Philadelphia Amends Ordinances Regulating Employer Use of Criminal and Credit History Information

By: Jennifer L. Mora and Pamela Q. Devata

Seyfarth Synopsis: On January 20, 2021, Philadelphia Mayor Jim Kenney signed three bills amending the city’s ordinances regulating employer use of criminal and credit history in employment screening. All employers with workers in the City of Philadelphia should immediately assess their screening programs and make necessary adjustments.

The City Expands its “Ban-the-Box” Ordinance

Since 2015, Philadelphia’s “Fair Criminal Record Screening Standards” (FCRSS) has required employers that use criminal history for pre-hire screening purposes to, among other things, defer any inquiries about criminal history until after a conditional offer of employment, remove any criminal history question from employment applications, and remove any question in employment documents regarding the applicant’s willingness to submit to a background check before a conditional offer. The law also prohibits Philadelphia employers from considering convictions older than seven years (excluding any period of incarceration) and mandates that they conduct an individualized assessment before rejecting an applicant with a criminal record considering, the following factors:

(a) The nature of the offense;

(b) The time that has passed since the offense;

(d) The particular duties of the job being sought;

(e) Any character or employment references provided by the applicant; and

(f) Any evidence of the applicant’s rehabilitation since the conviction.

The ordinance also provides that if an employer rejects an applicant for a “job opening” based in whole or in part on criminal record information, the employer must notify the applicant in writing of the decision and its basis, and must provide the applicant with a copy of the criminal history report. The employer must allow the applicant ten (10) business days to provide evidence of the inaccuracy of the information or to provide an explanation.”

The ordinance includes several exemptions, stating that its requirements do not apply where “the inquiries or adverse actions prohibited herein are specifically authorized or mandated by any other applicable Ordinance or regulation.”

On January 20, 2021, the Philadelphia Mayor signed Bill No. 200479 to expand and modify the law in several respects. The amendments are effective April 1, 2021.

First, the amendment expanded the definition of covered “employee” to “any person employed or permitted to work at or for a Private Employer within the geographic boundaries of the City, including as an independent contractor, transportation network company driver, rideshare driver, or other gig economy worker.”
Next, the bill expands the definition of a covered “private employer” to “any third-party person or entity that facilitates the relationship of work for pay between two other parties, as full-time or part-time employees or as independent contractors.”
In addition, the amendment makes the law applicable to both job applicants and to incumbent employees.
It also expressly allows employers to inquire about an employee’s pending criminal charge provided that 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.”
Finally, the amendment modifies the remedial provisions. The law has always afforded aggrieved individuals with a private right of action and the right to obtain compensatory damages, punitive damages and attorney’s fees. Now, however, instead of punitive damages, an individual can potentially recover “Liquidated damages, equal to the payment of the maximum allowable salary for the job subject to the complaint for a period of one month,” up to a maximum of $5,000. It is unclear how this might be calculated for a gig economy worker who does not receive a salary.

The City’s Amendments to Restrictions on Employer Use of Credit History

Since 2016, it has been an “unlawful discriminatory practice for an employer to procure, to seek a person’s cooperation or consent to procure, or to use credit information regarding an employee or applicant in connection with hiring, discharge, tenure, promotion, discipline or consideration of any other term, condition or privilege of employment with respect to such employee or applicant.” The prohibition on the procurement and use of credit information applies regardless of whether the check is conducted pre- or post-offer of employment. The ordinance sets out several exceptions. For instance, the law does not apply to any law enforcement agency or financial institution.

Under the amended ordinance effective March 21, 2021 (Bill No. 200413), law enforcement agencies and financial institutions are no longer automatically exempted from its prohibitions. Instead, law enforcement agencies and financial institutions may use credit history information for employment purposes if one of the other exceptions in the ordinance applies, including if such information “must be obtained pursuant to state or federal law” or the “job requires an employee to be bonded under City, state, or federal law.”

The amendment in Bill No. 200614 removes the requirement that employers provide written notice to the applicant or employee of their reliance on credit information, identify and provide the information on which the employer relied in making its adverse decision, and provide the individual an opportunity to explain the circumstances surrounding the potentially disqualifying information before the employer takes action. Of course, employers still must be mindful of the Fair Credit Reporting Act’s pre-adverse and adverse action notice requirements when taking action based in whole or in part on information obtained from a third-party background check report.

Next Steps for Employers

Most immediately, covered Philadelphia employers and gig economy companies should determine whether they need to revise job applications, interview guidelines, and policies and procedures for criminal and credit history background checks.

Employers throughout the United States, and particularly multi-state employers, should continue to monitor developments in this and related areas of the law, and always should remain mindful of their obligations under the federal FCRA. Class action claims under the FCRA remains a fertile source of litigation and, thus, employers should consider an annual audit and review of their background check disclosure and authorization forms and their pre-adverse and adverse action notices and processes.