or educational training with or without pay.

The Ordinance does not cover employers who are required by law to obtain information regarding an candidate’s conviction, or those who are prohibited by law from hiring an candidate who has been convicted of a crime. The Ordinance also does not apply to an individual who, because of a criminal conviction, cannot lawfully hold the position, regardless of whether the conviction has been expunged, judicially ordered sealed, statutorily eradicated, or judicially dismissed following probation. Last, the Ordinance does not apply to an candidate required to possess or use a firearm during employment.

Unlawful Hiring Practices
The Ordinance establishes several unlawful practices. Specifically, a Covered Employer is prohibited from inquiring into an individual’s criminal background unless and until a conditional offer of employment is made. Importantly, the conditional offer can be conditioned only on the criminal background check. The “inquiry” can be any direct or indirect conduct that is intended to gather criminal history information from or about an individual using any mode of communication, such as application forms, interviews, and criminal history reports. Employers can, however, make these inquiries after first making a conditional offer of employment—that is, after making a job offer that is conditioned only on the employer’s evaluation of the individual’s criminal history.

Further, a Covered Employer cannot take “adverse action” because of an individual’s criminal history without first conducting a “written assessment that effectively links the specific aspects” of the candidate’s criminal history “with risks inherent in the duties” of the position sought. Here, “adverse action” means a withdrawal or cancellation of a conditional offer of employment, or a failure or refusal to employ the candidate. In this respect, the Ordinance is like the New York City Fair Chance Act.

In conducting an individualized assessment, a Covered Employer must, at minimum, consider the factors set forth by the U.S. Equal Employment Opportunity Commission, such as (i) the time that has elapsed since the offense, (ii) the individual’s age at the time of the offense, (iii) circumstances surrounding the offense, (iv) the number of offenses for which the individual has been convicted, (v) employment history before and after conviction, (vi) evidence of rehabilitation, and other mitigating factors. But employers must also apply other factors as may be required by rules and guidance issued by the Department of Public Works, Bureau of Contract Administration (“Department”), who bears administrative responsibilities for this Ordinance.

Employer Assessment of Criminal History
As noted, prior to any adverse action, the Ordinance requires a written assessment that effectively links the specific aspects of the candidate’s criminal history with risks inherent in the duties of the position sought. A Covered Employer must also provide a “Fair Chance Process,” which refers to an opportunity to provide information regarding the accuracy of the criminal history information, evidence of rehabilitation, or other mitigating factors. The Covered Employer must wait at least five business days after informing the candidate of the proposed adverse action before taking adverse action. If the candidate provides the information, the Covered Employer must consider it in the written reassessment. If adverse action still will be taken after further consideration, the Covered Employer must notify the candidate of the decision and provide the candidate with a copy of the written reassessment.

Notice and Posting Requirement
A Covered Employer must state in all advertisements that it will consider qualified candidates with criminal histories in a manner consistent with the requirements of the Ordinance. Employers also must post a notice informing candidates of the provisions of the Ordinance in a “conspicuous place at every workplace, job site or other location in the City under [its] control and visited by…candidates.” There is no indication yet whether a form of notice will be provided by the Department. Covered Employers must also send a copy of the notice to each labor union with which they have a collective bargaining agreement covering employees located in the City.

Record Retention
Covered Employers must retain all records and documents related to applications, written assessments, and reassessments performed pursuant to the Ordinance for three years following the receipt of a job application.

Enforcement and Penalties
An candidate or employee alleging a violation of the Ordinance has one year to bring a claim to the Department. The Department is vested with subpoena power for items relevant to its investigation. If the Department determines that a Covered Employer has violated the Ordinance—whether based upon a complaint or its own investigation—the Department must issue a written notice to the Covered Employer requiring immediate cure and possibly imposing administrative fines.

The Ordinance also provides a private right of action against a Covered Employer, provided the civil action is not brought until administrative remedies are exhausted. Simply put, the individual must have reported the alleged violation within one year to the Department and the administrative enforcement process must be completed or a hearing officer’s decision must be rendered, whichever is later. The civil action must be filed within one year of the later of the completion of the Department’s enforcement process or the issuance of the hearing officer’s decision. Penalties and administrative fines for violations (with the exceptions of notice and record-retention violations) are up to $500 for the first violation, up to $1,000 for the second violation, and up to $2,000 for the third and subsequent violations. Violations of the notice and record retention requirement provisions are up to $500 per violation. Amounts are determined based on the willfulness of the employer’s action(s) and other material factors determined by the Department.

Per the City, civil penalties will not be imposed for violations before July 1, 2017. But those violations may result in a written warning.

The Ordinance prohibits retaliation against individuals who complain to the City about an employer’s compliance, who oppose any prohibited practices, who participate in a proceeding to enforce their rights, or who otherwise assert any rights under this Ordinance.

Los Angeles Ban the Box – New Individualized Assessment and Reassessment Form
The City of Los Angeles recently issued its Rules and Regulations Implementing the Fair Chance Initiative for Hiring. (Ban the Box:
Ordinance, providing critical guidance to employers on compliance with the new ban the box ordinance. UPDATE: The LA Bureau of Contract Administration has posted a “Fair Chance Initiative for Hiring Ordinance (FCIHO) Individualized Assessment and Reassessment Form” (the “Form”). It is unclear whether the Bureau expects employers to use this Form verbatim or whether modifications are permitted. Until the Bureau clarifies expectations, we recommend using the Form the Bureau has posted. The Bureau’s Form is available at: .
The Form combines the two separate form requirements (individualized assessment and reassessment) into one document, which is likely easier for administrative purposes. The portion of the document beginning “To be completed for a Reassessment” need only be completed if the candidate provides additional information after receipt of the pre-adverse package.

Ky. – Hopkinsville Joins ‘Ban the Box’ Effort for Criminal Records on Applications
The City of Hopkinsville is following Governor Matt Bevin’s lead removing questions about criminal convictions from job applications. Hopkinsville Mayor Carter Hendricks said on Facebook Friday that in the spirit of “second chances” the city is taking similar measures removing the box from city government applications. He said the city will still perform background checks and does not guarantee anyone a job. Bevin’s executive order Wednesday said the state would also still conduct background checks. The governor encouraged private employers to remove questions about criminal convictions.

District of Columbia Mayor Signs Law Restricting Employers from Using Credit Information in Employment Decisions
On February 15, 2017, District of Columbia Mayor Muriel Bowser signed a bill prohibiting, with limited exceptions, employers’ use of or obtaining a job candidate’s or employee’s credit information for employment purposes. D.C. joins the growing list of jurisdictions that have enacted similar laws: California, Chicago, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, New York City, Oregon, Philadelphia, Vermont, and Washington. This trend is likely to continue. Employers who use credit reports for employment purposes in any of these jurisdictions therefore should review, and, if appropriate, modify, their policies for compliance. The New Law Broadly Prohibits Employer Consideration of Credit Information. The D.C. “Fair Credit in Employment Amendment Act” amends the Human Rights Act of 1977 to make it unlawful for an employer to “directly or indirectly require, request, suggest, or cause any employee to submit credit information, or use, accept, refer to, or inquire into an employee’s credit information.” “Credit information” is defined as “any written, oral, or other communication of information bearing on an employee’s creditworthiness, credit standing, credit capacity, or credit history.” “Inquire” is broadly defined to mean “any direct or indirect conduct intended to gather credit information using any method, including application forms, interviews, and credit history checks.” The law provides very limited exceptions to the general prohibition, of which only a few apply to private-sector employers. Specifically, the prohibition does not apply:

  • Where an employer is otherwise required by District law to require, request, suggest or cause any employee to submit credit information, or use, accept, refer to, or inquire into an employee’s credit information;
  • Where the individual is applying for certain police officer positions;
  • To the Office of the Chief Financial Officer of the District;
  • Where the individual will work in a position that requires possession of a security clearance under District law;
  • To disclosures by District government employees of their credit information to the Board of Ethics and Government Accountability or the Office of the Inspector General, or to the use of such disclosures by those agencies;
  • To financial institutions where the position will involve access to personal financial information; and
  • Where an employer requests or receives credit information pursuant to a lawful subpoena, court order, or law enforcement investigation.

The law will take effect following a 30-day period of Congressional review as provided in the District of Columbia Home Rule Act and publication in the District of Columbia Register.

Practical Challenges for Employers Created by Legalized Marijuana
When Massachusetts voters legalized the use of marijuana for medicinal purposes four years ago, the impact on most employers was limited to clarifying that “legal” marijuana use was still generally prohibited in the workplace. Now, Massachusetts has legalized limited use of recreational marijuana. Although the recreational marijuana use law also provides that employers may prohibit employees from reporting to work or performing work under the influence of marijuana, the new law is raising practical challenges for employers. Here are three ways that employers may consider changing what they have been doing:

  • Pre-employment Drug Testing: Many employers require job candidates to successfully pass a drug test as a condition to receiving a job offer. Prior to the legalization of marijuana, a positive test for marijuana use by a job candidate was an indication of illegal drug use and clear grounds for rescinding an offer of employment. Since legalization of medical and recreational use, from a legal standpoint, rescinding a job offer based on testing positive for marijuana use is still generally permitted. From a practical standpoint, however, the rationale that marijuana use is illegal no longer exists and brings into question the rationale for drug testing for marijuana at all. For example, a job candidate may be prepared to have a clean drug test, but just after taking the drug test could engage in recreational marijuana use, thus defeating the purpose of the employer’s knowing whether the candidate uses marijuana. Also, if the drug test is positive for marijuana use, employers may still be required to assess whether the marijuana use is supported by a medical prescription and, thus, requires the employer to engage in an interactive process to determine whether continued medical marijuana use is a reasonable accommodation that must be provided to the candidate.
  • Identifying Marijuana Use at Work: The laws legalizing medical and recreational marijuana use in Massachusetts allows employers to prohibit the use of marijuana at the workplace. But, detecting its use may be challenging. With the advent of “vaping”, where the smell of marijuana can be easily masked, it may not be clear at all whether an employee is under the influence of marijuana at work. Employers can drug test, but as is the case with pre-employment drug testing, the drug test may not comprehensively indicate whether the employee is currently impaired by marijuana use that occurred after work hours. Due to the limited value of drug testing in most cases, employers may consider drug-testing only where there is a reasonable basis to believe someone is impaired by the marijuana (or some other drug) or is a threat to the safety of the employee or others.


California Employers Are Subject to New Requirements When Using Criminal History Information
The California Fair Employment & Housing Council (FEHC) issued proposed regulations in 2016 that identified numerous ways in which employers can face liability when using a candidate’s (which means both a job candidate and an employee) criminal history in hiring and other employment decisions. On January 10, 2017, the FEHC approved those proposed regulations. The regulations have been filed with the Office of Administrative Law and likely will be effective as of July 1, 2017. In many ways, the FEHC regulations borrow heavily from the EEOC’s Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964” (2012 Guidance). Specifically, the regulations do not prohibit a California employer from considering criminal information. Moreover, even though one’s status as an “ex-offender” is not considered a protected characteristic under California law or Title VII, the regulations allow a candidate to bring a discrimination claim if the employer’s use of conviction records results in an “adverse impact” (referred to by the EEOC as “disparate impact”) on those in protected classes, such as race, national origin and gender. The regulations are summarized below. Although this Insight does not address related considerations, such as the interplay between the regulations and the Fair Credit Reporting Act (FCRA), employers should continue to be mindful of their obligations under these laws when using criminal background reports provided by third-party consumer reporting agencies. In addition, nationwide employers should continue to be mindful of so-called “ban the box” laws and the fair employment laws in some states that extend various protections to ex-offenders as “ex-offenders,” rather than as members of an otherwise protected class.

Prohibition on Considering Certain Criminal Records
California currently prohibits employers from considering or seeking information about certain types of criminal records, including:

  • an arrest or a detention that did not result in a conviction;
  • certain marijuana infractions and misdemeanor convictions that are older than two years;
  • referral to or participation in any pre-trial or post-trial diversion program;
  • an arrest, detention, processing, diversion, supervision, adjudication, or court disposition that occurred while a person was subject to the process and jurisdiction of a juvenile court; and
  • convictions that have been sealed, judicially dismissed, expunged or statutorily eradicated by law.
  • The regulations now expand this list to include any non-felony conviction for possession of marijuana that is older than two years.

Standards for Proving Adverse Impact Discrimination
The FEHC regulations prohibit an employer from considering criminal history in employment decisions if doing so will result in an adverse impact on individuals within a protected class. This theory of discrimination may result from the administration of a facially-neutral policy or procedure; specifically, criminal record screening policies that disproportionately affect members of protected classes.

The candidate bears the threshold burden of proving disparate impact
According to the regulations, a candidate bears the threshold burden of proving that an employer’s criminal background screening policy has an adverse impact on a protected class. Adverse impact can be proven by using conviction statistics or by offering other evidence that establishes an adverse impact. State- or national-level statistics showing substantial disparities in the conviction records of one or more protected characteristics are presumptively sufficient to establish an adverse impact. However, an employer may rebut this presumption by offering evidence showing that there is reason to expect a different result after accounting for any particularized circumstances, such as (1) the geographic area covering the candidate or employee pool, (2) the types of convictions being considered, or (3) the specific job at issue.

The burden shifts to the employer to show its policy is job-related and consistent with business necessity
Like the defense of a disparate impact theory of liability under Title VII, the FEHC regulations state that if a candidate can establish an adverse impact, the burden will shift to the employer to prove that its conviction policy is job-related and consistent with business necessity. In this regard, the employer must show that its policy bears a “demonstrable relationship to successful performance on the job and in the workplace and measure the person’s fitness for the specific position(s), not merely to evaluate the person in the abstract.” To make this showing, an employer must establish that the policy or practice is appropriately tailored to the position at issue, taking into account certain factors, derived from Green v. Missouri Pacific Railroad, 549 F.2d 1158 (8th Cir. 1975) (the centerpiece of the EEOC’s position for the past 25 years): (1) the nature and gravity of the offense or conduct, (2) the time that has passed since the offense or conduct and/or completion of the sentence, and (3) the nature of the job held or sought. On this point, depending on whether the employer has a “bright-line” conviction disqualification rule or conducts an individualized assessment of the conviction, the regulations set out in detail the ways in which an employer will be able to prove that a policy or practice of considering conviction history in employment decisions is appropriately tailored to the job at issue. The FEHC defines a “bright-line” disqualification or consideration to mean that the employer does not consider the candidate’s “individualized circumstances” in making an employment decision based on criminal history. According to the regulations, for an employer to show that such a policy is appropriately tailored to the job at issue, it must show that the policy can properly distinguish between candidates that do and do not pose an unacceptable level of risk and that the conviction being used to disqualify, or otherwise adversely impact the status of a candidate, has a direct and specific negative bearing on the candidate’s ability to perform the duties or responsibilities necessarily related to the position. Any “bright-line” rule that includes conviction information that is more than seven years old is subject to a rebuttable presumption that the rule is not sufficiently tailored to meet the job-related and consistent with business necessity defense (unless subject to an exemption discussed below). On the other hand, according to the FEHC, an individualized assessment means that the employer has considered the candidate’s circumstances and qualifications before making an employment decision based on criminal history. To show this practice is appropriately tailored to the job at issue, such an assessment must involve the following:

  • notice to the candidate (before any adverse action is taken) that they have been screened out because of a conviction;
  • a reasonable opportunity for the candidate to demonstrate that the exclusion should not be applied due to their circumstances; and
  • consideration by the employer as to whether the additional information provided by the candidate or otherwise obtained by the employer warrants an exception to the exclusion and shows that the policy as applied is not job-related and consistent with business necessary.

The candidate has one final chance to prevail
If an employer can meet its burden of proving that its policy or practice of considering conviction history is job-related and consistent with business necessity, the candidate still may be able to prevail if he or she can demonstrate there is a less discriminatory policy or practice that serves the employer’s goals as effectively as the challenged policy or practice. The regulations give as examples a more narrowly targeted list of convictions or another form of inquiry that evaluates job qualification or risk as comprehensively without significantly increasing the cost or burden on the employer.

Notice Requirements
Regardless of whether the employer has a “bright-line” policy or conducts an individualized assessment, before an employer may take adverse action (e.g., decline to hire, discharge, or decline to promote) against a candidate based on conviction history, the regulations require an employer to give the candidate notice of the disqualifying conviction and provide him or her with a reasonable opportunity to present evidence that the conviction information is factually incomprehensive. If the candidate can demonstrate the record is factually incomprehensive, the employer will not be permitted to consider the record. This notice is only required when the criminal information is obtained by a source other than the candidate (e.g., a third-party background check, the employer’s independent search of court records or the internet). This is different from the FCRA, which requires certain notices only if the employer takes adverse action against a candidate based, even in part, on information contained in a third-party background check report (the FCRA does not require such notices when adverse action is taken based on criminal information derived from a source other than a third-party background report). This new California notice requirement is also different from those in some “ban the box” laws, such as city ordinances in Los Angeles and San Francisco, where notice may be required if adverse action is taken against a candidate based on criminal record information derived from any source, including a self-disclosure by the candidate.

Exemptions for Certain Regulated Employers
The FEHC regulations recognize that some employers are subject to federal or state laws or regulations that (1) prohibit individuals with certain criminal records from holding certain positions or (2) mandate a screening process employers are required or permitted to utilize before employing individuals in such positions. The regulations note also that some federal and state laws and regulations make criminal history a determining factor in eligibility for occupational licenses. In these situations, compliance with these laws or regulations will constitute a rebuttable defense to an adverse impact claim under California law.

Intentional Discrimination
The regulations address the subject of intentional or “disparate treatment” discrimination. Specifically, the FEHC reiterates the long-standing rule that it is unlawful for an employer to treat candidates or employees differently when considering conviction history if such treatment is substantially motivated by a protected characteristic.

International Developments

IAPP’s Five Stages of GDPR Preparedness
On February 23rd, the International Association of Privacy Professionals (IAPP) published an article identifying five stages of company preparedness for the upcoming implementation of the General Data Protection Regulation (GDPR). According to IAPP, the five stages of GDPR preparedness are: Stage One – Awareness of the GDPR’s jurisdiction and severity of penalties for noncompliance; Stage Two – Understanding the heightened level of consent required to gather personal data; Stage Three – Understanding the technical requirements of pseudonymization to de-identify data and data protection by default; Stage Four – Evaluation of business technology to see if it satisfies GDPR requirements; Stage Five – Ensuring the continuity of operating processes with technology for GDPR compliance.

Please Note: Some of the information contained herein is a monthly summary of the daily information provided by Arnall Golden Gregory LLP, an Atlanta firm servicing the business transactions and litigation needs of background check companies. The information described is general in nature, and may not apply to your specific situation. Legal advice should be sought before taking action based on the information contained herein. For more information about Arnall Golden Gregory LLP, please visit www.agg.com or contact Bob Belair at 202.496.3445 or robert.belair@agg.com.


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