Although the Equal Employment Opportunity Commission (EEOC) does not have the authority to tell employers they may not perform criminal background checks on applicants, the EEOC does have the authority to assert that background checks have an illegal discriminatory impact on hiring practices. In fact, the EEOC has been advertising that idea for quite awhile. However, 2013 was the year the Commission pushed litigation based on the claim that criminal background checks create illegal disparate impact…and lost in three different jurisdictions. Although EEOC’s disparate impact theory of background checks has not yet been tested in an Oklahoma federal court, it now seems unlikely the EEOC will be able to force employers to unknowingly hire convicted felons. Even so, equal employment opportunity matters should not be ignored. EEOC has spent and will continue to spend a lot of energy on trying to make this theory of discrimination work.
Although background checks may be a legitimate way to reduce theft and violence in the workplace, such checks are also regulated by a patchwork of federal, state, and local laws and regulations. Even thought Oklahoma counties and cities do not necessarily have an appetite for meddling in the employer-employee relationship, there are other places where meddling is the rule rather than the exception. Consequently, multistate employers are at the greatest risk for liability because, as the company’s footprint gets larger, compliance becomes more difficult and expensive.
Despite what may be going on at the state and local level, every employer who purchases background checks from a vendor must comply with the Fair Credit Reporting Act (FCRA), a federal consumer protection law. Basically, there are things an employer must do before obtaining a background check and things an employer must do before taking adverse action based on a background report. A good background check vendor will have all the information you need, including compliance documents and a model policy. An even better background check vendor will contractually agree to defend you in court and pay any expenses related to your FCRA liability caused by the vendor or by your reliance on the vendor’s expertise. The best vendor will also provide you with a certificate as named insured so its own insurance will defend your company and pay for FCRA liability rather than simply contractually promise to do so.
Violations of the Fair Credit Reporting Act (FCRA) can be expensive, but how expensive depends on whether the violation was negligent or willful. Whether negligent or willful, the employer can be on the hook for attorney fees and costs. The attorney fees may be far more costly than any other measure of the plaintiff’s damages. In fact, attorneys like taking promising FCRA cases because they know they will get paid for their hard work. Additionally, an employer who willfully violates FCRA can also be liable for punitive damages. To make matters worse, because background checks are normally applied to a range of applicants for different jobs over a long period of time, a single FCRA violation in the company’s background check procedure can affect several people: class action lawsuits are a real danger. Just two years ago, a federal court approved a $5.9 million settlement against a bus company that obtained background checks on applicants without obtaining the applicants’ permission.
Flexible Spending Accounts allow employees to spend pre-tax dollars on medical expenses. Originally, unspent amounts were forfeited at the end of the year. Later, employers could permit an optional period to use up funds in the first few weeks of the new year. Beginning in 2014, employers will have the option to allow employees to rollover up to $500 into the next plan year. Click here to read the IRS press release.
The Consumer Financial Protection Bureau (CFPB) recently warned employers that they may not require employees to receive payroll on a debit card chosen by the company. The CFPB is involved because it has regulatory control over the Electronic Funds Transfer Act and Regulation E. Be aware that state regulation of this practice varies widely. Click here to read the press release, which contains links to more detailed information.
Please do not hesitate to contact the Firm with any questions you may have about the effect of laws and regulations on your business or its operations.