| ENACTED LEGISLATION |
| MICHIGAN: State departments and agencies remove felony questions on licensing and state job applications |
| Summary: Gov. Rick Snyder signed Executive Directive 2018-4 instructing all state department and agencies to remove the felony question box that precedes job applications. The felony conviction box will be replaced with an affirmation of good character statement. This prohibition does not apply to an application or posting if a state or federal law prohibits hiring candidates with criminal histories for that specific position. The directive becomes effective on Oct. 1, 2018. |
| Impact(s): Michigan state agencies |
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| PROPOSED LEGISLATION |
| U.S. CONGRESS: Proposed Act will provide second chance to reformed drug offenders |
| Summary: The Clean Slate Act of 2018 was introduced on Aug. 14, 2018, in the U.S. House. H.R. 6669 seeks to give a second chance to reformed offenders of "victimless" crimes who face lifelong barriers to employment, housing and education. The Act would only pertain to federal crimes, such as offenses under the Controlled Substances Act and federal offenses involving marijuana. |
| Impact(s): All employers |
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| COURT OPINIONS |
| U.S. COURT OF APPEALS FOR THE THIRD CIRCUIT: Third Circuit finds plaintiffs lacked standing to bring FCRA claim alleging employer failed to provide FCRA Summary of Rights form |
| Summary: The U.S. Court of Appeals for the Third Circuit joined several other recent circuit court opinions tackling the question of standing under Spokeo, holding that the plaintiffs established standing for a violation of the FCRA's "pre-adverse action" notification requirement alleging a failure to provide them with a copy of the background report before terminating their employment, but could not establish standing for their allegation that the employer failed to provide them with an FCRA Summary of Rights form. The plaintiffs had standing for the former even though they did not allege any errors in the background reports, because they had a right to see the background reports before any adverse action was taking against them. On the other hand, the plaintiffs lacked standing based on their failure to receive the Summary of Rights form, because this was a "bare procedural violation, divorced from any concrete harm." The plaintiffs were not injured, the court explained, because they learned of their rights under the FCRA and were able to file their lawsuit within the FCRA's two-year statute of limitations period. |
| Impact(s): FCRA compliance – for general legal review |
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| U.S. COURT OF APPEALS FOR THE SEVENTH CIRCUIT: Seventh Circuit holds plaintiff had standing to bring suit for alleged violation of FCRA's pre-adverse action requirements |
Summary: The Seventh Circuit reversed a district court's order dismissing the plaintiff's case, holding that the plaintiff established she had standing under Spokeo by asserting that the employer failed to provide her with information she was entitled to by law, i.e., a copy of the background report and a summary of her legal rights under the FCRA. The court emphasized that the plaintiff was entitled under the FCRA to an opportunity to try to convince the employer not to rescind the offer and that she was entitled to see a copy of her background check in order to do so. The court reached this conclusion even though the plaintiff did not challenge the report's accuracy.
A few weeks ago, the Ninth Circuit reached the opposite conclusion in a similar class action alleging the same type of FCRA violation. The two differing opinions from federal appeals courts underscore the uncertainty in this evolving area of FCRA litigation.
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| Impact(s): FCRA compliance – for general legal review |
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| U.S. DISTRICT COURT FOR THE DISTRICT OF CONNECTICUT: Federal court further expands protections for medical marijuana users; rejects contractor's federal DFWA preemption defense |
Summary: A Connecticut federal court held that a federal contractor violated the state's medical marijuana law (Palliative Use of Marijuana Act or "PUMA") by refusing to hire her because she tested positive for marijuana on a pre-employment drug test. The same court previously held that various federal laws prohibiting use and sale of marijuana do not prohibit employers from hiring individuals who use marijuana in compliance with state law, relying on Connecticut state law which states:
[U]nless required by federal law or required to obtain funding: … No employer may refuse to hire a person or may discharge, penalize or threaten an employee solely on the basis of such person's or employee's status as a qualifying patient.
In this following up motion, the court considered and rejected the employer's argument that conflicts between federal and state law preempted enforcement of the Connecticut law, concluding that state law can co-exist with federal laws criminalizing marijuana use. Specifically, the employer argued that the federal Drug-Free Workplace Act (DFWA) prohibits federal contractors from allowing employees to use illegal drugs. The court rejected this argument, finding that the DFWA does not require drug testing and does not regulate employees who use illegal drugs outside of work while off-duty.
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| Impact(s): Drug screening compliance – for general legal review |
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| U.S. COURT OF APPEALS FOR THE EIGHTH CIRCUIT: Eighth Circuit holds plaintiff lacked standing to bring claims for FCRA violations |
Summary: The U.S. Court of Appeals for the Eighth Circuit joined the Seventh Circuit in holding that an individual plaintiff did not have standing to sue for an alleged violation of the FCRA's disclosure and authorization requirement. The plaintiff alleged that the City of Minot, ND had wrongfully terminated her employment after it improperly obtained her credit report. She brought claims against the City, the law firm that represented the City, the credit bureau, and the consumer reporting agency (CRA), for violations of the FCRA.
The trial court dismissed the plaintiff's claims against all of the defendants. On appeal, the Eighth Circuit reframed the issue and identified the "threshold question" as to whether the plaintiff alleged sufficient injury to have standing to proceed in federal court. The plaintiff claimed that she had suffered an injury to her privacy, reputation, personal security, the security of her identity information, and loss of time spent trying to prevent further violations of her rights under the FCRA. The Eighth Circuit disagreed, holding that she failed to state facts establishing any concrete injury. The court found that the plaintiff's privacy was not harmed because she had provided the City with consent to obtain the background check and the plaintiff could not establish that the City acted beyond her consent.
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| Impact(s): FCRA compliance – for general legal review |
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| U.S. COURT OF APPEALS FOR THE EIGHTH CIRCUIT: Federally regulated institution did not violate Title VII when it followed federal law that prohibits it from hiring individuals with certain criminal convictions |
Summary: The Eighth Circuit rejected an appeal from a putative class of minority workers who alleged that a federally regulated bank violated Title VII of the Civil Rights Act when it failed to sponsor waivers to overcome a federal law that bars certain former criminals from working for FDIC-backed banks. The federal law at issue, Federal Deposit Insurance Act, bars "any person who has been convicted of any criminal offense involving dishonesty or a breach" from working at FDIC-insured banks, regardless of how long ago the offense occurred, which plaintiffs argued disproportionately impacts people of color. The law allows those who have been disqualified to seek a waiver with the FDIC and allows banking institutions looking to hire those with previous convictions to sponsor such applications.
In a unanimous decision, the three-judge panel backed the finding of an Iowa federal court and held that the bank did not violate Title VII when it fired or refused to hire the previously convicted workers. The court held that the bank made a sound business decision, given that banks that are covered by the FDIC face up to $1 million in fines per day for hiring such workers. "We hold that even if [the bank's] policy of summarily terminating or not hiring any … disqualified individual creates a disparate impact, the bank's decision to comply with the statute's command is a business necessity under Title VII," the panel said.
The plaintiffs had argued that the bank could have combated the alleged disparate impact by sponsoring the employees' waiver applications. But the panel disagreed, questioning the statistics the putative class presented as evidence and noting that the waiver is not a guarantee of success
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| Impact(s): Federally regulated institutions |
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| OTHER UPDATES |
| FEDERAL DEPOSIT INSURANCE CORPORATION: FDIC revises its restrictions on hiring bank personnel with criminal histories |
Summary: The FDIC has modified its Statement of Policy for Section 19 of the Federal Deposit Insurance Act, 12 U.S.C. § 1929 to reduce certain hiring requirements for banking industry employers. Section 219 imposes a duty upon an insured institution to make a reasonable inquiry regarding an applicant's history. The FDIC believes that at a minimum, each insured institution should establish a screening process that provides the insured institution with information concerning any convictions or program entry pertaining to a job applicant.
The FDIC's revised SOP has expanded the de minimis exception, which means the FDIC's consent is automatically granted and an application is not required, to include the following:
- Isolated minor offenses committed by young adults: If the actions that resulted in a covered conviction or program entry of record all occurred when an individual was 21 years of age or younger, then the subsequent conviction or program entry that otherwise meets the general de minimis criteria set forth above will be considered de minimis, so long as the conviction or program entry was entered at least 30 months prior to the date an application would otherwise be required and all sentencing or program requirements have been met.
- Issuance of insufficient funds checks of moderate aggregate value: Convictions or program entries based on the writing of "bad" or insufficient-fund checks will be considered a de minimis offense and will not be considered as having involved an insured depository institution, so long as (i) there is no other conviction or program entry subject to Section 19, (ii) the aggregate total face value of all "bad" or insufficient checks was $1,000 or less, and (iii) no insured depository institution or insured credit union was a payee on any of the checks.
- Small dollar, simple theft: Convictions or program entries based on a simple theft of goods, services, currency or other monetary instrument, where the aggregate value taken was $500 or less at the time of conviction or program entry, will be considered de minimis, so long as (i) the person has no other conviction or program entry under Section 19, (ii) it has been 5 years since the conviction or program entry (30 months in the case of a person age 21 or younger), and (iii) there is no involvement of an insured financial institution or insured credit union. The FDIC notes that "simple theft" excludes burglary, forgery, robbery, identity theft and fraud.
- The use of a fake, false or altered identification card: Convictions or program entries for the use of a fake, false, or altered identification card by a person under the legal age for the purpose of obtaining or purchasing alcohol, or used for the purpose of entering a premise where alcohol is served but for which age appropriate identification is required, will be considered de minimis, so long as there is no other conviction or program entry for a covered offense.
It also clarifies or revises the following:
- A conviction or program entry is considered "expunged," and is not considered a conviction of record for purposes of Section 19, if an order of expungement has been issued in regard to the conviction or program entry that is intended by the language of the order or by the law under which the order was issued to be a complete expungement prohibiting the jurisdiction from using the conviction or program entry for any subsequent purpose, including to assess an individual's fitness or character. Additionally, the failure of a jurisdiction to destroy or seal the records expunged will not prevent the expungement from being considered complete for purposes of Section 19. (The prior version of the SOP did not recognize the expungement of criminal conviction records that remained accessible, including by law enforcement or court order. The focus of the revised SOP is on the intent of the order of expungement, not on the accessibility of or any failure to destroy or seal an individual's criminal records.)
- Drug-related offenses that satisfy the de minimis criteria will be granted automatic FDIC consent and do not require an application.
- For purposes of satisfying de minimis criteria, "jail time" includes any significant restraint on an individual's freedom of movement which includes, as part of the restriction, confinement where the person may leave temporarily only to perform specific functions or during specified time periods or both. However, jail time will not be considered to include time spent on probation or parole, or where the individual is otherwise restricted to a particular jurisdiction or required to report to a specific individual or location.
- Convictions that are set aside or reversed after completion of sentencing will be treated consistent with pretrial diversions or similar programs, unless the court records reflect that the underlying conviction was set aside based on a finding on the merits that such conviction was wrongful. Notably, the FDIC explicitly rejected the recommendations of several commenters during the comment period that New York's adjournments in contemplation of dismissal (ACD) program should not be considered a pretrial diversion or similar program (noting "it is difficult to treat ACDs as anything other than a pretrial diversion or similar program").
- An FDIC-supervised institution is permitted to provide an applicant with a conditional offer of employment contingent on the completion of a background check to determine if the applicant is barred from employment by Section 19, provided that the individual does not begin employment or work until the institution verifies that the individual's participation is not barred by Section 19.
This is a summary of an article that was originally published on Littler Mendelson's website. Click here to read the original article.
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| Impact(s): FDIC-regulated institutions |
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