Scherzer Blog

What’s up with California’s new E-Verify law?

The new law, AB 622, which went into effect January 1, 2016, adds Labor Code section 2814 to strengthen current California prohibitions on employers’ use of E-Verify and other electronic employment eligibility verification systems. Labor Code section 2811 (enacted in 2011) already prohibits private employers from using E-Verify or such other verification systems, unless required by federal law or as a condition of receiving federal funds.

The amended Labor Code section 2814 expands the definition of an unlawful employment practice to prohibit an employer or any other person or entity from using the E-Verify system at a time or in a manner not required by a specified federal law or not authorized by a federal agency memorandum of understanding to check the employment authorization status of an existing employee, or an applicant who has not received an offer of employment, except as required by federal law or as a condition of receiving federal funds. The new law also requires an employer that uses the E-Verify system to provide to the affected employee any notification issued by the Social Security Administration or the United States Department of Homeland Security containing information specific to his/her E-Verify case or any tentative non-confirmation notice. Employers will now face a civil penalty of $10,000 for each violation of these provisions.

Read the text of AB 622
Read guidance published by the U.S. Department of Homeland Security on conducting internal audits regarding Form I-9 compliance

|Employment Decisions|

FTC files charges against operators of alleged high school diploma mills

The Federal Trade Commission (the “FTC”) filed complaints on February 10, 2016 against two operators of online “high schools” that claim to be legitimate but allegedly are diploma mills, charging anywhere from $135 to $349 for a worthless certificate.

Complaints in both cases filed by the FTC in the U.S. District Court for the District of Arizona charge that the operators bought several website names designed to appear like legitimate online high schools and used deceptive metatags with terms such as “GED” and “GED online” to bring the bogus sites higher in search rankings. Once consumers got to the sites, messages popped up implying that the diplomas offered were equivalent to an actual high school diploma.

According to the FTC’s documents, the “courses” amounted to four untimed and unmonitored multiple-choice tests, requiring that students answer 70% of each test correctly. For some “high schools,” when students failed to meet that standard, they were redirected to the test once more, and this time, the correct answers were highlighted so that the students could change their answers. Other “high schools” provided students with an online “study guide” that also highlighted the correct answer for students to select when taking the test.

Upon completing the tests, the FTC’s documents charge that consumers were directed to a set of menus to evaluate their “life experiences,” where selecting that he/she knows how to “balance

[a] checkbook” translates as credit for accounting coursework. If a consumer says they “listen to music occasionally,” he/she may be given credit for a music appreciation course.

The FTC’s complaints in both cases point to numerous consumers who sought to use the diplomas to get jobs, apply for college and even join the military, only to find out that their diplomas were not recognized.

Read the FTC’s complaint against Stepping Stonez Development, LLC et al.
Read the FTC’s complaint against Capitol Network Distance Learning Programs, LLC et al.

|Fraud, Lawsuit|

Uber settles class-action for $28.5 million for misleading claims about drivers’ background checks

On February 12, 2016, Uber agreed to settle a consolidated class-action filed in the U.S. District Court for the Northern District of California (Philliben v. Uber Technologies, Inc. and Mena v. Uber Technologies, Inc.) by paying $28.5 million to approximately 25 million riders and promising to avoid using certain language in safety-related advertising, as well as the term “safe ride fee.”

In their complaint filed in 2014, the plaintiffs alleged that Uber’s claim of conducting “industry-leading background checks” for which they paid a “safe ride fee” of $1 to $2 on top of each fare, was false and misleading. According to the complaint, Uber does not and has never had an “industry-leading background check process.” To the contrary, the complaint stated that background screening by Uber does not involve fingerprint identification and, therefore, cannot ensure that the information obtained from a background check actually pertains to the driver that submitted the information. By contrast, most taxi regulators in United States require drivers to undergo criminal background screening, using fingerprint identification, and typically employing a technology called “Live Scan.” Going forward, Uber said it will rename the “safe ride fee” as a “booking fee” which will be used to cover safety and additional future operational costs.

If the judge approves the settlement, members of the class who rode in an Uber vehicle in the United States between January 1, 2013 and January 31, 2016 will be eligible to receive a portion of the settlement. If that pot is divided evenly among Uber’s 25 million passengers, after attorneys’ fees, each will get around $1.

Read the consolidated class-action complaint here.

|Lawsuit|

Province of Ontario passes the Police Record Checks Reform Act

On December 1, 2015, Ontario passed the Police Record Checks Reform Act, 2015 (the “Act”) which has significant implications regarding criminal record checks. The Act establishes comprehensive standards governing the type of information that can be disclosed by police in response to record check inquiries, and is intended to remove unnecessary barriers to employment, licensing, holding office, applying to educational programs and participating in volunteer activities. Its main objective is to prevent the inappropriate disclosure of non-conviction and non-criminal records, such as information obtained from street checks or “carding,” as well as mental health information.

Possibly the most significant requirement under the Act is that the individual must review the requested information and then consent to its disclosure. In the event that potentially inappropriate non-conviction information is included in a record, the Act provides that the individual may request a reconsideration of the disclosure. As a result, employers who conduct employment criminal record checks will now only be able to obtain the results if the applicant/employee has consented to the disclosure.

|Legislation|

Employers in New Jersey may face tougher restrictions for employment credit checks

Assembly Bill A2298Â which prohibits employment discrimination against a current or prospective employee based on information in a credit report advanced to a second reading on December 14, 2015. The proposed legislation prohibits an employer from requiring a credit check on a current or prospective employee, unless the employer is required to do so by law, or reasonably believes that an employee has engaged in a specific activity that is financial in nature and constitutes a violation of law. The bill does not prevent an employer from performing a credit inquiry or taking action if credit history is a bona fide occupational qualification of a particular position or certain employment classifications. An earlier version of the legislation passed the Senate in May 2012 in a 22-16 vote but was never voted on in the full Assembly.

|Employment Decisions, Legislation|

Portland’s new ban-the-box law goes beyond Oregon’s version

Effective July 1, 2016, covered Portland businesses will be prohibited from asking job applicants about their criminal history or accessing such records until after a conditional offer has been extended. The city’s legislation goes beyond the state’s law, which beginning January 1, 2016, prohibits Oregon businesses, unless exempted, from including criminal history questions during the preliminary hiring stages, but allows the inquiries during the interview process.

Just as with Oregon’s ban-the-box law, businesses within the city of Portland are excluded from coverage when hiring for certain positions, which include law enforcement, criminal justice, and working with children, the elderly, people with disabilities, and other groups considered vulnerable.

|Legislation|

Philadelphia expands its ban-the-box ordinance

On December 15, 2015, Philadelphia Mayor Michael Nutter signed Bill 150815 expanding the city’s ban-the-box legislation. The new ordinance, which goes into effect on or about March 14, 2016, amends Chapter 9-3500 of the Philadelphia Code entitled “Fair Criminal Records Screening Standards,” by modifying certain definitions and adding additional requirements regarding the screening of job and license applicants for criminal history. With limited exceptions, the new ordinance applies to employers having any employees within the city of Philadelphia. (The prior ordinance covered employers with 10 or more employees.) The highlights of the law include:

questions about criminal records must be removed from the job application–the ordinance specifically notes that multi-state applications may not include the question with a disclaimer for Philadelphia applicants not to answer;
employment materials cannot contain questions or refer to the applicant’s willingness to submit to a background check before a conditional offer has been extended;
criminal record inquiries must be postponed until after a conditional offer has been made;
notice of the background check must state that any consideration of the results will be tailored to the job;
employment decisions can only include a conviction that occurred less than seven years ago–employers may add to the seven year period any time of actual incarceration served because of the offense;
screening process must include individualized assessment for each applicant;
if the applicant is rejected based on a criminal conviction, he/she must be advised of the specific reason and provided with a copy of the record.

|Educational Series, Employment Decisions|

Phony job applicants targeting employers to collect on FCRA violations

As we reported throughout the year, class-actions brought against employers under the Fair Credit Reporting Act (“FCRA”) alleging hyper-technical violations are proliferating, with several resulting in multi-million dollar settlements.

But there appears to be a new development in this area. According to a National Law Review article, phony job applicants who have no intention of being employed with the targeted companies are submitting employment applications solely to position themselves as plaintiffs in class action litigation and potentially get a windfall settlement. The National Law Review article reports that the fake applicants typically fill out an online job application (usually with companies that have nationwide operations), sign the background check authorization, and then, after receiving an offer or rejection letter send a demand letter stating that the employer’s background check disclosure form or process does not comply with the requirements imposed by the FCRA and demand huge payouts to settle their claims and avoid the filing of a class action lawsuit.

The FCRA provides for statutory damages ranging from $100 to $1,000 per violation for non-compliance with the FCRA’s notice and disclosure requirements, even where the plaintiff has suffered no actual harm or damag

|FCRA, Lawsuit|

New US-EU Safe Harbor agreement may be around the corner

Various sources report that US and EU representatives met on December 17, 2015 to hash out an agreement that would replace the recently invalidated Safe Harbor privacy framework. The two governments aim to have a replacement framework in place by January, says EU Justice Commissioner Vera Jourová. One of the main goals of the new program is to allow EU citizens’ grievances to be filed directly with their national privacy regulator.

As reported in our client alert and blogs, in October 2015, judges from the European Court of Justice issued a judgment striking down a 15-year old agreement, known as the Safe Harbor framework, which allowed US and European organizations to freely move personal data between the two regions as long as the US ensured an adequate level of data protection at the company and certified that it would abide by the seven EU data privacy principles regarding notice, choice, onward transfer, security, data integrity, access, and enforcement. The invalidation ruling impacted nearly 4,000 businesses that relied on the Safe Harbor framework to transfer data between the US and Europe and requires all businesses to revaluate their compliance with European data privacy and security standards.

|European Union, Legislation|

Importance of background checks in employment decisions

Performing a background check as part of the hiring process, promotion, or retention in today’s world is essential. Stakeholders expect it. Regulators mandate it.

In a turbulent economy, the pool of job candidates is greater than ever and misrepresentations abound. For many firms, once an offer of employment has been extended, it is common practice to check the candidate’s background. Depending on the risk level of the position and its requirements, background checks can run the gamut from reference calls done internally, to using a consumer reporting agency to perform comprehensive searches to determine the existence of potentially negative information, such as criminal matters, civil litigation, bankruptcy filings, tax liens, judgments, regulatory actions, driving violations, and adverse media publicity, and to verify academic, licensing, employment and other professional qualifications and claims.

The law is clear–an employer who hires or retains a dangerous or incompetent employee can be held liable for that employee’s wrongful acts, if committed in the course and scope of his or her employment. The theories of negligent hiring and retention go even further–someone who is injured by an employee can sue the employer even if the employee’s conduct is outside of the employer’s control. For instance, one court found the owner of an apartment complex liable for a handyman’s assault of a tenant after working hours. The liability existed because the owner failed to screen the handyman’s background, which included a long list of violent crimes.

Underpinning the negligent hiring and retention theories is the negligence of the employer—that is, the employer knew or should have known the employee was unfit for the job, posed an unreasonable risk of harm to others, and did nothing about it. Virtually every state recognizes these theories as causes of action, or if not, has a similar legal theory. One of the best ways to reduce the risk of negligent hiring and retention liability is to perform adequate background checks as part of the hiring process and in connection with promotions or retention.

A well-designed background screening program that is compliant with applicable laws and regulations makes good business sense, as an individual’s prior history is often a predictor of future performance, workplace behavior and cultural fit. Various studies have shown that the cost of a bad hire is one to five times the salary of the job in question, considering the direct and indirect cost involved in recruiting, hiring, training, development, administration, management, and potential litigation, as well as the wasted wages and benefits. Comprehensive background screening can help identify individuals who may have a propensity for violence, theft, fraud, dishonesty, substance abuse, absenteeism, and other misconduct, and at the same time, find the candidates that can make the employer more successful.

Many employers are also required by government regulation, their insurance carriers, and/or their clients to conduct background checks. A comprehensive background check is clearly worth the investment. Employers never want to say “we should have known,” as an uninformed employment decision can result in significant financial losses and quickly tarnish an employer’s reputation.

|Educational Series, Employment Decisions|