1. Background Screening Challenges Continue as a Result of COVID-19 Various government, business, and education closures have been a necessary, but concerning, effect of the pandemic. These closures have had broad implications across many different industries, including background screening. And there is little doubt these implications will continue into 2021.
Court closures remain in jurisdictions with increased COVID-19 cases. Some courts have restricted access to records or have placed time restrictions under which to obtain records. While there are workarounds in some instances, these closures and delays often impact the timing of criminal searches.
Employment and education verifications are also affected in that many employers and educational institutions have staff working remotely, who do not have information as readily available as they previously had. Additionally, some employers have closed permanently, resulting in an inability to verify past employment. Similar to criminal searches, there may be alternatives in these scenarios.
Employers have also struggled with various aspects of transitioning to remote workforces, such as with Form I-9 document inspections. Early last year, Immigrations and Customs Enforcement (ICE) began allowing for flexibility with the Form I-9 physical presence requirements for employers with remote employees, provided that once the employees are physically present, there is in-person re-verifications within three business days. This flexibility extends through January 31, 2021, but is expected to continue.
2. COVID-19 Impacts to Drug Screening will Continue COVID-19 will continue to have tremendous impacts on how, when, and where drug screenings are performed. Many people are reluctant to go for drug testing at a facility that also conducts COVID-19 testing in fear of contracting the virus. As such, employers must now address and alleviate concerns of applicants and employees refusing to go for routine drug testing, according to the company’s drug free workplace policy.
Additionally, many collection sites have now implemented new policies and procedures for specific tests. For example, some collection sites no longer conduct Breath Alcohol Tests (BAT) or Pulmonary Function Tests (PFT), limiting options for applicants. Hours of operation continue to be fluid based on staff availability and sanitizing schedules, and more collection sites now require appointments for drug testing.
With the pandemic reaching new heights, this trend will continue into 2021. Employers should review and rewrite their drug policies and protocols, as needed, and determine alternative solutions to their drug testing needs.
One possible solution that will likely see an increase in demand is remote oral fluid testing. Testing kits can be sent to applicants at their homes allowing them to provide a sample, which can be monitored through teleconferencing options. The samples are then sent back to the testing laboratories, eliminating the need for in-person testing in many situations.
3. Court Access Issues will Evolve After COVID 19 Shutdowns The trend of limiting access to criminal records has exploded throughout the country over the past couple of years. And, with unemployment at record highs due to the pandemic, this is a trend that is expected to continue into 2021.
Legislation limits access to some records and seals others. In some instances, any personal identifying information, or PII, is removed, making it difficult to determine if the record belongs to the applicant involved. In other instances, courts have refused to share records at all. Additionally, many states and localities are now automatically sealing convictions under Clean Slate Acts. In fact, courts in Pennsylvania (the first state to pass a Clean Slate Act) have until June 27th of this year to seal 30 million criminal records. Other states, including Utah, California, and Michigan also have similar legislation. Los Angeles and Chicago have also cleared thousands of records resulting from certain marijuana convictions.
With these limitations, employers will continue to be concerned that the candidate who was reported as “clear” may still have a criminal background. To date, the legislation relates to older charges and minor drug possession charges. However, with a high unemployment rate and initiatives to get people back to work, employers will want to keep apprised of legislation that may further restrict access to criminal record information, potentially impacting the safety of workplaces, properties, customers, employees, and tenants.
4. Patchwork of State and Local Laws will Continue to Challenge Employers While the pandemic slowed down much of our lives, it did not slow down the enactment of new laws limiting information that can be obtained by employers or available courses of action for them. Ban the Box and Salary History Bans continued to be enacted in 2020.
New (or amended) Ban the Box Laws included: St. Louis, Missouri (effective January 1, 2021); Virginia (marijuana possession only – effective July 1, 2020); and Hawaii (amended to provide additional protections to ex-offenders – effective September 15, 2020). For Salary History Bans, Maryland was the only state to pass legislation in 2020 (effective October 1, 2020).
These laws go beyond banning a box or not being able to inquire into prior salaries. There are larger implications to making hiring decisions without having complete information about the individual involved. It is expected that similar laws will be enacted throughout the country in 2021.
5. Election Results Impact Background Screening Marijuana took center stage at the 2020 election. Mississippi passed a medical marijuana law (effective July 1, 2021), while Arizona (effective date to be determined), New Jersey (effective January 1, 2021), and Montana (partially effective October 1, 2021) each passed recreational marijuana laws. South Dakota passed both medical and recreational laws (effective July 1, 2021).
We do not see this trend of increased marijuana laws going anywhere. In fact, according to a Gallup poll in November of 2020, 68% of Americans are in favor of legalizing marijuana (up by 10% since 2015 and 20% since 2010).
Additionally, many election overtones point to increased laws over the coming year regarding criminal records, drug testing, and other areas for employers. There may also be changes on the consumer reporting side, as per the recent nomination, the Consumer Financial Protection Bureau (CFPB) will soon fall under the leadership of an aggressive consumer advocate.
6. Privacy Laws Increasingly Affect Background Screening COVID-19 has affected, and will continue to affect, privacy and security matters across all industries. As employees return to work, and employers face increased challenges to provide safe work environments, there will inevitably be new privacy concerns. While innovative technologies (symptom screening, contact tracing, etc.) to support re-opening initiatives can be helpful, employers must ensure they remain in compliance with all applicable laws, including, where appropriate, the notice and consent requirements under the Fair Credit Reporting Act, the California Consumer Privacy Act (CCPA), and European Union’s General Data Protection Regulation (GDPR).
COVID-19 has also prompted more expansive privacy and security measures. For example, employers in California should keep apprised of recently enacted Proposition 24, the California Privacy Rights Act (CPRS), which will further expand the CCPA. While this expansion becomes effective on January 1, 2022, employers should monitor developments to ensure their own privacy policies and procedures remain in compliance. Additionally, there is now federal prioritization of data security and privacy issues, with the introduction of the Consumer Data Privacy and Security Act of 2020 (CDPSA). If passed this year or in the following years, it will provide consumers with expansive rights over personal information and even broader privacy and security compliance obligations for employers.
2020 also saw the dismantling of the EU-US Privacy Shield, a framework for regulating transatlantic exchanges of personal data for commercial purposes between the European Union and the United States, by the Court of Justice of the European Union. Privacy Shield was found invalid due to its inadequacy to provide sufficient protections in the United States for personal data of EU origin. In November of 2020, the European Data Protection Board (EDPB) adopted recommendations to help ensure compliance with EU levels of protection of personal data.
With all of these developments, employers should stay aware of privacy and security concerns. Further, businesses that utilize a consumer reporting agency for their background screening services should be sure to partner with one that has achieved accreditation with the Professional Background Screeners Association (PBSA) Background Screening Credentialing Council (BSCC). The Background Screening Agency Accreditation Program (BSAAP) standard, policies and procedures, and measurements are available at http://www.pbsa.com.
7. Companies Begin More Rigorous Screening Practices for Third-Party Vendors and Contractors With companies of all sizes struggling to stay in operations due to the pandemic, many will choose to outsource various functions of their business. In doing so, the need for a comprehensive screening policy to cover the third-party vendors and contractors with whom they work will be vital in protecting their interests. Cases involving delivery companies or others contracted by another company where a tragedy unfolds, and where the contracting company is held responsible, have become far too common throughout the country.
Going forward, companies will not only need to assess their own screening criteria, but also that of their vendors and contractors. Ensuring the same criteria is applied, whether it is for an employee, vendor, or independent contractor is crucial for consistency in keeping the company, its employees, and its customers safe.
8. Applicants Have Higher Expectations Regarding the Candidate Experience In recent years, applicants have expressed a desire to work for companies that value them and their time throughout the hiring process, and this will continue in 2021. To them, it sets the expectations for the company’s culture and work environment. Each year, there is new technology to speed things up and provide for nearly instant gratification in many situations. This ease of information is what today’s candidates are accustomed to, and they expect the same as it relates to background checks and interviews.
In 2021, employers should consider what processes and technology are available to streamline the hiring experience, including mobile-friendly apps and increased communications. Employers must also pay close attention to their online reputation management, as many applicants choose to express their negative views of the employer’s hiring process on social media platforms.
9. Continuous Monitoring Becomes More Commonplace Particularly in light of the increased remote workforces around the country and world, more companies are realizing the importance of monitoring employees for indications of illegal behavior, including DUIs or other reckless driving reports. Employees represent a company’s brand, and now, often are needed to do so from home. Additionally, employees could have access to financial and other confidential information, raising privacy and security concerns. Not having trustworthy employees can lead to loss of productivity, workplace safety, and theft.
Continuous monitoring mandates continuous compliance. Employers must ensure that they have the employees’ consent to continue to conduct background screenings throughout their employ. Policies should reflect clearly when the screenings will occur and why, and apply equally to all employees.
10. The Evolution and Confusion Related to Drug Screening Continues As predicted, 2020 shaped up to be one of the biggest years for marijuana-policy reform. Last year saw the implementation of Nevada and New York City’s bans on pre-employment testing for marijuana. And the November election demonstrated the overall increasing acceptance of marijuana legalization. However, while there may be some consensus on broad legalization, there is anything but harmony with regard to testing, accommodations, and CBD use.
The use of CBD products is now fairly widespread. CBD, while not technically marijuana, could still lead to a positive marijuana drug test. As such, more applicants and employees may fail a drug test because of an unregulated substance.
Additionally, marijuana remains a Schedule I substance under the Controlled Substance Act, making it illegal for any reason under federal law. But more than half the states have legalized it in some form, with their own nuances. Employers are also continuing to struggle with questions, such as: Do I have to accommodate marijuana use? Can I still have a drug-free workplace? Can I get sued for terminating an employee for a drug test that is positive for marijuana?
The uncertainty surrounding marijuana’s status as legal or not, CBD use, and an employer’s obligation to provide accommodations almost guarantees additional legislation and caselaw in 2021 to determine the parameters of the future of drug screening.
The California Consumer Privacy Act (CCPA) has been enforced by the California Attorney General since July 1, 2020. The CCPA is designed to protect the personal information of California consumers, which is broadly defined as information that “identifies, relates to, describes, or could reasonably be linked, directly or indirectly, with a particular consumer or household.”
The CCPA affects companies that store personal information on California consumers, even if they are not located in California. The threshold for falling under CCPA enforcement, in addition to obtaining or using personal information on California residents, is:
Having a minimum gross annual revenue of $25 million,
Buying, sharing or receiving data on 50,000 or more California residents, or
Deriving 50% or more of its annual revenue from selling consumers’ personal information.
With the recent election, voters in California have now approved the California Privacy Rights Act (CPRA), also referred to as CCPA 2.0. While the CPRA does not take effect until July 1, 2023, the new requirements will apply to personal information collected on or after January 1, 2022. The new CPRA takes the CCPA even further by updating the definition of a “business,” adding restrictions to the “sharing of data” and not merely the selling of personal information, establishing the California Consumer Privacy Protection Agency (CPPA), and expanding a consumer’s private right of action, among others.
There are still exceptions to the new CPRA. For example, background screening companies, who are considered Consumer Reporting Agencies (CRAs), must adhere to the Fair Credit Reporting Act (FCRA) and are strictly regulated with regard to consumer information. Operating under the FCRA exempts companies such as Hire Image from the regulations under the CCPA/CPRA when the information is provided to employers for employment purposes. Under the FCRA, CRAs must maintain strict privacy and data security policies and procedures when dealing with consumers’ personal information.
Click here for more information about the CCPA exception. Stay tuned for further updates and clarifications on California privacy in the upcoming months.
If you have any questions about your company’s role or the role of the background screening company under FCRA or the CA CCPA, please contact us to learn more.
The U.S. Court of Appeals for the Second Circuit recently affirmed an FCRA decision of a Connecticut district court. In Sprague v. Salisbury Bank and Trust Company, the district court dismissed the lawsuit based on FCRA violations when the consumer involved did not notify a credit reporting agency of an alleged error on his credit report. The district court had dismissed the complaint, citing failure to state a claim because the plaintiffs did not allege that they ever notified a consumer reporting agency or that a consumer reporting agency notified the defendant of the dispute. Additionally, the court noted that there is no private right of action under the applicable subsection of the FCRA.
The FCRA has specific notice requirements and steps not only for consumers, but also for consumer reporting agencies. A successful claim must allege that these requirements were met. Hire Image understands the intricacies of the FCRA and can assist with your compliance efforts. Contact us today to learn more.
The Federal Trade Commission (FTC) is seeking comments on proposed changes affecting the Fair Credit Reporting Act (FCRA). The purpose of these proposed changes is to bring the FCRA more in line with the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The proposed changes would “clarify that five FCRA rules promulgated by the FTC apply only to motor vehicle dealers.” According to the FTC press release, the following rules would be affected:
Address Discrepancy Rule, which outlines the obligations of users of consumer reports when they receive a notice of address discrepancy from a nationwide consumer reporting agency (CRA);
Affiliate Marketing Rule, which gives consumers the right to restrict a person from using certain information obtained from an affiliate to make solicitations to the consumer;
Furnisher Rule, which requires entities that furnish information to CRAs to establish and implement reasonable written policies and procedures regarding the accuracy and integrity of the information relating to consumers provided to a CRA;
Pre-screen Opt-Out Notice Rule, which outlines requirements for those who use consumer report information to make unsolicited credit or insurance offers to consumers; and
Risk-Based Pricing Rule, which requires those who use information from a consumer report to offer less favorable terms to consumers to provide them with a notice about the use of such data.
Additionally, the FTC is seeking comments on the effectiveness of the five rules:
whether there is a continuing need for specific provisions of each rule;
the benefits each rule has provided to consumers;
what modifications, if any, should be made to each rule to benefit consumers and businesses; and
what modifications, if any, should be made to each rule to account for changes in relevant technology or economic conditions.
The public has 75 days to comment from the date the proposed changes are published in the Federal Register.
In 2010, the Dodd-Frank Act transferred rulemaking authority for certain sections of the FCRA to the Consumer Financial Protection Bureau (CFPB), limiting the FTC’s authority to enact rules. While these particular rule changes apply only to motor vehicle dealers, the CFPB is also reviewing and updating its policy guidance for financial service companies and others in light of COVID-19.
The importance of FCRA compliance cannot be overstated. As such, Hire Image continues to provide the most up-to-date information, as it is made available. Please contact us if you have any questions about the FCRA or your own background screening policy.
It is no surprise that the Fair Credit Reporting Act (FCRA) is the subject of many lawsuits and multi-million dollar class action settlements, particularly when it comes to a consumer report being obtained for “employment purposes.” This includes the “stand-alone disclosure” requirement and the two-step adverse action process when making an adverse employment decision. What is a surprise is that even when we think FCRA issues are settled, they can arise again and be interpreted differently than they had been before. Specifically, the issue of whether the FCRA requirements apply to independent contractors has recently been brought back to the forefront.
Contrary to the long-standing approach of many employers, in Smith v. Mutual Omaha Insurance Company, the Southern District of Iowa held that the protections afforded when consumer reports are obtained for “employment purposes” under the FCRA do not extend to reports obtained for independent contractors. In this case, Smith applied as an insurance salesperson contractor with Mutual Omaha. He was not hired because of an inaccurately reported felony on his background screening report. However, Mutual Omaha did not provide prior notice before advising him that he did not get the position. Smith brought suit, alleging a violation of the FCRA requirement of providing a pre-adverse action notice and a summary of rights if a consumer report is used to make an adverse employment decision. Mutual Omaha moved to dismiss on the basis that Smith was an independent contractor and not an employee, so that the FCRA’s pre-adverse action notice requirement did not apply.
“Employment purposes” is defined by the FCRA as “a report used for the purpose of evaluating a consumer for employment, promotion, reassignment or retention as an employee.” 15 U.S.C. § 1681a(h) (emphasis added). The court looked at the plain language of the statute and found that there was no ambiguity– that the requirement applies only to employees and not independent contractors. In doing so, the court followed the reasoning of two prior cases–the Northern District of Ohio in Johnson v. Sherwin-Williams Co., 152 F. Supp. 3d 1021 (N.D. Ohio 2015) and the Eastern District of Wisconsin in Lamson v. EMS Energy Marketing Service, Inc., 868 F. Supp. 2d 804 (E.D. Wis. 2012).
In the Lamson case, a Wisconsin federal court judge also held that the FCRA’s disclosure obligations do not apply to independent contractors. In that case, a sales representative filed suit against EMS Energy Marketing Service after he was terminated, based on claims that they failed to provide him with the written notice of his rights and a copy of the background screening report. The court ruled that Lamson was hired as an independent contractor, not an employee, and that the language of the statute refers only to employees. As such, the FCRA’s requirements did not apply.
With these cases, it appears there is a trend that the FCRA requirements do not apply to independent contractors. However, it wasn’t long before the Lamson case that the Federal Trade Commission issued contrary guidance on this particular subject, noting “’employment purposes’ is interpreted liberally” and it “may apply to situations where an entity uses individuals who are not technically employees to perform duties” in its 2011 staff report titled 40 Years of Experience with the Fair Credit Reporting Act. Specifically, the FTC stated:
INDEPENDENT CONTRACTORS, AGENTS, AND VOLUNTEERS Because the term “employment purposes” is interpreted liberally to effectuate the broad remedial purpose of the FCRA, it may apply to situations where an entity uses individuals who are not technically employees to perform duties. Thus, it includes a trucking company that obtains consumer reports on individual drivers who own and operate their own equipment; a title insurance company that obtains consumer reports on individuals with whom it frequently enters into contracts to sell its insurance, examine title, and close real property transactions; or a nonprofit organization staffed in whole or in part by volunteers.
The FTC relied, in part, on the 1975 case of Hoke v. Retail Credit Corp., 521 F.2d 1079 (4th Cir. 1975), which noted that courts “are not constrained to limit its application by the common-law concept of master and servant,” so the FCRA could apply to independent contractors under some circumstances.
Based on the FTC’s liberal interpretation, many employers have proceeded with caution (and justifiably so) by applying the FCRA’s requirements to all applicants, regardless of their status as employee or independent contractor. There is now a third ruling demonstrating this may not be necessary. This conflict continues to beg the question – does an employer need to abide by the FCRA when it comes to independent contractors?
One may argue that in order to “play it safe” until there is a definite answer to this question, an employer should merely treat everyone the same whether they are independent contractors or employees. However, this could contradict a long-standing employment law doctrine, which differentiates the two categories. If an employer treats an intended independent contractor as an employee for FCRA purposes, could they be deemed an employee for other purposes? This leads down a path filled with issues of interpretation and sources of potential litigation.
There is also the question about state requirements. Other than the FCRA, certain states, such as Pennsylvania, California, and Massachusetts, to name a few, also have their own requirements when it comes to pre-adverse action notices. Are they going to fall under the broader interpretation or the narrower one, as exemplified in the Smith case? As far as statutory construction, all three state statutes specifically use the word “employment.” For example, Pennsylvania mentions “employment applicant” and “suitability for employment,” while California says “position of employment” and Massachusetts uses “employment decision.” Following the reasoning of the Southern District of Iowa, it would appear that these statutes apply to employees and not independent contractors. However, the courts in these (and other) states do not have to follow Iowa’s reasoning and could make their own decision, independent of the ruling in the Smith case.
Ultimately, this is one district court’s opinion, but the evolution of this issue demands attention. Other courts could take the broader interpretation that “employment purposes” includes the work of independent contractors, depending on the circumstances. Until there is more clarification, employers may consider treating independent contractors the same way they would treat employees for the purpose of the FCRA’s requirements. In doing so, they would be well-advised to create a separate background screening policy for independent contractors, rather than including them in the employee background screening policy. Modifying forms to refer to the applicant as an independent contractor and not as an employee could help to avoid the question of the status of that work relationship for other reasons later.
At Hire Image, we understand the various issues surrounding the FCRA, including the distinction between employees and independent contractors. Additionally, our disclosures and authorizations already cover contractors and volunteers. Contact us to discuss your situation and ways in which we can help.
On August 20, 2018, the Supreme Court of California held that the state’s Investigative Consumer Reporting Agencies Act (“ICRAA”) was not unconstitutionally vague as applied to employer background checks, despite some overlap with another state statute, the Consumer Credit Reporting Agencies Act (“CCRAA”). InConnor v. First Student, Inc., a conflict between two courts of appeal about whether the ICRAA applied if a background screener did not obtain the information from personal interviews was resolved. The case had a long and interesting history and had been pending for eight years.
While the statutes involved in this case have some differences, including the information they govern, the obligations and limitations they impose, and the remedies they provide for violations, they have something important in common. Both the ICRAA and the CCRAA govern reports that contain information relating to character and creditworthiness, which was based on public information and personal interviews and used during the employment background screening process. As such, the background check involved in this case was found to be an investigative consumer report under the ICRAA, triggering its application, and even though the CCRAA also applied, the defendants were not exempt from the requirements under ICRAA before conducting the background check.
Key takeaways from the court’s ruling in Connor include:
(1) partial overlap between two statutes does not render one unconstitutionally vague; and
(2) the ICRAA and CCRAA can coexist, as both acts are sufficiently clear, and each regulates information that the other does not.
With this decision, California companies should confirm with their background screener whether or not they fall under the ICRAA and are complying with its provisions, as well as with the CCRAA.