July 2nd, 2021 | Sterling

7 Compliance Questions That Keep HR Professionals Up at Night

Navigating the complex and evolving compliance landscape poses significant challenges for HR professionals and staffing agencies. That’s why Sterling tapped Angela Preston, our Senior VP and Counsel for Corporate Ethics & Compliance, for a recent webinar — now available on-demand — addressing top-of-mind questions about shifts in FCRA compliance requirements and more. Take a closer look at the issues — and answers — that came out during the conversation.

The May webinar began with a quick poll question for attendees. When asked, “What keeps you up at night?” and offered options ranging from compliance with state and local, FCRA (Fair Credit Reporting Act) and EEOC (Equal Employment Opportunity Commission) regulations to class action litigation for non-compliance, the majority responded, “All of the Above.” Given the clear broad scope of the audiences’ challenges, we started the Q&A session by tackling state and local level issues.

Question 1: What’s happening with hiring laws at state and local levels?

Angela was quick to acknowledge that the election and ongoing gridlock at the federal level means that most legislative action has taken place at the state and local levels. Consider the slew of ban-the-box, fair chance hiring laws, and restrictions on the type of information you can consider in background checks. Inspired by rising awareness of social and criminal justice issues, states, counties, and cities have stepped in with updates to existing laws or crafted new ones that can affect when and how criminal background checks take place.

Beyond the federal Fair Chance Act signed into law in December 2019, the National Employment Law Project notes that, “Nationwide, 36 states and over 150 cities and counties have adopted what is widely known as ‘ban-the-box’ so that employers consider a job candidate’s qualifications first — without the stigma of a conviction or arrest record.” While these laws apply primarily to public employers and contractors, 14 states and 20 cities or counties hold private employers to similar standards. And that’s just the tip of the iceberg. A new resolution, H.R. 1598, also referred to as the Workforce Justice Act of 2021, would give states three years to extend ban-the-box requirements to private sector employers.

Angela notes that these restrictions — including new state and local laws — add layers of complexity on top of what employers are already obligated to do for FCRA and EEOC compliance.

Angela explains, “Specifically, we recently saw Illinois introduce a new law that makes it a civil rights violation to disqualify a candidate based on criminal history unless there is a substantial relationship to the job or if hiring that person would pose an unreasonable risk to the population affected.” The amendment to the Illinois Human Rights Act also requires employers to:

• Disclose in writing any rationale being used to disqualify a candidate
• Provide five days for the candidate to respond
• After considering the response, provide final written notice of the decision and an explanation of the process for challenging that decision

The law also gives disqualified candidates the right to file a complaint with the Illinois Department of Human Rights. This rigorous review process has considerable overlap with what employers are already doing to support FCRA and EEOC compliance.

Local jurisdictions may also limit the types of crimes that you can inquire about. For example, New York City, Philadelphia, and some other cities are limiting pre-employment screening for marijuana use or disqualifying candidates on the basis of offenses related to marijuana use as more states adopt laws allowing medical or recreational marijuana. “You have to stay very aware of state and local laws that drill down even more into specific areas that you can and can’t ask about in terms of types of convictions in a pre-hire situation,” notes Angela. “For New York City’s Article 23A, for example, you must make sure you provide the required written notices and you cannot ask about arrest information.”

Digging deeper, Angela notes, “Part of what we’ve seen really is a social movement of looking for opportunities to increase diversity in the workplace, to get people back to work who were previously convicted or even incarcerated.”

Question 2: When is the best time to ask about a criminal conviction?

Generally, fair chance and ban-the-box laws require employers wait until later in the candidate screening process to ask about a criminal conviction.

Many of the new laws specify delaying questions about criminal history until after the application stage. In some cases, the delay may be required even longer — until after the interview or offer stages, to avoid premature disqualification.

Some of these laws have additional requirements around how candidates are notified, including individualized assessments or opportunities for candidates to respond in order to support fair chance or second chance hiring.

“Most frequently,” says Angela, “criminal background checks should take place post interview or post offer. In general, best practice is to wait on asking about criminal history until a conditional offer of employment is made. This fits with the timing that most of our clients follow for running the criminal background check.”

Question 3: Can you explain the laws for employers around the use of arrests, convictions, and other non-convictions, as well as case statuses such as open warrants?

One key aspect of criminal justice reform has been the use of alternative dispositions, such as deferred cases that result in non-conviction upon program completion. While such cases are later dismissed, they may still be considered convictions under FDIC Section 19 for financial institutions.

Angela notes that to be EEOC compliant, employers should not be looking at arrest information to disqualify candidates as a blanket policy. Employers need to follow EEOC laws and guidance very carefully, which has generally moved away from disqualification based on arrest or deferred prosecution and require individualized assessment. She goes on to point out that the EEOC does make exceptions. For example, finance or banking organizations and other federally regulated areas may have an exemption under the EEOC if regulatory requirements conflict.

Question 4: How does Sterling handle this type of reporting to address EEOC laws?

As a general matter of background checks, Sterling does not typically report non-convictions or dismissals, based on the understanding that these are not factors most employers would want to consider to stay compliant with EEOC, state, and local laws. Angela points out that a number of states prohibit use of non-conviction information for hiring decisions. Furthermore, she says, even if consideration of non-convictions such as dismissals or alternative dispositions are permitted in a state or local jurisdiction, they may be subject to a seven-year time limitation.

The EEOC guidance specifies that criminal history consideration must align with both the job in question and business necessity, such as in finance or transportation. The guidance goes further, recommending an individualized assessment that looks at a range of factors:

• Nature and gravity of the offense or conduct
• Amount of time passed since the offense
• Type of job being sought or held
• Age at the time of the offense
• Job experience and references
• Certificate of rehabilitation, bonding, or other qualifying factors
• Demonstrated ability to do the job without incident

With respect to warrants, many active warrants could potentially be reported as open cases, even in states that that limit reporting of non-convictions, like California. While the state restricts reporting and consideration of non-conviction information, employers can consider open, pending cases as long as it is within the legal scope of reporting— and as long as an individualized assessment takes place. The hiring decision can also be deferred pending resolution of an open case.

While many companies may already undertake individualized assessments during conversations with candidates, the changing legal landscape makes formalizing the process more important. Documenting individualized assessments in writing helps to verify that your hiring practices meet fair chance standards.

Question 5: How does this affect volunteers? At what point should background checks be done with a volunteer coming in to work with an organization?

Consumers who are volunteers may be afforded the same consumer protections as employees, so even if you’re not compensating a volunteer monetarily, the best practice would be to afford them the same consumer protections brought by FCRA compliance and EEOC laws. Unless there is a downside or a barrier to doing so, the best approach is to follow the same practices with a volunteer that you would with a traditional W2 type employee.

Question 6: How do you determine which jurisdiction’s regulations to follow when you are hiring someone for remote work?

The deciding factor on which laws apply for remote work hires usually falls to where the candidate would undertake the bulk of the work. There are some exceptions. Of course, EEOC and FCRA laws come into play overall, but state and local jurisdictions also apply. For example, if the job is located in New York, but the candidate is located in Philadelphia, then state and local jurisdictions apply as well. The best approach is to consult with your counsel because of grey areas such as hybrid work schedules that might involve working in different states or local jurisdictions.

Question 7: How far back can or should companies look when it comes to criminal background checks?

Under the FCRA, there is no limitation for reporting of convictions. However, employers may be subject to other laws that restrict use. Typically, seven years is the standard look-back period for criminal background checks, but it isn’t black and white. Some state and local laws, for example, shorten the look-back window and may even call out certain categories of crimes, such as misdemeanors. In other cases, regulated industries may have greater leeway on how far back they look. Since part of the EEOC standard for individualized assessments includes looking at both the candidate’s age at the time of the offense and how long ago the offense took place, a holistic approach as advised by your legal counsel is best.

Watch the full on-demand webinar for even more answers to more top-of-mind questions, including several centered on the latest disclosure and authorization form requirements. Want to continue the deep dive into FCRA compliance? Check out Angela’s follow-up Sterling Live episode on FCRA updates.

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Sterling is not a law firm. This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.