January 2017 Screening Compliance Update


January 2017 Screening Compliance Update

Federal Developments

CFPB Takes Action Against TransUnion and Equifax
On January 3, 2017, the Consumer Financial Protection Bureau (CFPB) took action against Equifax, Inc., TransUnion, and their subsidiaries for allegedly deceiving consumers about the cost and usefulness of credit scores they sold to consumers. TransUnion sold consumers credit scores based on a model from VantageScore Solutions, LLC. Equifax sold consumers credit scores that were based on its proprietary model. According to the CFPB, neither the VantageScores nor the scores based on Equifax’s proprietary system are typically used by lenders in making credit decisions about consumers. The CFPB alleges that TransUnion and Equifax violated the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act by:

  • Falsely representing to consumers that the credit scores they sold to them were the same scores used by lenders to make credit decisions, even though those scores were not typically used by lenders; and
  • Falsely claiming that consumers’ credit scores and other credit-related products were free (or only $1 in the case of TransUnion’s credit scores), despite the fact that consumers were automatically enrolled in a subscription program that charged a monthly fee unless consumers cancelled during the trial period.

The CFPB alleges that Equifax also violated the Fair Credit Reporting Act (FCRA), by requiring consumers to view Equifax advertisements prior to receiving their “free” credit report (which they are entitled to under the FCRA).

In order to resolve the alleged violations, TransUnion and Equifax entered into consent orders with the CFPB. Pursuant to the consent orders, TransUnion and Equifax must:

  • Pay a combined $17.6 million in restitution to consumers ($13.9 by TransUnion and $3.8 by Equifax);
  • Clearly inform consumers about the true nature of the credit scores that they sell to consumers;
  • Obtain consent from consumers prior to enrolling them in a credit-related product that requires a “negative option feature” (i.e., a program that automatically enrolls a consumer and charges them, unless the consumer opts out);
  • Provide consumers with an easy and simply way to cancel any purchase of a credit-related product and stop charging consumers for those products once they are cancelled; and
  • Pay a combined $5.5 million in total penalties ($3 million by TransUnion and $2.5 million by Equifax).

TransUnion consent order: http://files.consumerfinance.gov/f/documents/201701_cfpb_Transunion-consent-order.pdf
To view the Equifax consent: http://files.consumerfinance.gov/f/documents/201701_cfpb_Equifax-consent-order.pdf
Article: http://www.lexology.com/library/detail.aspx?g=a0da7160-610e-40fa-849c-bddc17b08d4a&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email&utm_campaign=ACC+Newsstand+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2017-01-09&utm_term=

EEOC Issues Guidance Interpreting National Origin Discrimination
The Equal Employment Opportunity Commission (“EEOC”) recently issued an Enforcement Guidance on this subject. Although the EEOC’s position at times is broader than controlling case law, the Enforcement Guidance is helpful because it offers insight into how the EEOC will investigate claims of alleged national origin discrimination in the future. According to the EEOC, national origin discrimination means discrimination because an individual (or his or her ancestors) is from a certain place or has the physical, cultural, or linguistic characteristics of a particular ethnic group. National origin discrimination often overlaps with race, color, or religious discrimination because a national origin group may be associated with (or, according to the EEOC, perceived to be associated with) a particular religion or race. Title VII prohibits an employer from using certain recruitment practices, such as sending job postings only to ethnically or racially homogenous areas or audiences, or requesting that an employment agency refer only candidates of a particular national origin group. Importantly, employers may not rely on the discriminatory preferences of coworkers or customers as the basis for an adverse employment action in violation of Title VII. Thus, for example, a retail store may not reject an candidate for not fitting its “all American image.”

Social Security Numbers: The EEOC also addressed an issue that sometimes trips up employers. According to the EEOC, having a policy or practice of screening out candidates who lack a Social Security number implicates Title VII if it disproportionately screens out work-authorized individuals of a certain national origin, such as newly arrived immigrants or new lawful permanent residents, and thus has a disparate impact based on national origin. The EEOC has clarified that newly-hired employees should be allowed to work if they can show that they have applied for but not yet received a Social Security number.
Accents: Under Title VII, an employer may refuse to hire (or fire) an individual if his or her accent interferes materially with job performance. To meet this standard, however, an employer must be able to provide evidence showing that: (1) effective English communication is required to perform job duties; and (2) the individual’s accent materially interferes with his or her ability to communicate in spoken English. Likewise, an English fluency or English proficiency requirement is permissible only if required for the effective performance of the position for which it is imposed. According to the EEOC, the key is to distinguish a merely discernible accent from one that actually interferes with the spoken communication skills necessary for the job. Evidence of an accent materially interfering with job duties may include documented workplace mistakes attributable to difficulty understanding the individual, assessments from several credible sources who are familiar with the individual and the job, or specific substandard job performance that is linked to failures in spoken communication.
Hostile Work Environment Claims: The EEOC’s Enforcement Guidance also issued an important reminder to employers that harassment based on an employee’s national origin could give rise to liability for a hostile work environment. A hostile work environment based on national origin can take different forms, including ethnic slurs, ridicule, intimidation, workplace graffiti, physical violence, or other offensive conduct directed toward an individual because of his birthplace, ethnicity, culture, language, dress, or foreign accent. None of this behavior should be tolerated in the workplace.
Promising Practices: The EEOC lists several “promising practices” for employers to consider to avoid liability for national origin discrimination:

  • Use a variety of recruitment methods to attract as diverse a pool of job seekers as possible;
  • Identify your Company as an equal opportunity employer;
  • Implement clearly-defined criteria for evaluating performance;
  • Distribute a policy prohibiting harassment based on national origin and train employees regarding their rights and obligations under the policy.


You Mean It’s Un-American to Hire Only Americans? DOJ Issues Final Rule on Unfair Immigration-Related Employment Practices
If you thought it would be safer to require every new hire to be an American citizen—think again. The U.S. Department of Justice (DOJ) has a new rule revising its prior regulations on Section 274B of the Immigration and Nationality Act (INA), which prohibits unfair immigration-related employment practices. This new rule, effective January 18, 2017, is intended to clarify the standards for determining whether a prohibited practice has occurred and updates the DOJ’s enforcement procedures. According to the DOJ, the new rule revises the existing Section 274B regulations to “clarify the full extent of the prohibitions against unfair immigration-related employment practices and to eliminate ambiguities in the regulatory text.”

  • Defines “Discriminate.” Perhaps the most significant revision is the inclusion of new language defining the term “discriminate.” According to the DOJ, this language is intended to incorporate the “intent” requirement added to Section 274B in 1996. This new definition does make clear that an employer’s action does not constitute an unfair immigration-related practice unless that action is taken with the intent of treating persons differently because of their national origin or citizenship status.
  • Makes it Easier to Establish Intent. Unfortunately, however, the DOJ has also added language that may make it easier, in some situations, for an employee to establish the requisite discriminatory intent. The new rule now explicitly provides that intentional discrimination may exist “regardless of the explanation for the differential treatment, and regardless of whether such treatment is because of animus or hostility.”

This means that, if an employer treats an employee differently because of his citizenship status during the Form I-9 process, the employee may be able to establish a violation even if the different treatment was innocent or actually intended to help the employee satisfy the Form I-9 requirements. Indeed, in the summary accompanying the new rule, the DOJ noted that an employer might be guilty of an unfair documentary practice if the employer were to ask about an employee’s citizenship or immigration status and then suggest specific documentation the employee might provide based on his response.

Ring in the New Year with a Revised I-9 Form
In November 2016, the U.S. Citizenship and Immigration Services published its new I-9 form (click here). Employers may immediately begin using the new form for new hires and reverifications, and must stop using the old form (identified as version “03/08/13” in the lower left corner) by January 21, 2017. All employers — public and private — must complete a Form I-9 to document verification of the identity and employment authorization of each new employee (both citizen and noncitizen) hired after November 6, 1986 to work in the United States. Employers are not required to complete new forms for existing employees or prepare new forms to replace existing forms. The new I-9 entails only a few significant revisions. The revisions primarily adapt the format so the form can be partially completed online or electronically. Although most of the form may be completed electronically, the form must still be printed out and signed and dated by the employee, employer, and translator or preparer (if applicable).

The instructions for completing the I-9 (click here) balloon from 6 pages to 15 pages, with extensive discussion of the documents listed in List A, List B, and List C. Notably, no new documents have been added to these lists.

Other significant revisions include:

  • Section 1 asks for “other last names used” rather than “other names used.”
  • A field is designated for including additional information. The instructions suggest this field may be used for:
    • Employment authorization extensions for Temporary Protected Status beneficiaries, F-l OPT STEM students, CAP- GAP, H-1B and H-2A employees continuing employment with the same employer or changing employers, and other nonimmigrant categories that may receive extensions of stay;
    • Additional document(s) that certain nonimmigrant employees may present;
    • Discrepancies that E-Verify employers must note when participating in the IMAGE program;
    • Employee termination dates and form retention dates;
    • E-Verify case number, which may also be entered in the margin or attached as a separate sheet per E- Verify requirements and your chosen business process; and
    • Any other comments or notations necessary for the employer’s business process.


Swiss-U.S. Privacy Shield Announced
On January 11, 2017, the Swiss Federal Data Protection and Information Commissioner announced that it has reached an agreement with the U.S. Department of Commerce on a new Swiss-U.S. Privacy Shield framework, which will allow companies to legally transfer Swiss personal data to the U.S. The Swiss Privacy Shield will replace the U.S.-Swiss Safe Harbor framework, and according to the Swiss government’s announcement, will “apply the same conditions as the European Union, which set up a comparable system with the U.S. last summer,” referring to the EU-U.S. Privacy Shield. According to the announcement, “[t]he fact that the two frameworks are similar is highly significant, as it guarantees the same general conditions for persons and businesses in Switzerland and the EU/EEA area in relation to trans-Atlantic data flows.” POLITICO has reported that a Swiss government spokesman stated that companies can begin signing up to the Swiss Privacy Shield in about 90 days.

Court Cases

7th Circ. Skeptical of TWC Data Class Action after Spokeo
Multiple judges on a Seventh Circuit panel Wednesday made clear they believe a class action brought against Time Warner Cable Inc. over its alleged storage of former customers’ information should stay dead Wednesday, telling the customers’ attorney no one was harmed by the company’s actions

Cook County Biometrics Case Raises Privacy Questions
On December 30th, the Cook County Record published an article about the privacy questions raised from the class-action lawsuit Klaudia Sekura v. L.A. Tan in the Circuit Court of Cook County, which was settled for $1.5 million. According to the complaint, L.A. Tan violated the Illinois “Biometric Information Privacy Act” (BIPA) by collecting customers’ fingerprints and not disclosing that their fingerprints were being used by a third-party vendor. In addition, L.A. Tan failed to comply with BIPA’s written data retention policy which requires companies to inform customers in writing the purpose and length of time the biometric information will be collected, stored, and used.

Reuters Report Class Action Against Experian
A national reporting system Experian is being sued in a class action for allegedly unlawfully selling consumer credit reports in violation of the Fair Credit Reporting Act

Penn. – District Court Finds That “Complete and Up to Date” Requirement of FCRA § 1681K Does Not Include an Accuracy Component
A consumer reporting agency complies with § 1681k(a)(2) of the Fair Credit Reporting Act (“FCRA”) if it “maintain[s] strict procedures designed to insure that whenever public record information which is likely to have an adverse effect on a consumer’s ability to obtain employment is reported it is complete and up to date.” In Kelly v. Business Information Group, the District Court for the Eastern District of Pennsylvania addressed whether this “complete and up to date” requirement means what it says and only requires current information, or, instead, whether it includes an “accuracy” component as well. Squarely addressing the issue, the court declined to read a requirement into § 1681k(a)(2) that the record be comprehensive. Not only will the court’s decision impact claims under § 1681k(a)(2), but it also could inform the interpretation of other FCRA claims, such as those under § 1681e(b), which include requirements related to accuracy, but not completeness. In Kelly, the plaintiff alleged that he was denied employment opportunities based on adverse public record information in a consumer report that the defendant furnished to his employer. Specifically, he argued that the defendant erroneously reported that a judgment had been taken against him when the public record cited actually belonged to his son. Based on this allegation, the plaintiff claimed that the defendant failed to furnish “complete and up to date” information on him under 15 U.S.C. § 1681k.

Data Breach Victims Sue without Data Misuse
On January 20th, the U.S. Court of Appeals for the Third Circuit ruled that the improper disclosure of personal information in violation of the Fair Credit Reporting Act (FCRA) constitutes an injury, and as a result, consumers have a right to sue in federal court under the FCRA. According to the complaint, Horizon Blue Cross Blue Shield of New Jersey customers’ personal health information (PHI) was breached when two unencrypted laptops were stolen from the company, but there was no evidence that the PHI was misused. The Court of Appeals ruled that the Plaintiffs did not have to prove that the data breach caused them any personal detriment to establish harm under the FCRA. The Court only addressed the standing issue. The court did not reach the Defendant’s argument that it is not a consumer reporting agency or otherwise subject to the FCRA The case is In re: Horizon Healthcare Services Inc. Data Breach Litigation, case number 15-2309, in the United States Court of Appeals for the Third Circuit.

Wash. – AG Takes on Discriminatory Blanket Housing Bans on Renters with Criminal Histories
Attorney General Bob Ferguson today announced his office has taken significant action to combat housing discrimination. A court has approved the last of five legal resolutions with rental housing companies across the state accused of violating federal Fair Housing Act and the Washington Law Against Discrimination by using blanket bans on tenants with a past felony. The resolutions all involve fines of $5,000 or more, penalties and nondiscrimination training. While criminal history may be grounds to refuse to rent to an individual, landlords cannot have a blanket ban on renting to anyone who has a previous felony conviction or arrest record. Instead, they must consider individual facts such as the type and severity of the offense and how long ago the offense occurred. Because certain groups of people, such as African-Americans, have higher statistical rates of arrests and convictions, blanket bans have the effect of making it harder for African-Americans than for other groups to find housing. This disparate impact renders blanket policies illegal. Under these types of blanket bans, a 30-year-old simple marijuana possession conviction may preclude a person from finding housing.

Ninth Circuit is the First Appellate Court to Rule on “Extraneous Text” in a FCRA Background Check Disclosure
On January 20, 2017, the U.S. Court of Appeals for the Ninth Circuit became the first appellate court to rule on the lawfulness of a liability waiver in a Fair Credit Reporting Act (FCRA) disclosure. In Syed v. M-I, the Ninth Circuit ruled that an employer acted willfully in violation of the FCRA when it included a liability waiver in its FCRA disclosure. The FCRA is the federal law that regulates employer use of “consumer reports,” more commonly known as “background checks” or “background reports.” Before an employer may obtain a consumer report from a consumer reporting agency, typically the employer must make a “clear and conspicuous” written disclosure to the consumer, in a document consisting “solely” of the disclosure, that a consumer report may be obtained. The candidate or employee must provide written authorization before the employer may obtain a consumer report for employment purposes. During the last few years, the number of federal class action lawsuits against employers alleging hyper-technical non-compliance with the FCRA has skyrocketed. The class action suits challenging the employer’s background check disclosures tend to target disclosures that are included within the employer’s job application, or if separate from the job application, that include alleged impermissible (“extraneous”) text, such as a release of liability in favor of the employer, the background company, or both. Federal district courts have not been able to agree on when the inclusion of such text in the disclosure is unlawful and, if so, whether the plaintiff can clear the next hurdle of proving a willful theory of liability. The latter is important because if a plaintiff can show the employer acted “willfully,” then the plaintiff does not have to prove “actual damages,” which makes it easier for the plaintiff to attempt to certify the case as a class action. Thus, many FCRA litigators have been waiting for a federal appellate court to weigh in.

The Decision: The named plaintiff applied for a position with the employer in 2011. As part of his application process, the plaintiff signed a “Pre-employment Disclosure Release,” which advised him that his credit history and other information could be collected and used as a basis for the employment decision. The document also authorized the employer to order the plaintiff’s background report and stated that the plaintiff was waiving his rights to sue the employer and its agents for violations of the FCRA. The plaintiff signed the document and later brought suit after learning that the employer had ordered his background report. The employer moved to dismiss the case, asserting that the plaintiff’s lawsuit failed to allege facts establishing a willful violation. The employer argued that the legal standard for willfulness requires a violation of an unambiguous statutory requirement, and that the section of the FCRA requiring the disclosure was too uncertain to sustain such a violation. The trial court agreed with the employer that the law was uncertain and dismissed the plaintiff’s lawsuit against the employer. The trial court also denied the plaintiff’s motion to reconsider its ruling. The Ninth Circuit reversed the judgment and reinstated the lawsuit. The court first addressed a question not even addressed by the trial court: whether the employer’s disclosure violated the FCRA. The court ruled that it did violate the FCRA, finding that including the liability waiver together with the disclosure violated the statute’s requirement to present the disclosure in a document consisting “solely” of the disclosure. The court then ruled this textual requirement was unambiguous and, thus, that the employer’s violation, whether or not deliberate, was willful (i.e., that merely by presenting the disclosure to the plaintiff, the employer ran an “unjustifiably high risk” of violating the FCRA). The court reached the conclusion about how the statute is unambiguous even though in 2012 a trial court judge in North Carolina had upheld an employer’s disclosure that included a liability release. The court disregarded that prior opinion as unpersuasive and contrary to the statute’s plain terms. The Ninth Circuit’s holding is unremarkable because a number of trial court rulings have already reached this same conclusion in cases with similar facts (i.e., a liability release presented together with the disclosure). More surprising is how in ruling on willfulness the Ninth Circuit ignored the undeniable fact that learned federal judges have disagreed, and continue to disagree, on what form of disclosure complies with the FCRA, let alone willfully violates the statute. Although the court addressed the 2012 opinion from North Carolina, no mention is made of recent opinions from Texas, Florida and Minnesota.

District Court Dismisses FCRA Lawsuit
On January 24th, the U.S. District Court for the District of New Jersey dismissed a consolidated proposed Fair Credit Reporting Act (FCRA) class-action lawsuit against Michaels Stores. According to the complaint, Plaintiffs Christina Graham, Gary Anderson, Michele Castro, Janice Bercut, and Michelle Bercut alleged that Michaels failed to “clearly and conspicuously” announce its intent to obtain candidates’ background checks in a stand-alone disclosure, in violation of the FCRA. The Court ruled that the Plaintiffs failed to meet Article III requirements of the Constitution. The judge asserted that mere procedural violations do not constitute a concrete harm and that the Plaintiffs were aware that their background checks would be obtained, even though the disclosure was not in the correct location. The centralized case is In Re: Michaels Stores Inc., Fair Credit Report Act (FCRA) Litigation, MDL No. 2615 in the U.S. District Court for the District of New Jersey.

Amazon Can’t Escape Candidates’ Background Check Suit
A Florida federal judge on Monday said that Amazon.com Inc. can’t duck a class action by job candidates accusing the online retailer of violating the Fair Credit Reporting Act through its background check system, saying that it is possible the company did not follow the proper steps to receive approval for the checks.

State Developments

Philadelphia City Council Follows Massachusetts in Passing Legislation to Ban Inquiries into Wage History
After Massachusetts became the first state to pass a law restricting inquiries into an candidate’s wage history, Philadelphia is now poised to become the first city in the United States to do so. On December 8, 2016, the Philadelphia City Council passed a bill that would amend the city’s Fair Practices Ordinance to add a provision that would prohibit employers from inquiring about wage history. Mayor Jim Kenney is expected to sign the amendment into law in the near future. The amendment will take effect 120 days thereafter. The amendment to the Ordinance is designed to address pay inequities affecting primarily women and minorities, as reflected in U.S. census data on wages. Many employers ask candidates about their pay history during the hiring process. However, using an candidate’s wage rate or salary with a prior employer to determine the pay offered to an candidate may perpetuate pay discrimination to the extent an candidate’s pay history was influenced (explicitly or implicitly) by unlawful bias. The amendment would make it illegal for employers in the City of Philadelphia to inquire about wage history, require disclosure of wage history, condition employment on the disclosure of wage history or retaliate against an candidate for failing to respond to an inquiry about wage history. The amendment defines “inquiry” and “wages” broadly to effectuate its remedial purpose. The amendment to the Ordinance includes two narrow exceptions. First, if an candidate knowingly and willingly discloses a prior wage to an employer, then the employer may rely on the candidate’s wage history in determining the wage for the position to which the candidate is applying. This exception likely will be construed narrowly by the city based on its interpretations of other Ordinances passed by City Council. Second, the Ordinance does not restrict an employer from inquiring about or otherwise using wage history if a separate federal, state or local law specifically authorizes the disclosure or verification of wage history for employment purposes. The amendment to the Ordinance cites the similar legislation enacted in Massachusetts as influencing the City of Philadelphia to amend its Ordinance. On August 1, 2016, Massachusetts became the first state to impose restrictions on employers from asking about pay history. Among other things, the Massachusetts legislation prohibits employers from seeking the salary history of any candidate, unless the candidate provides written authorization, and only after the employer has made an offer of employment with compensation. The Massachusetts legislation takes effect on January 1, 2018. Other jurisdictions may soon follow suit. For example, the states of Pennsylvania, New Jersey, and California and New York City each have bills pending that would restrict employers from asking candidates about their pay history.

Philadelphia’s Wage Equity Bill Set To Go Into Effect On May 23, 2017
Mayor Jim Kenney signed the Philadelphia Wage Equity Bill into law on Monday, January 23, 2017. It will take effect on May 23, 2017, and be codified in the Philadelphia Code at Sections 9-1103((1)(i) and 9-1131. Under the new law, employers may not ask about a prospective employee’s wage and fringe benefits history or rely on such information in setting compensation and benefits. The new law is modeled after a Massachusetts statute, and is intended to narrow the gender wage gap by preventing employers from setting pay based in whole or in part on an candidate’s wages and benefits at a prior job, unless the candidate wants to disclose it. A covered employer may still ask an candidate what his or her salary and benefits expectations are, and an candidate may knowingly and willingly disclose his or her salary and benefits history. The new law requires employers to revise employment applications and processes for interviewing candidates, negotiating and setting compensation and verifying prior employment to ensure that there is no obligation to disclose salary and benefits history. The law includes a posting requirement, and the City plans to provide a poster on its website along with answers to FAQs before May 23, 2017. One FAQ we hope the City answers relates to the scope of the law, which is written to apply to employers that do business in the City of Philadelphia, without reference to whether they employ any employees within the City limits.

Ga. – Augusta Commissioners Give the Green Light to Ban the Box
Augusta commissioners talking about a new stance on hiring folks with a criminal history. It might have taken six months, but today Augusta commissioners passed Ban the Box. “I’m excited that it passed I think we’re moving in the right direction,” Augusta commissioner Ben Hasan said. Now Augusta government job applications won’t have questions about a criminal history, and that cannot be a reason not to hire someone. “Georgia is the first southern state that enacted it, Governor Deal passed it back in 2015. Atlanta, Columbus, Macon, all of those cities are utilizing it right now,” Hasan said. Commissioner Ben Hasan says this will help with Augusta’s unemployment. “We’re always talking about poverty in Augusta Richmond County is close to thirty percent, when you’re talking about a way to get people gainfully employed once again that’s a huge step in the right direction,” he said.

Real ID
On January 3rd, the Portland Herald Press reported that Maine has not met requirements set forth by the federal Real ID law, which sets federal standards for identification documents. If the state fails to act, on January 30th Maine’s driver licenses will no longer be accepted as a form of identification by the Transportation Security Administration for boarding flights and will not be accepted for entry into federal buildings. State officials have opposed the law because it puts “consolidated personal data at risk.” State Senator Bill Diamond has proposed legislation that would bring Maine into compliance with the federal law, and will likely be considered by Maine’s Transportation Committee in the coming weeks. Several other states also are considered non-compliant by the Department of Homeland Security and face the same January 30th deadline, including Kentucky, Montana, Pennsylvania, and South Carolina.

D.C. Council Passes Ban on Credit History Screens on Job Candidates, Interns, Employees
The Washington D.C. Council unanimously passed the “Fair Credit in Employment Amendment Act” (Bill 21-244) to amend the Human Rights Act of 1977 and prevent employers from taking discriminatory action against candidates, interns and employees based on the individual’s “credit information.” The Fair Credit law prohibits most employers from requiring an candidate, intern, or employee to submit credit information as part of the hiring process or during the individual’s employment with the employer. It also prohibits most employers from using, referring to, or inquiring into an candidate, intern, or employee’s credit information. This law does not apply to federal jobs, D.C. police, special police, campus police, or financial institutions where the job involves access to personal financial information, or otherwise required by D.C. law or pursuant to lawfully issued subpoena. The Fair Credit law is similar to D.C.’s 2014 “Ban the Box” law prohibiting employers from asking candidates about their criminal history before making a conditional offer of employment. However, unlike D.C.’s “Ban the Box” law, where employers can check for criminal convictions after the conditional offer is made and rescind an offer under certain circumstances, the D.C. Council concluded that credit history is rarely, if ever, relevant to the hiring process. Therefore, the Fair Credit law bans most employers from inquiring into or using an candidate or employee’s credit history at any point during the hiring process. The law is under review by Mayor Muriel Bowser. The Mayor has not indicated whether she supports the law and will sign the legislation, but the Fair Credit law would be veto-proof if the unanimous support of the D.C. Council holds. Once approved by Mayor Bowser (or approved by at least two-third vote of the D.C. Council should the Mayor veto the bill), the Act will be submitted to the U.S. Congress for a 30-day Congressional review. If after 30 days Congress fails to enact a joint resolution disapproving the D.C. Council’s law (which must be approved by the President), the Fair Credit Act would become law in D.C. This process could be complete as early as spring 2017.

Texas Introduces State Pay Equity Bill Banning Inquiries into Prior Salaries
Following the growing trend of states enacting laws that address pay equity in the workplace, Texas State Representative Eric Johnson introduced House Bill 290 in the Texas legislature, seeking to amend the Texas Labor Code to prohibit sex discrimination in compensation.

The proposed bill would make it illegal for an employer to include a question regarding an candidate’s wage history information on an employment application, inquire into or consider an candidate’s wage history information, or obtain an candidate’s wage history information from his or her previous employer. However, the bill does provide that an candidate may provide written authorization to a prospective employer to confirm his or her wage history, but only after the prospective employer has made a written offer of employment to the candidate that includes the candidate’s wage and benefit information for the position. Like the federal Equal Pay Act, the proposed bill would prohibit employers from paying an employee at a rate less than an employee of the opposite sex for the same or substantially similar work. A retaliation provision is also built in to protect employees if an employer takes an adverse action or otherwise discriminates against a person because he or she opposed an unlawful act under this law; sought to enforce rights under the law; or inquired about, disclosed, compared, or otherwise discussed an employee’s wages. If the law is enacted, an employee who wishes to file a complaint under the proposed law would be able do so with the Texas Workforce Commission by following the same procedure as he or she would for complaints of discrimination under Chapter 21 of the Texas Labor Code.

Similar Federal Legislation Pending
Texas House Bill 290 was introduced shortly after H.R. 6030, known as the Pay Equity for All Act of 2016 (PEAA), was introduced in the United States Congress. The proposed federal law would amend the Fair Labor Standards Act to make it illegal to ask an candidate to disclose information about his or her previous compensation. This restriction would apply to all candidates, regardless of gender. If implemented, the PEAA would give enforcement authority to the U.S. Department of Labor (DOL). If a violation were to be found, the DOL would have authority to assess fines up to $10,000 against the offending employers. The PEAA also includes a private cause of action that would allow candidates and employees to bring private suits against employers. Although damages are capped at $10,000, plaintiffs could also seek their attorneys’ fees.
Other States and Localities Focusing on Pay Equity
Other states and localities have enacted pay equity bills in the last year, including Massachusetts, Maryland, New Jersey, Philadelphia, California, and New York. Several states and localities—including Connecticut, Indiana, Mississippi, Missouri, and the District of Columbia—also have similar legislation pending.


Governor Cuomo Signs Executive Orders to Close the Wage Gap as part of “New York Promise” Agenda
There is no doubt that pay equity and pay data have both been a major focus of the federal government enforcement agenda during the Obama administration. While we wait to see if and how the Trump administration will address equal pay enforcement, several states continue to advance measures on pay equity. For example, Texas is considering a pay equity bill prohibiting employers from asking about an candidate’s wage history. Earlier this week, on January 9, 2017, New York Governor Andrew Cuomo signed two executive orders “to put New York on the fast track to eliminate the wage gap.” The executive orders, which Governor Cuomo signed as part of his 12th proposal of the 2017 State of the State Agenda, prevent employers from asking candidates about their salary histories and require certain government contracts to include data on employees’ job titles and salaries.

Executive Order 161: Ensuring Pay Equity by State Employers
Executive Order 161 prohibits state entities from asking or mandating an candidate to “provide his or her current compensation, or any prior compensation history,” before offering a conditional offer of employment with compensation. Notably, the executive order does not prevent candidates from volunteering information about their compensation histories. After offering employment to an candidate, a state entity “may request and verify compensation information.” State entities that already have such compensation information are prohibited from relying on it to determine an candidate’s salary (unless doing so is required by law or a collective bargaining agreement).

The executive order defines state entities as

  • “all agencies and departments over which the Governor has executive authority”; and
  • “all public benefits corporations, public authorities, boards, and commissions, for which the Governor appoints the Chair, the Chief Executive, or the majority of Board Members, except for the Port Authority of New York and New Jersey.”

Executive Order 162: Ensuring Pay Equity By State Contractors
Executive Order 162 requires state agencies and authorities to include a provision in state contracts “requiring contractors to agree to include detailed workforce utilization reports” that include the job titles and salaries of each employee performing work on the contract. Contractors that are unable to identify which of its employees are working directly on the state contract must include the job titles and salaries “of each employee in the contractor’s entire workforce.” The requirement to include these reports is in addition to contractors’ preexisting obligation to provide equal employment opportunity information. Similarly, the executive order requires state agencies and authorities to include a provision in their agreements “imposing the same requirement on all subcontractors for their employees.”

Contractors and subcontractors will be required to report this information to state agencies on a quarterly basis for all prime contracts with a value in excess of $25,000. Contractors on prime contracts with a value in excess of $100,000 must report their data on a monthly basis. The executive order applies to “all State contracts, agreements, and procurements issued and executed on or after June 1, 2017.”


Executive Order Issued by Governor Cuomo Prohibits State Agencies From Asking Candidates About Prior Salary History to Help Ensure Pay Equity
On January 9, 2017, New York State Governor Andrew Cuomo issued an executive order aimed at ensuring pay equity. The executive order prohibits the State from asking job candidates about their current or previous compensation history until a conditional offer of employment with compensation has been extended. Such measures have become increasingly popular in employee-friendly states and localities. Effective January 1, 2017, California employers are prohibited from relying on an employee’s prior salary to justify a disparity between the salaries of similarly situated employees. And beginning July 1, 2018, Massachusetts employers will be prohibited from screening job candidates based on their salary histories, requiring candidates to provide their salary history before receiving a formal job offer, and seeking the salary history of prospective employees from current or former employers prior to extending an offer of employment. Other jurisdictions, including Philadelphia, New York City, and New Jersey, are considering barring similar pre-hire inquiries of salary history.

New York employers should expect these types of measures to soon affect the private sector, too. Employers generally should anticipate similar legislation to spread to other employee-friendly jurisdictions.

Labor and Employment Alert: Employers Must Now Comply With Connecticut’s Ban-The-Box Law
Nationally, 24 states and more than 150 cities and counties have enacted “ban-the-box” or “fair chance” legislation that restricts public employers or government contractors from inquiring into candidates’ criminal histories. In June 2016, Connecticut became one of the nine states (along with Hawaii, Illinois, Massachusetts, Minnesota, New Jersey, Oregon, Rhode Island, and Vermont) to limit inquiries by private employers into an candidate’s criminal history. Connecticut’s law became effective on January 1, 2017. Under the law, an employer is prohibited from inquiring about an candidate’s prior arrests, criminal charges, or convictions on an initial employment application. This limitation applies to any employer regardless of size unless the employer meets one of the two exceptions: (1) if the employer is required by state or federal law to ask about the candidate’s criminal history; or (2) if a security or fidelity bond or an equivalent bond is required for the position for which the candidate is seeking employment. Connecticut law continues to prohibit inquiries into criminal records that have been erased in accordance with state law. An employee or candidate may file a complaint with the Connecticut Labor Commissioner alleging an employer’s violation of these various provisions. Practically speaking, the ban-the-box law means that an employer can still inquire into an candidate’s criminal background but must wait until later in the hiring process. For example, the employer can ask during the interview process or make an offer of employment contingent upon a criminal background check. In addition to restricting criminal history inquiries on initial employment applications, employers must continue to comply with an existing Connecticut law that limits employees’ access to applications that actually contain such information. So if an employer is required by state or federal law or by bonding to inquire into criminal history, the portion of the application containing information about the criminal history may only be available to (1) the employer’s personnel department or, if there is no personnel department, to the person in charge of employment, (2) to those involved in the interviewing of the candidate, and (3) to certain broker-dealers or investment advisors, insured depository institutions, or insurance producers when necessary for their compliance responsibilities under state or federal law.

LA’s Law Banning the Box for Private Employers Effective This Month
On January 22, 2017, the City of Los Angeles will ‘ban the box’ when the Los Angeles Fair Chance Initiative for Hiring (Ban the Box) (the “Initiative”) goes into effect, prohibiting private employers in Los Angeles “from inquiring into or seeking a job candidate’s criminal history unless and until a conditional offer of employment” is made to the individual. In doing so, Los Angeles will become the fourth California city to ‘ban the box’ with greater protections than the state statute, and the second to do so with respect to private employers. If an employer makes a conditional offer of employment and then receives information about an candidate’s criminal history, the employer cannot take an adverse employment action against the candidate based on that history until (1) a written assessment has taken place and (2) a Fair Chance Process has occurred. First, the employer must perform a written assessment connecting the candidate’s criminal history to particular aspects of the position sought that suggest a risk in hiring the candidate. In doing so, the employer must consult factors identified by the U.S. Equal Employment Opportunity Commission and certain state-level agencies. Once the employer performs the written assessment, the employer must provide the employee with a written notification of the proposed adverse action and a copy of the written assessment, as well as any other information supporting the proposed adverse action. The employer then must hold the position for at least five business days after informing the candidate of the decision in order to allow the candidate to complete the Fair Chance Process, (i.e., the candidate’s chance “to provide information or documentation to an Employer regarding the accuracy of his/her Criminal History or Criminal History Report or that should be considered in the Employer’s assessment…such as evidence of rehabilitation or other mitigating factors”). If the candidate provides a response to the employer in accordance with the process, the employer must then consider that information and perform a reassessment of the proposed action in writing.

After performing a reassessment, if the employer still engages in an adverse action, the employer must tell the candidate of the decision and provide the candidate a copy of the reassessment. Records regarding employment applications and assessments performed pursuant to the Initiative must be retained for a period of three years from the receipt date of the initial application. The Initiative also mandates certain notices and posts. Employers are now required to state in all job posts “that the Employer will consider for employment qualified Candidates with Criminal Histories” consistent with the Initiative’s requirements. In addition, employers must post a notice informing candidates of the Initiative’s provisions “in a conspicuous place” at all locations in the City visited by candidates under the employer’s control, and send a copy of that notice to any labor union or worker representative with which the employer has a collective bargaining agreement, other agreement or understanding applicable to employees in Los Angeles.

The Initiative prohibits retaliation against any employee who (1) complains to the City regarding whether or not the employer has complied or plans to comply with the Initiative, (2) opposes any provision required by the Initiative, (3) participates in any proceeding related to the Initiative and (4) seeks to enforce the employee’s own rights under the Initiative by any lawful means, or otherwise asserting rights under it. The Initiative is applicable to private employers located or doing business in the City with 10 or more employees, including the owner. The Initiative does not apply to instances where:

  • the law requires an employer to obtain an candidate’s criminal history;
  • the job would require the candidate to possess or use a firearm in the course of the candidate’s performance;
  • the requirements of the job prohibits someone convicted of a crime from holding it, “regardless of whether that conviction has been expunged, judicially ordered sealed, statutorily eradicated or judicially dismissed following probation”; or
  • the employer is legally prohibited from hiring a person convicted of a crime.

Candidates or employees can seek enforcement of the Initiative by reporting the alleged violation to the DPW within one year of the alleged violation having occurred. The DPW will then investigate the complaint. In an administrative proceeding to enforce the Initiative, employers are required to provide the DPW, if asked, with access to records and documents related to the application at issue and any assessment it performed. If the DPW determines a violation has occurred, it will “issue a written notice to the Employer of the violation, require the Employer to immediately cure the violation and may impose an administrative fine[.]” Fines for notice, posting and records retention violations can be up to $500 for each violation. Fines for other violations of the Initiative are capped at $500 for a first violation, $1,000 for a second violation and $2,000 for any further violations. Though the amounts may not be substantial, the Initiative provides that “[e]mployer violations may be treated as separate violations and subject to the penalty or administrative fine amounts set forth therein.” Fines will not be imposed until July 1, 2017. Prior to that time, the DPW will only issue written warnings. The decision of a hearing officer will constitute the City’s final position, which can then only be reviewed by a petition for writ of mandate to the Superior Court. Candidates or employees can bring a civil action against an employer for violating the Initiative. However, such an action can only be brought after the candidate or employee has reported the alleged violation to the DPW and the administrative enforcement process has been completed or the hearing officer has rendered a decision. If brought, such an action must be made within one year of the later of the two.

Colo. – Proposed Bill Would Require Background Checks for Doctors, Nurses
A new Colorado bill would require more than 160,000 medical professionals to get background checks based on their fingerprints in order to practice medicine in the state. The bill is called the Patient Safety Act of 2017 and would require the background checks for doctors and nurses who prescribe medication. The federal background checks would help keep tabs on medical professionals even if they move to different states to practice and look into the ones moving to Colorado. Currently, Colorado is one of five states that doesn’t require the checks for nurses and only one of six states that doesn’t require it for physicians.

International Developments

The UK Implements Network and Information Security Directive
On January 4th, Out-Law.com reported that the United Kingdom (UK) will likely implement the European Union’s Network and Information Security (NIS) Directive despite the UK’s vote to leave the EU. The NIS Directive sets security standards for information technology systems in critical sectors of the economy such as banking, energy, and healthcare.

Latest Microsoft-Ireland Case Ruling Affirms U.S. Warrants Do Not Reach Data Stored Outside the U.S.
The U.S. Court of Appeals for the Second Circuit ruled in Microsoft Corporation v. United States of America that U.S. warrants “cannot compel Microsoft to disclose data stored in Ireland” (Center for Democracy and Technology).


When do Data Breaches Cause Harm?
On December 28th, privacy expert Daniel Solove published a post about the issue of harm in data breach cases. He argues that harm in data breach court cases needs to be reconsidered because courts are too quick to conclude that data breaches do not cause harm. According to Solove, the two dimensions to data breach harm are risk and anxiety, which courts usually dismiss as actual harms: • Risk – When it comes to risk, many courts find anything involving risk too difficult to quantify and not concrete enough to constitute an injury. However, other fields have recognized risk as an injury and courts in other areas of law have concluded that risk is a sufficient harm. • Anxiety – In regards to anxiety, the emotional distress a person might feel as a result of a breach, courts have dismissed it as a harm in data breach cases noting that emotional distress alone is too vague and unsupportable in proof to constitute an actual harm. Yet in other areas of law, emotional distress alone is sufficient to establish harm and is rarely disputed.

Trump’s executive order won’t destroy Privacy Shield, says EU
On January 27th, an European Commission official announced that President Trump’s executive order (EO) entitled, “Enhancing Public Safety in the Interior of the U.S.”, which seeks to deport illegal immigrants and those who have overstayed or violated the terms of their visas, will not affect the EU-U.S. Privacy Shield Agreement. The Privacy Shield Agreement allows businesses to transfer the personal information, including personally identifiable information, of EU citizens to the U.S. for processing. Previously, there was concern that the EO would have an impact on the agreement because it requires guaranteed privacy rights for European citizens’ data processed in the U.S. However, Privacy Shield only protects data transferred to the U.S. and not data gathered within the U.S., which is covered by the U.S. Privacy Act. The EO excludes people who are not U.S. citizens or Lawful Permanent Residents from the protections of the Privacy Act, and therefore has no effect on the Privacy Shield Agreement.

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 [email protected]


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