Another Busy Year for Employment-Purposed Background Checks: What Happened in 2021?

Each year, employers revisit and possibly modify their background screening policies and practices to account for newly enacted ban-the-box and other laws impacting background screening. Last year, we saw some major developments, which are highlighted in this alert.

Illinois

Illinois amended the Illinois Human Rights Act to make it more difficult for employers to reject applicants or terminate employees based on their conviction history. Specifically, employers may only take an adverse employment action against an individual based on a conviction if it bears a “substantial relationship” to the job at issue or presents an “unreasonable risk” to property or the safety of others. In making this determination, Illinois employers must consider: (1) the length of time since the conviction; (2) the number of convictions on the individual’s record; (3) the nature and severity of the conviction and its relationship to the safety and security of others; (4) the facts or circumstances surrounding the conviction; (5) the age of the individual at the time of the conviction; and (6) evidence of rehabilitation efforts.

If, after undertaking this evaluation, the employer makes a preliminary decision that the individual’s conviction record is disqualifying, the employer must provide a written notice that contains: (1) the disqualifying conviction(s) and the employer’s reasoning for the disqualification; (2) a copy of the conviction history report, if any; and (3) an explanation of the applicant or employee’s right to respond before the employer’s decision becomes final, including the right to submit evidence challenging the accuracy of the conviction record(s) or evidence of mitigation, such as rehabilitation. The employer must wait five business days before making a final decision to allow the individual an opportunity to respond to the notice and submit information for the employer’s consideration.

If the employer decides to move forward with the adverse action, it must provide the individual a final written notice, which must (again) identify the conviction at issue, explain the basis for the decision (even if not changed from the preliminary notice), advise of any existing internal procedures for requesting reconsideration, and advise the individual of the right to file a charge of discrimination with the Illinois Department of Human Rights.

Louisiana

On June 16, 2021, Louisiana passed a “Fair Chance” law, which prohibits employers (those with 20 or more employees in the state) from considering an arrest record or a charge that did not result in a conviction if the information was “received in the course of a background check.” In terms of considering convictions, the law adopts as a requirement the Equal Employment Opportunity Commission’s (EEOC) framework for determining whether a conviction is job-related as set out in its 2012 Enforcement Guidance on the Consideration of Arrests and Conviction Records in Employment Decisions under Title VII of the Civil Rights Act. Applicants also now have the right to make a written request for “any background check information used during the hiring process.” Thus, if an applicant makes such a request, the employer must provide a copy of the report and any other information the employer considered in making its decision (e.g., online searches, public record court searches, etc.).

New York City

New York City’s amendments to and guidance regarding its Fair Chance Act (FCA) received the most attention from employers. Among other things, employers may not consider non-convictions, must follow a specific process when considering a pending record, and may only reject an applicant for failing to disclose their criminal history if the applicant’s misrepresentation was “intentional.”

Most importantly, the New York City Commission on Human Rights now takes the position that a conditional offer of employment is one that can be revoked based only on the results of a criminal background check (including sex offender registry and driving records), a medical examination as permitted by the Americans with Disabilities Act, or “[o]ther information the employer could not have reasonably known before making the conditional offer….” The Commission explains in its Guidance that to comply with the FCA, employers should utilize a two-step background check process.

• First, the employer should obtain and evaluate all non-criminal information before making a conditional offer (e.g., employment or education verifications, drug tests, reference checks, credit checks, etc.) (not including criminal, sex offender registry and motor vehicle records).
• After this is complete and the conditional offer has been extended, the employer may ask applicants to self-disclose their criminal history and request a criminal background check, which includes motor vehicle records.

If an employer cannot perform a two-step background check, it must establish a system to internally segregate criminal history information to ensure that it is available to decision-makers only after a conditional offer has been made. Employers that opt to follow such process will bear the burden of proving that the criminal information was inaccessible to decision-makers until after a conditional offer. This may create a challenge for employers.

An employer seeking to disqualify an applicant post-conditional offer based on non-criminal information will have to prove that: (1) it could not have reasonably known the information before the conditional offer; and (2) regardless of the results of the criminal background check, the employer would not have made the offer if it had known the non-criminal information before the offer was extended. Any non-criminal information could reasonably have been known before a conditional offer if the information existed prior to the conditional offer and could have been obtained by the employer exercising reasonable due diligence.

The Commission recommends that employers omit mention of a criminal background check when seeking an applicant’s consent for a background check prior to a conditional offer, and instead use terms such as “consumer report” or “investigative consumer report” rather than “background check” in their disclosure and authorization forms, if used prior to a conditional offer. Of course, employers still have to comply with the Fair Credit Reporting Act (FCRA), so they may want to consider using two sets of forms to advise applicants of the scope of the background check inquiry during this two-step process.

Philadelphia

Early in 2021, Philadelphia expanded its existing ban-the-box ordinance, which already required that employers, among other things, defer inquiries into criminal history until after a conditional offer, not consider convictions older than seven years, perform an individualized assessment of any potentially disqualifying conviction, and provide certain notices if action is taken based on a criminal record. Now, the ordinance makes clear that it covers independent contractors, gig workers, and current employees. Moreover, the ordinance expressly allows employers to inquire about an employee’s pending criminal charge if it is job-related, the employer’s written policy details the pending charges that must be reported, and the employer “reasonably” concludes that the employee’s continued employment would present an “unacceptable risk to the operation of the business or to co-workers or customers” and that terminating the employee is “compelled by business necessity.” The ordinance also expanded the remedies available to aggrieved individuals.

Also, in 2021, Philadelphia amended its ordinance relating to employer use of credit history information. Since 2016, it has been unlawful for an employer to use credit information regarding an employee or applicant for employment purposes, subject to limited exceptions. Under the amended ordinance, however, law enforcement agencies and financial institutions are no longer automatically exempt (as they were under the previous version of the ordinance). Instead, they may use credit history information for employment purposes if one of the other exemptions in the ordinance applies, including if the information “must be obtained pursuant to state or federal law” or the job has a bonding requirement under city, state, or federal law.

Takeaways for Employers

All employers should consider a privileged review of their background screening practices by experienced counsel. Beyond the laws discussed above, some jurisdictions do not permit employers to inquire about criminal history on a job application or before a conditional offer, including ordering a criminal history report from a background check provider, subject to narrow exceptions. Also, several jurisdictions also have their own laws concerning “job relatedness” requirements for an employer's use of criminal history information, including California, New York, and Wisconsin, among others. And several have enhanced notice requirements that go beyond what the FCRA requires.

In addition, employers continue to be targeted in hyper-technical FCRA class action lawsuits over the forms and process they use to obtain background checks As a result, employers are well advised to consider evaluating background check processes to ensure compliance with the FCRA, similar state fair credit reporting statutes and substantive employment laws.