Compliant Employment Screening Policies
Compliant employment screening policies protect the organization from liability exposure in the hiring and retention of employees.
In changing regulatory environments, new rules and practices require employers to prioritize due diligence in keeping employment screening practices up-to-date including types of data that can be collected, the limitations and restrictions on data usage, and safeguarding employee rights of privacy.
However, compliant employment screenings are only as effective as the organization’s commitment to actively engage in research and monitoring of proposed, pending, and in-place legislation and taking the requisite steps to incorporate those legal requirements into compliant practices.
With more states and municipalities enacting legislation for various issues in employment hiring practices, the screening process has become more complicated in sorting out the governing level of authority and the interpretation of rules and restrictions. The differences in federal, state, and local regulations add to the complexity in understanding and implementing employment screening processes.
The overall legislative climate has been referred to as a patchwork of laws that, while designed to protect applicant/employee rights, has been applied differently in different states, cities and municipalities. In some cases state or municipality rules and regulations are in conflict with federal rules and regulations. Interpretation of rules may vary by locality.
To add to the complexity of employment screening regulations, the growing number of non-traditional, non-employee, on-demand workers, i.e., a contingent workforce, point to the need to screen all individuals that produce a work product for or interface with the organization’s customer or client base, direct employees or the general public. All workers, whether directly employed or contracted labor, should be screened to the same standards to reduce potential liability risks to the organization.
Due diligence in screening practices is a priority task for the employer’s duty of care obligations to evaluate applicants and employees in light of known risks and foreseeable risks that may pose a threat to third parties. Employers cannot afford liabilities of negligent hiring, workplace violence, employee theft, fraud, harassment, injury or other cause for action that could arise from the employer’s failure to adequately screen workers.
The employer’s due diligence extends to the requirements of federal, state, and local laws applicable to employment, consumer protections, and anti-discrimination protections. Some employment laws apply to all employers while some employment laws apply only to employers with a certain number of employees or for certain industries.
The following discussion covers some of the important federal, state, and local regulations that impact employment screening policies and practices.
Federal Laws
Employers have obligations under federal laws such as:
Fair Credit Reporting Act (FCRA)
The FCRA governs the procurement, preparation and use of consumer reports for employment purposes. When employers utilize credit reporting agencies to obtain a consumer report for employment decisions, the employer and the partner reporting agency are bound by the requirements of the FCRA. An employment decision is an action for hiring, retention, promotion, reassignment, or termination. A consumer reporting agency must provide a Summary of Consumer Rights whenever it makes a written disclosure of information from a consumer’s file or a credit score to the consumer.
To ensure compliance with the FCRA, an employer must take specific actions before and after obtaining a consumer report. The employer must disclose in a stand-alone document that a consumer report will be used for employment purposes. It is important to note that the disclosure must be a separate document and not included as part of an employment application. The employer must obtain the consent of the applicant or employee to the background check by written authorization of the applicant or employee.
The background report contains consumer information obtained from various reporting sources. Information in the report could potentially qualify or disqualify an applicant or employee from a proposed employment action. The process of dealing with potentially disqualifying information in a background report as part of an employment decision is referred to as adverse action under the FCRA.
If potentially disqualifying information in the background report could be a factor in the employment decision, the FCRA requires the employer to follow the Adverse Action process prior to making a final employment decision. This is an important consumer protection. The intent of the adverse action process is to protect candidates and employees from unfair employment-related decisions.
The adverse action process requires three steps: a pre-adverse action notification, a reasonable period of time for consumer review and response to the consumer report, and a final adverse action decision notification.
Americans with Disabilities Act Amendments Act of 2008 (ADAAA)
The ADAAA prohibits employers from discriminating against qualified individuals with disabilities in all employment practices, such as recruitment, compensation, hiring and firing, job assignments, training, leave and benefits. An employer is required to provide a reasonable accommodation to a qualified applicant or employee with a disability unless the employer can show that the accommodation would be an undue hardship that requires significant difficulty or expense.
Age Discrimination in Employment Act (ADEA)
The ADEA prohibits arbitrary age discrimination against applicants or employees age forty or older due to their age.
Title VII of the Civil Rights Act of 1964
Title VII of the Civil Rights Act of 1964 protects employees against discrimination based on certain specified characteristics: race, color, national origin, sex, and religion. Under Title VII, an employer may not discriminate with regard to any term, condition, or privilege of employment, such as recruiting, hiring, promoting, transferring, training, disciplining, discharging, assigning work, measuring performance, or providing benefits.
Equal Pay Act (EPA)
The EPA provides that employers may not pay unequal wages to men and women who perform jobs that require substantially equal skill, effort and responsibility, and that are performed under similar working conditions within the same establishment.
Equal Employment Opportunity Laws (EEO)
Equal opportunity anti-discrimination laws prohibit employers from discriminating against people in all aspects of employment process, including recruitment, screening, hiring, and employment terms and conditions.
The Equal Employment Opportunity Commission (EEOC) is responsible for enforcing federal laws that make it illegal to discriminate against a job applicant or an employee because of the person’s race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, age (40 or older), disability or genetic information. It is also illegal to discriminate against a person because the person complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit.
State and Local Laws
Some states and municipalities have passed legislation that prohibit or restrict certain background screenings used for employment purposes. State laws may differ from state to state and by jurisdiction within a state. An employer will need to determine the appropriate level of compliance since many times state and local laws are more stringent than federal regulations. Some examples of state and municipality laws are:
Ban the Box Laws
Many states and local jurisdictions have enacted prohibitions or restrictions on the use of criminal background checks for employment purposes. Ban the Box refers to eliminating the checkbox on job applications regarding criminal record history. Ban the Box requirements further restrict inquiries about criminal history until a later time in the hiring process such as after a conditional offer of employment. A criminal record alone may not be sufficient to deny employment to an applicant. Some states and local jurisdictions have laws that require an employer to conduct an individualized assessment before making an employment decision based on the applicant’s criminal record reports. This will allow the applicant the opportunity to discuss his history with the employer. In the process of individualized assessment, employers are required to consider the nature and gravity of the offense; the time that has elapsed since the offense and/or completion of the sentence; and the nature of the job being sought.
Fair Chance Laws
State and local Fair Chance policies go a step further than Ban the Box laws. Fair Chance laws place restrictions on an employer’s consideration and use of criminal convictions during the employment process. Background checks or records related inquiries are delayed until after a conditional offer for employment is made.
Pay Equity Laws
Some states have enacted legislation that provides broader protections for pay equity using a standard of similar work rather than the federal Equal Pay Act standard.
Salary History Ban
Some local and state governments have enacted laws that prohibit employers from requesting salary information from job applicants.
Credit Reports Restriction and Prohibition
Several states and municipalities have passed laws that restrict the use of the credit reports for employment purposes.
Records Restrictions
Some states and municipalities restrict employers from the inquiry and use of certain types of juvenile or conviction records that are sealed, expunged, pardoned, or statutorily eradicated. Use of arrest records, criminal convictions more than 7 years old, and first time offender criminal records for employment purposes may be prohibited.
Background Screening Providers
Partnering with a FCRA compliant background screening vendor strengthens the employer’s due diligence efforts for compliant employment screenings. Employers should carefully review the vendor agreement to understand vendor services and responsibilities and employer duties and responsibilities. A qualified, knowledgeable background screening provider can help reduce the risk of a bad hire and the risk of potential litigation from a regulatory violation.