November 2nd, 2020 | Angela Preston, SVP and Counsel, Corporate Ethics and Compliance, Sterling

Background Check Compliance: 2020’s Year In Review

Compliance is always a top consideration for an effective criminal background check program. And while many aspects of work changed in 2020 due to the impact of the global pandemic, one aspect that has remained constant is that your pre-employment screening program has to comply with relevant laws in order to satisfy well-established tenets of privacy, consumer protection, and anti-discrimination.

That’s not to say, however, that there haven’t been some important developments in compliance for 2020. Let’s take a look at three key areas of compliance, noting some considerations to get ahead of the game in planning for the new year.

FCRA Compliance

Violations of the Fair Credit Reporting Act (FCRA) can be costly, particularly when they take the form of class action lawsuits and may carry the extra wallop of attorneys’ fees and statutory damages. SHRM reported that companies have paid out over $174M in FCRA claims in the past decade. And while some regulations have eased up during the pandemic, the FCRA remains in full force and effect.

The claims we’ve seen in the past year continue to focus on forms—particularly the precise language used in the candidate consent forms that are required to run a criminal background check. Required forms include both a standalone disclosure that a background check is being run, and a signed authorization from the candidate.

A series of class action cases shook up employers early in 2020, causing a renewed focus on this area of compliance that employers have learned is far too costly to ignore, and do so at their own peril. The Unites States Ninth Circuit Court of Appeals had addressed the form question in 2019, in Gilberg v. Cal. Check Cashing Stores, LLC, where it held that the standalone disclosure for a background check must be clear and conspicuous. That case was followed in May 2020 by Walker v. Fred Meyer, Inc., and then Luna v. Hansen & Adkins Auto Transport, Inc., where the court looked at the “standalone” requirement for disclosures under Section 1681b of the FCRA.

A few takeaways from these cases include the finding that the FCRA disclosure should be in a distinct document, readily noticeable, and in a “reasonably understandable” form. According to the Ninth Circuit, authorizations do not need to “stand alone”.

In addition, a claim that the pre-adverse action notice must provide a means of contesting information with the employer was rejected by the court, which found that the notice form need only identify the consumer reporting agency for purposes of dispute. These cases continue to be hot, and the best defense is to clean up your forms and review your two-step pre- and final-adverse action notice process so that you don’t become the next target. Now is a great time to review your forms with your legal counsel and your background check provider.

EEOC Guidance

The role of the Equal Employment Opportunity Commission (EEOC) is to enforce anti-discrimination laws and ensure equal treatment in the workplace. The agency has issued guidance on a number of topics that relate to screening in the workplace—everything from use of criminal conviction records and arrest information to age, disabilities, and sex discrimination. Given the health threat posed by Covid-19 to the workplace, the EEOC issued some new guidance in 2020, specifically addressing how employers can comply with anti-discrimination laws, such as the Americans with Disabilities Act, and still stay in compliance with the new health and safety requirements imposed by Covid-19.

Recognizing that the Covid virus poses a “direct threat” of harm to the workplace, the agency updated its long-standing Pandemic Preparedness guidance to specifically address questions around testing and screening for the virus. The EEOC concludes that employers may use medical testing for the coronavirus as a means of determining whether an employee or prospective employee can access the workplace. However, in keeping with CDC guidance, since there is still uncertainty around whether antibodies confer immunity, antibody testing cannot be used to determine whether a person is safe to return to work.

For more information about the specific application of EEOC guidance in your workplace screening program, a previous blog covered the topic in more depth, and you can also view our video on the subject here.

State and Local Laws

With Congress preoccupied with pandemic crisis management, Supreme Court appointments, and the general focus on the November election, much of the legislative activity around consumer rights and privacy has been at the state and local level.

The focus on systemic racism in the US and the push for equality has surfaced in some states with the renewed push to “ban the box” and level the playing field with “fair chance” laws to combat discrimination against job candidates. These laws seek to provide a fair and equitable process for ex-offenders and people with arrests or other information in their criminal history that may make it difficult to seek employment. They establish ground rules for employers to clarify when and how to ask about criminal history, and the steps required of employers to conduct an individualized assessment of circumstances rooted in a job-related analysis. Some states require specific forms and set forth notice requirements to candidates.

Hawaii updated its ban the box law in September of 2020 to limit the lookback for past criminal history from 10 to seven years. The shortened seven-year look-back is intended to reduce the chance of old, aged cases having a discriminatory impact on hiring.

In a similar move, in May of this year the state of Virginia decriminalized and reduce penalties for low-level marijuana possession and banned the box for related charges.

In Maryland, the General Assembly’s 2019 ban-the-box initiative was vetoed by the governor, but in January of 2020 the Assembly successfully voted to override the veto and the Criminal Records Screening Act went into effect February 29, 2020.

Local governments have also gotten in on the act, with fair chance laws passed by the City of Waterloo, Iowa (passed in 2019, but recently upheld after a court battle that was finally resolved in April, 2020) and Suffolk County, New York, which passed a resolution in March 2020.

Staying Current to Mitigate Risk

For employers, it’s critical to stay on top of the increasingly changing landscape of compliance in hiring and background check practices. Whether you are delivering essential services that require workers on a job site, hiring a remote workforce, or screening workers on a technology-based gig platform, the FCRA is still in full force and effect, state and local laws are rapidly changing, and lawsuits abound to push the boundaries of technical enforcement.

As you plan for 2021, use lessons learned from this year to double-down on your compliance strategy, set aside time to review policies and forms with your counsel, and take some steps to mitigate your risk.

Register for our FCRA Compliance Updates webinar on November 18 2020 from 1:00-2:00 p.m. ET.

To stay informed on everchanging federal, state, and local laws that can impact your hiring and background check program, visit our Compliance Updates page.

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.