May 2017 Screening Compliance Update


May 2017 Screening Compliance Update

Federal Developments

Proposed FCRA Liability Harmonization Act
May 5th. This week Rep. Barry Loudermilk (R-GA) introduced the FCRA Liability Harmonization Act (H.R. 2359) to amend the Fair Credit Reporting Act (FCRA) to place caps on damages stemming from class action litigation. This legislation will benefit background screening companies as well as employers and landlords who request background screening reports under the FCRA and are subject to growing class action litigation. The legislation is pending in the House Financial Services Committee.

FTC – Disclosure Publication
On April 28, 2017, the FTC published an education piece which provides information for employers regarding disclosure and authorization forms.

FTC offers FCRA guidance on background screening reports
Companies often face lawsuits under the Fair Credit Reporting Act (FCRA) regarding the sufficiency of disclosures informing prospective employees that a background screening report will be obtained. As the Federal Trade Commission reminds in a recent blog posting on its website, employers must avoid lapses that could create FCRA liability. Background screening reports are “consumer reports” under the FCRA when they serve as a factor in determining a person’s eligibility for employment, housing, credit, insurance or other purposes and they include information “bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living.”

FCRA requires the following of employers:

  • Before obtaining a background screening report about a prospective employee, disclose to the person the intention to get the report and get the candidate’s written authorization allowing you to do that. • If the background screening report reveals facts affecting a decision not to hire, the employer must notify the candidate of the results of the report and provide a copy. Next, the employer must give sufficient time to review the report so the candidate can challenge any elements that might be incorrect.
  • If the employer ultimately decides not to hire someone based in whole or in part on the contents of a background screening report, the employer must provide a notice to that person stating that the hiring decision was at least in part the result of the background screening report.

Under FCRA, a company may put the required disclosure and its request for their authorization in one document. The wording must be clear so that the prospective employee will understand. Within the document, complicated legal jargon or extra acknowledgements or waivers could create FCRA liability. The FTC notes some examples of language that should not be in the document:

  • Don’t include language claiming to release the company from liability for conducting, obtaining or using the background screening report
  • Don’t include a certification by the prospective employee that all information in his or her job application is comprehensive
  • Delete any wording that purports to require the prospective employee to acknowledge that hiring decisions are based on legitimate non-discriminatory reasons
  • Avoid overly broad authorizations that permit the release of information that the FCRA doesn’t allow to be included in a background screening report – for example, bankruptcies that are more than 10-years old.

If the employer has additional waivers, authorizations or disclosures that it provides to prospective employees, it should do so in a separate document. Don’t include them in the FCRA disclosure and authorization document.

These guidelines should be integrated into a company’s hiring practices to avoid the substantial costs and risks associated with FCRA lawsuits, which can often include efforts to proceed as a class action.

EEOC Suit Alleges Luxury Hotel Discriminated Against Haitian Employees and Used Staffing Agency as a Conduit to Discriminate
On April 18, 2017, the Equal Employment Opportunity Commission (“EEOC”) filed a putative class action against the SLS Hotel South Beach in Miami, Florida (“Hotel”), alleging that the Hotel violated Title VII by firing black Haitian dishwashers who worked in the kitchen and serviced several restaurants in the Hotel – including the Bazaar by Jose Andres, Katsuya and Hyde Beach – and replacing them with white and Hispanic workers, who were supplied by a staffing agency, National Service Group (“NSG”). This case highlights one of the EEOC’s asserted priorities in its strategic plan for the next six years, to address discrimination in “complex employment relationships” focusing on “temporary workers, staffing agencies, independent contractor relationships, and the on-demand economy.” Here, although a staffing agency made the decision regarding who to hire to replace the terminated employees, the EEOC has stated that an employer may not shield itself from liability for discrimination simply by authorizing an agent to make its hiring or firing decisions, if those decisions are discriminatory.

The Complaint against the Hotel was filed by the EEOC after fifteen former employees lodged charges of discrimination with the EEOC based on their race, color and national origin, and the EEOC issued Letters of Determination after finding reasonable cause to believe that discrimination occurred. The Complaint asserts that black Haitian employees were treated worse than their Hispanic counterparts at the Hotel. Among the allegations in the Complaint are that black Haitian employees were reprimanded for speaking Creole while Hispanic employees were not reprimanded for speaking Spanish; that black Haitian employees were referred to as “slaves” by other employees, including managers; and Haitian employees were forced to carry heavy items up the stairs, while Hispanic employees were not asked to perform those same tasks. Further, the Complaint alleges that the Hotel decided to outsource staffing to NSG, but it did not encourage or notify its black Haitian employees to apply for positions with the agency. Rather, according to the Complaint, black Haitian employees were provided a settlement agreement in English, though many cannot read the language, and were told they would only receive their final paycheck upon signing the agreement. A press release from the EEOC further contends that the black Haitian workers were replaced “with light-skinned Hispanics.” For its part, the Hotel has spoken out against the allegations, contending that it conducted an investigation as soon as it received notice of the charges and found no evidence of wrongdoing. Chief Legal Officer for the Hotel, James L. Greeley, stated that the Hotel has been cooperating with the EEOC, engaging in good faith attempts to resolve this matter, and will continue to fully defend the Hotel against false claims.

Macy’s Hit with EEOC Charge Over Criminal History Screening
Macy’s screening of job candidates for their criminal history is too sweeping and results in qualified minority job seekers being unlawfully turned away for employment, according to a charge filed with the Equal Employment Opportunity Commission. The company’s screening process is overbroad in three ways, attorney Ossai Miazad told Bloomberg BNA May 17. First, it requires candidates to disclose criminal violations over too long a period. Second, the categories of violations it seeks disclosure of are themselves too broad. And finally, Macy’s doesn’t adequately account for “mitigating circumstances,” such as whether an candidate has been rehabilitated, as part of its criminal background screening, she said. Miazad is with plaintiffs-side firm Outten & Golden LLP in New York, which filed the charge May 15 on behalf of the Fortune Society. The Long Island City, N.Y.-based organization is dedicated to helping people involved in the criminal justice system become successfully reintegrated into society, including by providing them with job training and placement services and assistance, according to its website.

EEOC’s Most Current Decision Digest is Available On-Line
The Equal Employment Opportunity Commission issued its Fiscal Year 2017, Volume 2 Digest of Equal Employment Opportunity Law, which can be found on the EEOC’s website here.

The decisions selected for inclusion in the Digest are catalogued based on the main topic or issues addressed, and there is a short summary of each decision provided. Also, there is a link available for each decision enabling electronic access to a copy of the full decision. In addition to these resources, this volume of the Digest includes an article: “Age Discrimination: An Overview of the Law and Recent Commission Decisions.” The brief article very generally touches on the central legal principles established by the Age Discrimination in Employment Act, reviews the basic standards used in analyzing claims under the statute, and provides summaries of select on-topic EEOC decisions which, in this instance, were primarily decided in 2016.

This Digest can serve as a useful resource when considering issues related to matters that often arise before the EEOC in the area of employment discrimination.

New Federal Railway Administration Requirements for Maintenance-Of-Way Workers Take Effect June 12, 2017
The U.S. Department of Transportation’s Federal Railroad Administration’s (“FRA”) final rule expanding drug and alcohol testing to maintenance-of-way (“MOW”) employees takes effect on June 12, 2017. MOW employees are “employees of a railroad, or of a contractor to a railroad, whose duties include inspection, construction, maintenance or repair of railroad track, bridges, roadway, signal and communication systems, electric traction systems, roadway facilities or roadway maintenance machinery on or near track or with the potential of fouling a track, and flagmen and watchmen/lookouts.” FRA has amended its regulations (set forth at 49 CFR Part 219) to expand the definition of “employees” to include employees, volunteers and probationary employees performing activities for a railroad or a contractor (including subcontractors) to a railroad. Additionally, FRA has adopted the term “regulated service” to encompass both “covered service” and MOW activities. Performance of a “regulated service” makes an individual a “regulated employee” subject to Part 219, regardless of whether the individual is employed by a railroad or a contractor (including subcontractors) to a railroad. The new rule subjects MOW employees to a broader spectrum of drug and alcohol testing, including random testing, pre-employment testing, post-accident testing, return-to-duty testing, reasonable cause testing and reasonable suspicion testing. While expansive testing has long been in place for other railroad workers, such as engineers and dispatchers, MOW employees previously were required to be tested only if they died after an accident. The regulations contain certain exceptions for small railroads and their contractors.

Only MOW employees hired on or after June 12, 2017 are subject to pre-employment drug testing. (If a MOW employee is subject to both FRA and FMCSA regulations, only one pre-employment drug test is necessary). Starting on the effective date, current MOW employees are subject to FRA’s initial minimum random drug testing rate of 50% and initial minimum alcohol testing rate of 25% (even though current FRA random test rates for other covered employees are 25% for drugs and 10% for alcohol). This will require employers to create a separate random testing pool for MOW employees, both to allow those employees to be tested at the appropriate testing rates and to establish a separate database for MIS reporting. FRA also has created a separate subpart for reasonable cause testing, to distinguish it from reasonable suspicion testing. Reasonable cause testing is triggered by certain types of incidents or rules violations. It is not mandatory but may be elected by the railroad and if elected, all regulated employees must be notified that such testing will be conducted. Reasonable suspicion testing, however, is mandatory and must be conducted when the railroad has reasonable suspicion to believe that the regulated employee has violated a drug or alcohol prohibition set forth in the regulations. Employers subject to FRA drug and alcohol testing regulations must publish a written policy that must be distributed to each regulated employee. The regulations contain a list of required items to be included in the policy. Employers of MOW employees should ensure that they have written drug and alcohol testing policies that comply with FRA’s requirements effective June 12, 2017.

Court Cases

New York Court of Appeals Clarifies Application of New York’s Criminal History Discrimination and “Aiding and Abetting” Provisions
May 5th, 2017. In Griffin v. Sirva, Inc., the New York Court of Appeals held that while only “employers” may be liable for criminal conviction history discrimination under Section 296(15) of the New York State Human Rights Law (“NYSHRL”), a covered employer may extend beyond a worker’s direct employer to also include entities that exercise “order and control” over the individual’s work. The court further held that the “aiding and abetting” provisions of the NYSHRL may apply to entities even where a direct or indirect employment relationship cannot be shown. The case involves two former employees who were terminated after past criminal convictions were discovered through a background check. The former employees worked directly for Astro Moving and Storage Co., which in turn performed work for Allied Van Lines, Inc. pursuant to an agency contract. The terminated employees filed suit under the NYSHRL, alleging that an Allied policy that disqualified employees or contractors convicted of certain felonies from performing jobs for Allied violated the NYSHRL because it did not consider all the factors enumerated in Article 23-A of the New York Corrections Law, as is required under Section 296(15). The plaintiffs sued both Astro and Allied (as well as Allied’s ultimate parent).

On appeal following a grant of summary judgment in favor of Allied and its parent, the Second Circuit certified three questions to the New York high court:

  • Does Section 296(15) limit liability for unlawful denial of employment only to a worker’s “employer”?
  • If so, what is the scope of the term “employer,” i.e., does the term extend beyond an employee’s “direct employer” to include those who exercise “a significant level of control over the discrimination policies and practices” of the direct employer?
  • Does the “aiding and abetting” liability provision contained in Section 296(6) of the NYSHRL apply to Section 296(15), such that an out-of-state principal corporation that causes its New York State agent to discriminate unlawfully may be held liable?

The court answered the first question by holding that liability under Section 296(15) is limited only to an aggrieved party’s employer. The court relied on the fact that Section 296(15) imposes liability where there has been a violation of Article 23-A. Article 23-A, in turn, specifies that it applies “to any application by any person for a license or employment at any public or private employer.” The court began its discussion of the second question by noting that a variety of factors are relevant to the determination of whether “employer status” may be conferred on an entity that is not the aggrieved party’s direct employer. After examining definitions derived from various sources (including case law decided under Title VII), the court concluded that New York common law applies and that four factors are relevant, i.e., the alleged employer’s involvement in: (i) the selection and engagement of the servant; (ii) the payment of salary or wages; (iii) the power of dismissal; and (iv) the power of control of the servant’s conduct. Of these factors, the “greatest emphasis [should be] placed on the alleged employer’s power to order and control the employee in his or her performance of work.” The court addressed the third question and held that the “aiding and abetting” provision of Section 296(6) “extends liability to persons and entities beyond joint employers, and this provision should be construed broadly.” The court placed particular emphasis on the fact that Section 296(6) applies to any “person.” Thus, “[u]nlike section 296(15), nothing in the statutory language or legislative history limits the reach of this provision to employers.” The court went on to find that Section 296(6) “also applies to out-of-state defendants,” citing the NYSHRL’s extraterritoriality provision, which provides that the provisions of the law “shall apply…to an act committed outside this state against a resident of this state…if such act would constitute an unlawful discriminatory practice if committed within this state.” The court noted that it has previously held that “[t]he obvious intent of the State Human Rights Law is to protect ‘inhabitants’ and persons ‘within’ the state…”

In a dissent, Judge Jenny Rivera stated that “[t]he majority’s approach disregards the express statutory terms of the [NYS]HRL and the legislative mandate that it be construed liberally to achieve its remedial antidiscrimination purpose,” and that Section 296(15) on its own should be read broadly to impose liability on employers and non-employers alike when a violation is found.

FCRA Case/InfoMart
On April 28th, consumer reporting agency InfoMart, Inc. was hit with a proposed class-action lawsuit in the U.S. District Court for the Northern District of West Virginia for allegedly providing incomprehensive information in consumer reports, in violation of the FCRA. Plaintiff Robert Mills alleges that he was denied a job because of false information provided by InfoMart, including a civil judgement that the Company failed to mention had been vacated and a criminal record belonging to a different person named Robert Mills. According to Mills, InfoMart failed to provide him the report in a timely manner so he could correct the errors. The case is Robert Mills II v. Infomart Inc., case number 3:17-cv-00048, in the U.S. District Court for the Northern District of West Virginia.

Pay History: An Improper Factor for Employers to Consider in Starting Salaries? Not Necessarily, According to the Ninth Circuit
Pay history has recently become a topic of much discussion among federal, state and municipal legislatures. Many jurisdictions around the country are considering laws that would quell employer inquiries into candidate pay history. The underlying purpose of these laws is to level out the historical pay gap between men and women, which pay history ban proponents argue is perpetuated when employers base starting salaries on candidates’ prior earnings. In fact, many of these pay history bans are part of a larger scheme of pay equality laws. Amidst this movement, the Ninth Circuit announced last week that salary history alone can be used to determine new employee starting salary without violating federal equal pay law.

In Rizo v. Fresno County, Plaintiff Aileen Rizo, an educational consultant, filed suit against her employer, Fresno County, under the federal Equal Pay Act (EPA) after learning she made less than her male counterparts for the same work. The EPA, which prohibits pay disparity between men and women who perform the same work, has a strict liability standard, such that a plaintiff must only prove a pay disparity between men and women who perform the same work exists, and not that the disparity is an intentional act of discrimination by the employer. Because all Rizo’s counterparts were male and made a higher salary than she did, the County conceded the pay disparity and defended itself by arguing that it fell under an exception to the EPA because it used “any other factor other than sex” to set Rizo’s and her co-workers’ starting salaries. Specifically, the County said it determined incoming salary for new employees by offering them a 5% pay increase above their most immediate prior salary. The County argued this was an objective formula entirely independent of gender.

In considering the County’s motion for summary judgment, which asked the Court to dismiss Rizo’s EPA claim based on this defense, the United States District Court for the Eastern District of California found that using salary history to set current salary was not “any other factor other than sex.” The trial court reasoned that such a practice “is so inherently fraught with the risk … that it will perpetuate a discriminatory wage disparity between men and women that it cannot stand, even if motivated by a legitimate non-discriminatory business purpose.” For this reason, the District Court concluded the practice could not be valid under the EPA. On appeal, the Ninth Circuit declared the District Court’s outcome was in direct contradiction to Ninth Circuit precedent interpreting the EPA. The Ninth Circuit pointed to its prior decision in Kouba v. Allstate Insurance, Co., in which the plaintiff alleged Allstate violated the EPA. Allstate’s pay system at issue considered pay history, among other factors, in setting new employee salaries. The plaintiff in that case alleged that pay history was the sole cause of the alleged pay disparity. Allstate responded, stating that, to the extent its consideration of pay history did create a pay disparity between men and women, pay history was a “factor other than sex” and therefore the practice did not violate the EPA. The Ninth Circuit agreed. The Court of Appeals specifically found that employers can use pay history to set incoming salary if the practice was to effectuate a business policy, and was used reasonably considering this policy and its other business practices. The Ninth Circuit determined that establishing these factors satisfies the affirmative defense that any resulting salary disparity was determined by a “factor other than sex.” Based on Kouba, the Ninth Circuit reversed the District Court’s decision in Rizo and remanded the case so the trial court could analyze Fresno County’s business reasons offered to support the pay history practice and determine whether the County used prior salary “reasonably in light of these business reasons and other practices.” Thus, while this outcome does not automatically green-light pay history-based salary systems, employers in the Ninth Circuit that can establish a business policy and reasonableness of the system may escape the EPA’s harsh penalties. But, as we previously cautioned, this outcome may be in conflict with other affirmative laws prohibiting pay history inquiries, which may end up providing more protection for pay equality than the federal scheme.

The Fourth Circuit Finds No Article III Injury in Fair Credit Reporting Act Case
The U.S. Court of Appeals for the Fourth Circuit held that the plaintiff’s allegations that Experian denied him access to information to which he was entitled under the Fair Credit Reporting Act was insufficient to establish injury under Article III in Dreher v. Experian Information Solutions, Inc., et al. The Fair Credit Reporting Act imposes certain requirements on any “consumer reporting agency” that “regularly…assembl[es] or evaluat[es] consumer credit information…for the purpose of furnishing consumer reports to third parties.” 15 U.S.C. § 1681a(f). Such requirements include, but are not limited to, “clearly and comprehensively” disclosing to the consumer “[t]he sources of information [in the consumer’s file at the time of the request].” 15 U.S.C.§ 1681(g)(a)(2). The FCRA provides a private right of action against consumer reporting agencies for their willful or negligent failures to comply with the FCRA’s requirements. See 15 U.S.C. § 1681n(a) & 1681o(a). Plaintiff Michael Dreher filed a class action suit in September 2011 against defendants Experian Information Solutions, Inc. (Experian) and CardWorks, Inc. and CardWorks Servicing, LLC (CardWorks) in the Eastern District of Virginia alleging that Experian willfully violated the FCRA by failing to provide comprehensive information in its credit report. Dreher alleged that, in 2010, he was undergoing a background check for security clearance when the federal government discovered he was associated with a delinquent credit card account. Dreher requested his credit report from Experian, which listed a delinquent account under the names Advanta Bank or Advanta Credit Cards. Dreher corresponded with Advanta about removing the delinquent account, which remained on his credit report until June 2012. The delinquent account did not affect Dreher’s security clearance. Unknown to Dreher at the time, Advanta had gone into receivership in early 2010, and CardWorks had been appointed as servicer of Advanta’s portfolio. CardWorks continued using the Advanta name, website, and phone number, and continued to list Advanta accounts on consumer credits reports as being associated with the Advanta name. Dreher alleged the listing on his credit report of Advanta rather than CardWorks as the holder of his delinquent account violated the FCRA’s requirement that a consumer report comprehensively identifies the source of information in the report. In May 2013, the district court certified a class of all persons who requested a copy of a consumer disclosure from Experian after August 1, 2010 and received a document in response that identified Advanta Bank or Advanta credit cards. The district court later granted Dreher’s motion for partial summary judgment concluding that Experian committed a willful violation of the FCRA and denied Experian’s cross-motion for partial summary judgment wherein Experian argued that Dreher lacked Article III standing. The district court held that the FCRA “creates a statutory right to receive the ‘sources of information’ for one’s credit report,” and when a credit reporting agency fails to disclose those sources, “it violates that right, thus creating a sufficient injury-in-fact for constitutional standing.” The Fourth Circuit reversed the district court’s decision, concluding that Dreher failed to allege a concrete injury in fact sufficient to satisfy standing under Article III. The Fourth Circuit explained that Dreher failed to show how the knowledge that he was corresponding with a CardWorks employee, rather than an Advanta employee, would have made any difference in the “fair[ness] or accura[cy]” of his credit report, or that it would have made the credit resolution process more efficient. The court held that Dreher had alleged a “statutory violation divorced from any real-world effect.” The court observed that Dreher’s allegations of harm were unlike those in cases where the deprivation of information adversely affected the plaintiff’s conduct, holding that, despite viewing the name Advanta rather than CardWorks, “[h]e was able to receive a fair and comprehensive credit report, obtain the information he needed to cure his credit issues, and ultimately resolve those issues.” Indeed, the court concluded that, if anything, the record showed that listing Advanta may have actually assisted an alleged identity theft victim. Other circuits have applied Spokeo more expansively and recognized Article III standing solely based on violations of the statutory protections created by federal privacy statutes. For example, the Third Circuit in In re: Horizon Healthcare Services Data Breach Litigation, 846 F.3d 625 (3d Cir. Jan. 20, 2017), Ninth Circuit in Syed v. M-I, LLC, 853 F.3d 492 (9th Cir. 2017) and Van Patten v. Vertical Fitness Group, LLC, 847 F.3d 1037 (9th Cir. 2017), and the Eleventh Circuit in Church v. Accretive Health, Inc., 654 Fed. Appx. 990 (11th Cir. 2016) and Perry v. Cable News Network, Inc., et al., No. 16-13031 (11th Cir. April 27, 2017) have recently held that statutory violations alone under, respectively, the FCRA, Fair Debt Collection Practices Act, Telephone Consumer Protection Act, and Video Privacy Protection Act were sufficient to establish Article III standing. Dreher exacerbates this growing division among the circuits concerning how Spokeo is applied in statutory injury cases. This division will likely not be resolved until and if the Supreme Court decides to address the issue further.

Employer’s Refusal to Hire Medical Marijuana User Violates State Law, Rhode Island State Court Holds
Employers cannot refuse to hire a medical marijuana cardholder, even if the individual admittedly would not pass the employer’s pre-employment drug test required of all candidates, a Rhode Island state court has held under the state medical marijuana law. Callaghan v. Darlington Fabrics Corp., et al., No. PC-2014-5680 (R.I. Super. Ct., May 23, 2017). The court granted summary judgment to the plaintiff-candidate.

The plaintiff had applied for a paid internship with the employer and disclosed that she had a medical marijuana card and would not pass the employer’s required pre-employment drug test. The employer’s policy prohibited only the use of drugs on company property. It did not state that a positive drug test result would lead to withdrawal of a job offer. When she was not hired, the plaintiff sued the employer under the Rhode Island medical marijuana law, the Hawkins-Slater Act, as well as the state’s disability discrimination statute, for refusing to hire her. The Hawkins-Slater Act provides, “No school, employer, or landlord may refuse to enroll, employ, or lease to, or otherwise penalize, a person solely for his or her status as a cardholder.” The Act, however, also provides, “Nothing in this chapter shall be construed to require … [a]n employer to accommodate the medical use of marijuana in any workplace.”
In a 32-page opinion that opened with a Beatles quote on getting high, the Rhode Island Superior Court granted summary judgment to the plaintiff. The court held the Act created an implied private right of action in large part because, without such an implied private right, the law’s prohibition on refusing to employ an individual solely because of his or her status as a medical marijuana cardholder would be rendered meaningless. The court rejected the employer’s argument that the law permitted a distinction between refusing to hire because of cardholder status (admittedly unlawful under the Act’s plain language) and refusing to hire because of an inability to pass a mandatory pre-employment drug screen, urging the court to interpret the Act to prohibit employers from refusing to hire under both scenarios. Referencing the employer’s own policy language, the court also rejected the argument that employers had no obligation to accommodate medical marijuana use under the Act on the premise that the Act distinguishes between the medical and nonmedical use of marijuana. While the court agreed that employers are not required to tolerate employees who report for work under the influence of marijuana, it held the Act expressly states that an employer may not refuse to employ a person due to his or her status as a medical marijuana cardholder. Therefore, the court ruled the employer violated the Act in refusing to hire the plaintiff even though she admittedly could not pass the pre-employment drug test. As to the candidate’s disability discrimination claim under state law, the court rejected the employer’s argument that, having no knowledge of the plaintiff’s disability, it could not have discriminated against her. The court ruled that discrimination could be shown “against a class of disabled people – namely, those people with disabilities best treated by medical marijuana.” It also concluded medical marijuana users are not precluded from bringing a state law disability discrimination claim, despite that: (1) the law disclaims protections to those who seek remedies based on his or her illegal drug use; and (2) marijuana remains illegal under federal law.

Further, despite relevant case law from other states and the U.S. Supreme Court, the court also rejected the defendants’ argument that federal law (i.e., the Controlled Substances Act) preempted state law. Unpersuaded by the fact that marijuana remains illegal under federal law always and for all purposes, the court held it was not “physically impossible” to comply with both federal and state laws. It stated that Rhode Island’s law governs only marijuana use in the workplace and that “what an employee does on his or her off time does not impose any responsibility on the employer.” The court also emphasized the fact that Congress has passed spending bills in the past few years prohibiting the Department of Justice from using federal funds to prevent states from implementing their own laws regarding medical marijuana. The complicated landscape for employers who conduct drug testing for marijuana is further complicated by Callaghan. An employee’s off-duty use of marijuana may cause the employee to test positive on a workplace drug test because marijuana may stay in the fatty tissues of the body for weeks. While Callaghan certainly will be appealed, the ever-swirling debate surrounding marijuana and a growing sense, in some quarters, that marijuana use is acceptable (both recreationally and medically) highlight the need for employers – in Rhode Island and elsewhere – to consider the marijuana laws affecting their workplaces and how they will handle the question before an actual issue arises.

State Developments

California’s New Criminal Background Check Regulations to go into Effect July 1, 2017
California’s Department of Fair Employment and Housing (DFEH) recently enacted regulations that impose additional burdens on employers’ use of criminal background checks in employment decisions. The new regulations are expected to go into effect on July 1, 2017. The new regulations apply state-wide and, ultimately, will make it difficult for any employer in California to maintain no-hire policies for persons with criminal convictions. The DFEH recently passed regulations prohibiting employers in California from using an candidate’s/employee’s criminal background history in making employment decisions. Specifically, the regulations require that, for any criminal background check policy that creates an adverse impact on a protected class (such as individuals of a particular race, national origin or gender), an employer must justify its use of a policy as job-related and consistent with business necessity. According to the regulations, an employer must justify this policy or practice by demonstrating that its policy or practice bears “a demonstrable relationship to successful performance on the job and in the workplace and measure[s] the person’s fitness for the specific position(s), not merely to evaluate the person in the abstract,” and that the policy or practice is “appropriately tailored” to the job. The regulations provide two ways for an employer to meet these requirements: (1) conduct an individualized assessment of the candidate or employee; or (2) demonstrate that any “bright-line” disqualification policy properly distinguishes those who do and do not pose an unacceptable level of risk. Either method requires the employer to provide the impacted candidate/employee with notice and a reasonable opportunity to present evidence that the information is factually incomprehensive prior to moving forward with the employment decision. Additionally, an employer may still be found liable under the regulations if the candidate/employee can show that there is a less discriminatory alternative available to achieve the employer’s goals as effectively as the challenged policy or practice, such as a more narrowly targeted list of convictions that render the candidate/employee disqualified, or another form of inquiry that evaluates job qualification or risk as comprehensively without significantly increasing the cost or burden on the employer. The regulations state that compliance with federal or state laws or regulations that mandate particular criminal history screening processes or require employees or candidates to possess specific occupational licenses constitutes a rebuttable defense to an adverse impact claim under the Act.

UPDATE: The City of Los Angeles Adopts “Ban the Box,” Prohibiting Criminal Conviction Inquiry Prior to Job Offer
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 became effective on January 22, 2017; however, it will not be enforced until July 1, 2017. Violations between January 22, 2017, and June 30, 2017, may result in a written warning.

The City of Los Angeles Bureau of Contract Administration (the “BCA”) has posted printable Ordinance forms and posters on its website:

  • Notices to Candidates or Employees for City Contractors
  • Notices to Candidates or Employees for Private Employers
  • Notice to Rescind Employment Offer – Sample Letter
  • Fair Chance Initiative For Hiring Complaint Forms (English/Spanish)

UPDATE: Two new documents have been posted to the BCA website:

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. 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 similar to 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 the notice the BCA provides on its website 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.” 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.

Indiana Legislature Bans “Ban the Box” Ordinances
Some cities and counties across the country have enacted local ordinances restricting the ability of employers to inquire into the criminal histories of candidates during various stages of the job application process. (These ordinances are commonly known as “ban the box” legislation.) However, the Indiana General Assembly recently passed a bill that prohibits local governments from adopting such ordinances in Indiana. Senate Bill 312 prohibits political subdivisions (including counties, municipalities, and townships) from enacting ordinances that interfere with an employer’s ability to obtain or use criminal history information during the hiring process to the extent allowed by state or federal law. The bill also provides that criminal history information regarding an employee or former employee may not be introduced as evidence against an employer in a civil action based on the conduct of the employee or former employee if the criminal history information does not bear a direct relationship to the facts underlying the civil action, or if the conviction has been sealed, expunged, reversed, vacated, or pardoned, or if the criminal history information relates to an arrest or charge that did not result in a conviction. Indiana Governor Eric Holcomb has said he will sign the bill, which takes effect on July 1, 2017.

Mayor de Blasio Signs NYC Ban on Salary Inquiries
On May 4, 2017, New York City Mayor Bill de Blasio signed a law that will prohibit New York City employers from inquiring about the salary and benefits histories of job candidates. The law, which the New York City Council passed on April 5, 2017, will take effect October 31, 2017. Introduction Number 1253-A prohibits employers from inquiring about the salary history of an candidate and from relying on an candidate’s salary history in determining compensation. The law defines “to inquire” broadly to include questions to the candidate, the candidate’s current or former employer, or current or former agents of such candidate’s current or former employer. It also includes conducting searches of publicly available records but does not prohibit employers from informing candidates about the proposed or anticipated salary or salary range. The law also defines “salary history” broadly to cover all wages and benefits but does not preclude employers from making inquiries regarding objective measures of productivity, such as revenue or sales. Under the new law, employers can consider an candidate’s salary history where an “candidate voluntarily and without prompting discloses [such] salary history.” The law also makes clear that an employer “may, without inquiring about salary history, engage in discussion with the candidate about their expectations with respect to salary, benefits and other compensation, including but not limited to unvested equity or deferred compensation that an candidate would forfeit or have cancelled by virtue of the candidate’s resignation from their current employer.” Additionally, an employer may verify an candidate’s voluntarily disclosed salary history. Intro. No. 1253-A does not apply to internal candidates for transfer or promotion. The New York City law reflects a growing trend in states and municipalities around the country. Massachusetts already has enacted similar legislation that will take effect in 2018. Philadelphia also passed a similar law, which currently is enjoined pending a First Amendment challenge.

State Data Breach Notification Laws – Overview of Requirements for Responding to a Data Breach Updated April 2017
With the ever-changing complexity of state data breach notification laws, companies facing a data breach need resources that will help them understand the issues. The summary provides an overview of the similarities and differences in data breach laws adopted in 48 states and the District of Columbia. As reflected in the summary, laws may differ as to the information defined as “personal” or “sensitive” and the triggers for notification. Many states require that specific content be included in notices, and those requirements differ. In addition, several states impose obligations to notify certain state agencies in some or all cases. Because privacy is a politically popular topic for legislators, laws continue to evolve and change. It is important to confirm that no changes have been made to relevant laws whenever you deal with a data breach. While the summary focuses on data breach notification obligations, many state laws also impose specific data security requirements for companies that handle personal information, which should also be consulted…

Massachusetts’s CORI regulations
We previously reported in the April Privacy Summary edition about the amendments to the Massachusetts’s CORI regulations. The Massachusetts Department of Criminal Justice Information Services (DCJIS) posted the final agency regulations on its website. The regulations were finalized on April 27, 2017. DCJIS will be publishing updated CORI Acknowledgment Forms, a Model CORI Policy, cloud storage guidelines and the iCORI Agency Agreement soon, according to their website.

Penn. – Gov. Wolf Moves to Ban the Box on Non-Civil Service Job Applications
Governor Tom Wolf announced Friday that beginning July 1 state agencies will remove the criminal conviction question, otherwise known as “banning the box,” from non-civil service employment applications. “Banning the box will allow prospective candidates with criminal records to be judged on their skills and qualifications and not solely on their criminal history, while preserving a hiring agency’s ability to appropriately screen candidates as part of the hiring process,” Governor Wolf said in a statement. The new policy will be effective July 1, 2017 for non-civil service candidates. Wolf said the Office of Administration will provide guidance and training to agencies prior to the implementation of the policy, and anticipates that the policy will be applied to civil service candidates by December 2017.

Background Checks State Legislation
The following legislation regarding background checks is currently being considered by state legislatures:

  • Alabama – The House of Representatives passed H.B. 277, which would revise the criminal background check provisions required for individuals who work at a child care facility.
  • Colorado – The Senate passed H.B. 1057, which would require criminal background checks for candidates of physical therapy licenses, and the House of Representatives passed H.B. 1305, which would limit the types of questions employers could ask regarding candidates’ criminal history.
  • Florida – The Senate passed S.B. 1726, which would require employees of hemp industrial projects to undergo a criminal background check.
  • Illinois – The Senate passed S.B. 1688, which would prohibit the Department of Financial and Professional Regulation from requiring professional licensure candidates to report certain criminal history information, and S.B. 677, which would include background check requirements for candidates of nursing licenses. The House of Representatives passed H.B. 690, which would prohibit an agency or third-party client from charging a laborer for the expense of conducting a consumer report, a criminal background check, or a drug test.
  • Nevada – The Assembly passed A.B. 429, which would include criminal background check requirements for those who practice psychology.
  • North Carolina – The House of Representatives passed H.B. 803, which would include provisions regarding criminal history background checks for housing renters.
  • Texas – The House of Representatives passed H.B. 1292, which would require out-of-state funeral embalmer and funeral director license holders to undergo a criminal history background check before practicing in the state.

International Developments

Canada’s Personal Information Protection and Electronic Documents Act
IAPP publishes an article comparing Canada’s Personal Information Protection and Electronic Documents Act with the EU’s GDPR (IAPP).

Transferring Data Overseas? Use the +1 Approach
With both Privacy Shield and standard contractual clauses being challenged in court, it is important to prepare accordingly and not completely rely upon one mechanism to ensure that the transatlantic data flow may continue legally. The European Commission provides three different mechanisms that allow a legal data exchange: Privacy Shield, standard contractual clauses, and binding corporate rules. The +1 approach, explained below, sees companies adopting two of the above mechanisms to guarantee the data flow may continue should one of the mechanism be invalidated by the Court of Justice of the European Union. The U.S. Department of Commerce and European Commission adopted the Privacy Shield agreement to provide companies in both the U.S. and EU with a mechanism to comply with data security requirements and legally transfer data from the EU to the U.S. in support of global commerce. Privacy Shield is an inexpensive, self-certification mechanism that is relatively easy to apply to and achieve certification. However, Privacy Shield is currently being challenged in the Irish High Court and could go the way of Safe Harbor, ultimately being invalidated.

India – Employers Add Credit Score to List of Employee Background Checks
Borrowers are likely to find their loan repayments track record bothering them at the time of seeking new employment. Credit bureau TransUnion CIBIL has tied up with employee screening firms which help companies in screening potential new hires. “We have been getting multiple requests from banks and background screening firms that in addition to the present screening processes that they have for employees – education, criminal and medical tests — they also wanted to do a financial credit test,” said Hrushi Mehta – VP and Head – Consumer Interactive, TransUnion CIBIL. He added that employers making these requests were largely multinational companies out of a compliance perspective. Although credit histories are usually requested by lenders who have received a loan proposal, TU CIBIL is able to provide this service as it is released after consumer consent. “We have a process wherein only when the customer authenticates it that we release it to the third party. It helps in deciding whether the company should do further due diligence on a prospective candidate or not,” said Mehta. He added that if the report is that of a chronic defaulter, it is up to the company to decide whether or not to hire the person.

Background Checks in Ireland
What can employers do with regard to background checks and inquiries in relation to Criminal records? Criminal record checks are permitted in Ireland in very limited circumstances. All searches must be performed by the National Garda Vetting Unit (NGVU) of the national police service (An Garda Síochána). However, the NGVU will conduct such a search only where it relates to a person who will be working in certain limited areas (e.g., childcare, with vulnerable adults or in private security services).

Israel Enacts Landmark Data Security, Notification Regulations
Culminating more than six years of back and forth negotiations, the Israeli Parliament approved extensive, far-reaching data security regulations March 21, setting forth detailed requirements for a broad swath of data controllers and processors in Israel’s public and private sectors. Israel Minister of Justice Ayelet Shaked succeeded in advancing the Privacy Protection Regulations (Data Security), 5777-2017, in the face of intense lobbying by regulators, government agencies and businesses, some of which tried to exempt their operations from the scope of the new requirements. “The approval of the Regulations is a landmark in the protection of personal data and privacy,” Shaked said.

China’s Credit Reporting Industry
On May 14th, Caixin Global published an article about China’s struggling efforts to establish a third-party credit reporting industry. In 2015, the People’s Bank of China (PBOC) approved a pilot project to open the credit reporting industry to eight selected private companies. However, according to PBOC Credit Information Systems Bureau Director Wan Cunzhi, the credit reporting industry is still far below market demand and regulatory standards. The PBOC has not issued a license to the eight companies because the companies have not met the regulatory standards. Director Wan Cunzhi explained that the credit reports are frequently incomprehensive and that all the companies are associated with credit lending or investment businesses, creating a potential conflict of interest.

Italian GDPR Guidelines
The Italian Data Protection Authority released its first set of GDPR guidelines (IAPP).


EPIC Letter about FBI Biometric Database
On May 1st, the Electronic Privacy Information Center (EPIC) sent a letter to the Senate Judiciary Committee regarding the May 3rd hearing on oversight of the FBI and the FBI’s Next Generation Identification (NGI) biometric database. EPIC expressed concerns that the NGI system violates citizens’ privacy and civil liberties due to the:

  • High rate of inaccuracy of the NGI facial recognition technology;
  • Use of the NGI system for non-criminal purposes; and
  • Risk of identity theft for consumers.

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 or contact Bob Belair at 202.496.3445 or [email protected]


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