California Ban the Box Law

The nationwide campaign to "ban the box" has borne fruit in California. AB 1008, which will become effective January 1, 2018, makes it an unlawful employment practice for an employer with 5 or more employees to include on an employment application any question that seeks the disclosure of an applicant’s conviction history, to inquire into or consider the conviction history of an applicant until that applicant has received a conditional offer, and, when conducting a conviction history background check, to consider, distribute, or disseminate information related to specified prior arrests, diversions, and convictions. The new statute adds Government Code section 12952 to the Fair Employment and Housing Act.

An employer who intends to deny an applicant a position of employment solely or in part because of the applicant’s conviction history to make an individualized assessment of whether the applicant’s conviction history has a direct and adverse relationship with the specific duties of the job. If an employer a preliminary decision to deny employment based on that individualized assessment, it must provide the applicant with written notification of the decision, and allow him or her 5 business days to respond to that notification before the employer may make a final decision. If the applicant notifies the employer in writing that he or she disputes the accuracy of the conviction history and is obtaining evidence to support that assertion, the employer must grant the applicant an additional 5 business days to respond to the notice. The employer must consider information submitted by the applicant before making a final decision.

The ban the box campaign is aimed at encouraging employers to consider hiring those who have criminal convictions, and not to disqualify applicants automatically because of any criminal conviction.

Anti-discrimination laws banning employment practices that have a disparate impact on those with protected characteristics should already have made employers cautious about imposing blanket disqualification based on any conviction. Because studies have shown that such practices may result in a disproportionate number of minority applicants being disqualified, both the EEOC and the California Department of Fair Employment and Housing have made clear that employers risk liability for employment discrimination if they do not use a nuanced approach when considering the effect of convicitions on employment eligibility. See this enforcement guidance from the EEOC, and this recent regulation from the DFEH.

Restrictions on the ability to use criminal convictions for hiring decisions can put employers on the horns of a dilemma.

• On one horn, employers may face liability for negligent hiring if they do not conduct a thorough background investigation. For example, the North Dakota Supreme Court affirmed a verdict against a vacuum cleaner manufacturer who employed door-to-door salesmen to sell its products. One of the salesman had been convicted of two assault charges and two weapons charges, and had a criminal sexual conduct charge pending when he was hired. The company had not conducted a background check. McLean v. The Kirby Company.
• On the other horn, if the use of criminal background checks disproportionately disqualifies minority applicants, the employer may be liable for employment discrimination. For example, Pepsi Beverages had to pay $3.13 million to settle EEOC charges that criminal background check policy discriminated against African American applicants. EEOC press release.

Contact us if you have questions about what the new statute means for you.

Personality Testing

Time Magazine has a cover story this week entitled "How High Is Your XQ?" which describes the current interest among employers in the use of personality tests to make hiring, promotion and termination decisions. The answers to test questions are supposed to reveal personalty traits that are correlated with success on the job. You may hear the area referred to as "people analytics." The providers of such testing include Hogan Assessment, Caliper, Prophecy Healthcare, Pegged Software, Gallup's StrengthFinder, and Infor.

Testing raises legal issues that employers need to be aware of before they put people analytics into practice:

Reasonable accommodation: The disability laws require employers to provide reasonable accommodations during the hiring process, to make sure that applicants are not screened out because of an inability to perform tasks that are not essential functions of the job. The EEOC's guidance on "Job Applicants and the Americans with Disabilities Act" gives this example: "An employer gives a written test to learn about an applicant's knowledge of marketing trends. Maria is blind and requests that the test be given to her in braille. An individual's knowledge of marketing trends is critical to this job, but the employer can test Maria's knowledge by giving her the test in braille. Alternatively, the employer could explore other testing formats with Maria to determine if they would be effective, for example, providing a reader or a computer version of the test."

Disparate impact: Testing may exclude people with certain protected characteristics, This is referred to as disparate impact. For example, in Griggs v. Duke Power Co., 401 U.S. 424 (1971) (the Supreme Court's seminal case on disparate impact), the employer's requirement that applicants have a high school diploma and submit to an intelligence test excluded a disproportionate number off African American applicants from consideration. Where a disparate impact on those with a protected characteristic is shown, the employer must that the testing is job-related and consistent with business necessity. Even if the employer can make that showing, the testing may still be unlawful if the employees can show that there is a less discriminatory alternative. The process for determining whether a test is job-related and consistent with business necessity is called validation. A group of federal agencies (including the EEOC) has developed Uniform Guidelines on Employee  Selection Procedures for use in making sure that testing has sufficient validity to survive scrutiny under the discrimination laws. For a discussion of applying the guidelines to Prophecy, see Legal Defensibility of the Prophecy Assessment, from Biddle Consulting (one of the partners in the development of Prophecy). For further information, see also the EEOC's fact sheet on "Employment Tests and Selection Procedures."

Using Convictions and Arrests To Make Hiring Decisions

Last week, the EEOC adopted an enforcement guidance on the use of arrest and conviction records in employment decisions. It issued a press release, the guidance document itself, and a question-and-answer document about the guidance. With the guidance in mind, now is a good time for employers to scrutinize how they use such records to make hiring decisions.

The EEOC's concern is that the use of such records may have an disparate impact on those with protected characteristics. As the guidance document explains, "Nationally, African Americans and Hispanics are arrested in numbers disproportionate to their representation in the general population. In 2010, 28% of all arrests were of African Americans, even though African Americans only comprised approximately 14% of the general population. In 2008, Hispanics were arrested for federal drug charges at a rate of approximately three times their proportion of the general population. Moreover, African Americans and Hispanics were more likely than Whites to be arrested, convicted, or sentenced for drug offenses even though their rate of drug use is similar to the rate of drug use for Whites."

Nonetheless, anti-discrimination law recognizes that the wrongful conduct revealed by arrest and conviction records may be sufficiently job-related to justify their use despite a disparate impact. The EEOC says that employers may rely on convictions if (1) data validates the use of convictions for particular offenses as predictors of subsequent work performance, or (2) the employer determines which convictions will be considered by considering the nature of the crime, the time elapsed since the conviction, and the nature of the job, and then provides an opportunity for an individualized assessment for people excluded by the screen to determine whether the policy as applied is job related and consistent with business necessity.

Because they are not proof of wrongdoing, arrest records alone should never be relied upon to make employment decisions. However, the fact of an arrest may prompt the employer to investigate the circumstances of the arrest and conclude that disqualifying misconduct did occur. The guidance documents gives the following example if a proper use of the fact of an arrest:

• Andrew, a Latino man, worked as an assistant principal in Elementary School for several years. After several ten and eleven-year-old girls attending the school accused him of touching them inappropriately on the chest, Andrew was arrested and charged with several counts of endangering the welfare of children and sexual abuse. Elementary School has a policy that requires suspension or termination of any employee who the school believes engaged in conduct that impacts the health or safety of the students. After learning of the accusations, the school immediately places Andrew on unpaid administrative leave pending an investigation. In the course of its investigation, the school provides Andrew a chance to explain the events and circumstances that led to his arrest. Andrew denies the allegations, saying that he may have brushed up against the girls in the crowded hallways or lunchroom, but that he doesn’t really remember the incidents and does not have regular contact with any of the girls. The school also talks with the girls, and several of them recount touching in crowded situations. The school does not find Andrew’s explanation credible. Based on Andrew’s conduct, the school terminates his employment pursuant to its policy.

Other laws bar use of some arrest and conviction records without regard to their discriminatory adverse impact. For example, the Fair Credit Reporting Act bars consumer reporting agencies from reporting records of arrests that did not result in entry of a judgment of conviction, where the arrests occurred more than seven years ago.

In California, arrest records may not be considered at all unless the arrest resulted in a conviction, or the applicant is awaiting trial. Employers may not inquire about marijuana convictions that are more than two years old.  See California Labor Code  sections 432.7, 432.8. 

Does the Wal-Mart decision matter?

Business and employee advocates seem to agree that the Supreme Court's decision in Wal-Mart Stores, Inc. v. Dukes (No. 10-277 June 20,2011) is a landmark decision of some sort. The U.S. Chamber of Commerce says that it "is without a doubt the most important class action case in more than a decade." According to the ACLU, the decision "increases the likelihood that discrimination will now go unremedied in many cases." Newspaper editorial boards concur. The L.A. Times says that, because of the decision, "serious allegations against Wal-Mart dating back a decade won't be tested in court, and similar lawsuits against other employers will never be undertaken at all." A Wall Street Journal article says that the decision "is likely to reverberate in other class actions, making lower courts scrutinize whether large groups of employees are similar enough to sue together."

The fact of the matter is that the decision breaks no new ground and is unlikely to have any long term effects on discrimination cases. This is an example of the Supreme Court's correction of an error by the Ninth Circuit in applying established class action rules, not of the articulation of a new standard. It was not appropriate to use the class action device to to address pay and promotion decisions at 3,400 individual stores involving hundreds of thousands of employees. In fact, all nine justices agreed that the Ninth Circuit's decision to recognize the class alleged in the case was wrong.

Employers should not expect that large class actions will become less frequent, particularly in the wage and hour area, where an unlawful pay practice can lead to multi-million dollar awards to employees. Wal-Mart itself has had a string of such cases go against it recently. On June 10, 2011, a Pennsylvania appellate panel affirmed the award of over $150 million in damages and penalties for wage and hour violations. Braun v. Wal-Mart Stores, Inc., 2011 PA Super 121. In December 2008, it agreed to pay up to $640 million to settle a number of wage and hour class actions around the country.

Discrimination class actions will also continue, where the plaintiffs can show that groups of employees with the same protected characteristic have different terms and conditions of employment than others. Ebbert v. Nassau County (Case No. 05-CV-5445 April 32, 2009) is a good example. Nassau County paid police communications workers (over 90 percent of whom were women) less then it paid fire communications workers (100 percent of whom were men). The county could not come up with a sufficiently convincing explanation for the disparity to win a summary judgment motion. On June 9, 2011, it submitted a proposed settlement of $7 million for court approval to settle the class action.

Use of Criminal Background Checks May Violate Discrimination Laws

In an effort to avoid hiring problem employees, employers frequently include criminal background checks as part of the application process. Employers who rely on such information must be careful to avoid practices that might subject them to discrimination lawsuits.

The anti-discrimination laws prohibit employment practices that have an unjustified disparate impact on a protected group, even if the employer did not intend to discriminate. For example, the use of height and weight requirements in law enforcement and firefighting organizations excluded large percentages of women from consideration. Therefore, such requirements are illegal if they are not sufficiently job-related, as the Supreme Court explained in Dothard v. Rawlinson.

Similar considerations apply to blanket exclusions based on criminal history. For example, the Eighth Circuit Court of Appeals found that the Missouri Pacific Railroad's policy of disqualifying any applicant with a criminal conviction other than a minor traffic offense had a disparate impact on Black applicants. The evidence established that in urban areas from 36.9 percent to 78.1 percent of all Blacks would incur a conviction during their lifetimes, while only 11.6 percent to 16.8 percent of all white persons would acquire a conviction. See Green v. Missouri Pacific Railroad Co.

Publications from the EEOC explain its enforcement philosophy in this area. An EEOC fact sheet explains how selection procedures may violate Title VII by having a disparate impact on applicants with protected characteristics. In an informal discussion letter, the EEOC explained that, although Title VII does not override federal background check requirements, it does preempt state or local requirements that have a discriminatory impact. In a policy guidance, the EEOC concluded that a business justification can rarely be demonstrated for blanket exclusions based on arrest records. In a policy statement on use of conviction records, the EEOC states that, where a disparate impact is shown, the employer must show that it considered these three factors: (1) the nature and gravity of the offense or offenses, (2) the time that has passed since the conviction and/or completion of the sentence; and (3) the nature of the job held or sought.

A 2009 study confirms that reliance on old convictions is unjustified. As the authors of the study explain on the National Institute of Justice website in 'Redemption' in an Era of Widespread Criminal Background Checks, after eight years the "hazard rate" (the chance that someone will be arrested) for ex-cons declines to the rate for the general population.

Sometimes, the EEOC overreaches in this area. In EEOC v. Peoplemark, Inc., a federal district court in Michigan awarded the defendant its costs (including attorney's fees) after the EEOC continued to pursue a disparate impact claim based on use of criminal background checks long after it should have realized that it had no case. The company did not in fact a blanket exclusion policy. It had in fact hired several of those with criminal records whom the EEOC purported to be representing in the lawsuit.

California employers should also be aware that state law imposes restrictions on the use of certain convictions. For example, employers are prohibited by Labor Code section 432.7 and 432.8 from making employment decisions based on arrests that did not result in convictions and marijuana convictions that are more than two years old. Civil Code section 1786.18 prohibits investigative reporting agencies from reporting arrests and convictions that are more than seven years old.

UPDATE [1/26/2012]

On January 12, 2012, the EEOC announced a $3.1 million settlement with Pepsi Beverages of a claim that its criminal background check policy had a disparate impact on African American employees. Under Pepsi’s former policy, job applicants who had been arrested pending prosecution were not hired for a permanent job even if they had never been convicted of any offense. The former policy also denied employment to applicants from employment who had been arrested or convicted of certain minor offenses. Pepsi adopted a new background check policy and will offer jobs to those improperly excluded under its former policy.

Staub v. Proctor Hospital And Motivating Factor

The Supreme Court's recent decision in Staub v. Proctor Hospital, Case No. 09-400 (Mar. 1, 2011) discusses the standards for proof of motive in a claim for discrimination based on military obligations. This prompts consideration of the role of motive in all sorts of employment cases.

In Staub, two low level supervisors were hostile to the military reserve obligations of an angiography technician. One of the supervisors gave the technician a disciplinary warning with a directive to report to one of the supervisors when his cases were completed. After it was reported that the technician had violated the directive, the vice president of human resources decided to fire him. The technician complained that one of the supervisors had fabricated the original warning out of hostility to his military obligations, but the vice president adhered to her decision.

The Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) and the Department of Labor's USERRA Regulations prohibit employers from discriminating against employees based on military service or the obligation to perform military service. An employee may sue for damages caused by a USERRA violation if his military affiliation was a "motivating factor in the employer's action." Although Proctor Hospital argued that it was shielded from liability because its vice president was not hostile to the technician's military obligations. The Supreme Court rejected the argument, holding that, "if a supervisor performs an act motivated by antimilitary animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA."

The same analysis appears to apply in cases brought against California employers under Title VII and under California's Fair Employment and Housing Act (FEHA). See, e.g., Poland v. Chertoff, 494 F.3d 1174 (9th Cir. 2007); Reeves v. Safeway Stores, Inc., 121 Cal.App.4th 95, 16 Cal.Rptr.3d 717 (2004).

Employers should keep in mind that there are other standards for proving unlawful motive in other types of employment cases.

Where direct evidence of discriminatory intent is unavailable, plaintiffs may prevail in disparate treatment cases under Title VII and FEHA by invoking the burden-shifting approach set forth in McDonnell Douglas. See McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973); Guz v. Bechtel Nat. Inc., 24 Cal.4th 317, 8 P.3d 1089 (2000). Under that approach, the plaintiff establishes a prima facie case by showing that (1) he belongs to a racial minority; (2) he applied and was qualified for a job the employer was trying to fill; (3) though qualified, he was rejected; and (4) thereafter the employer continued to seek applicants with complainant's qualifications. That shifts the burden to the employer to provide a legitimate reason for its action, which the plaintiff may then overcome by proving that the employer's stated reason is a pretext for discrimination.

The courts will also entertain disparate impact cases under Title VII and FEHA. Griggs v. Duke Power Co., 401 U.S. 424 (1971); Guz v. Bechtel National, Inc. 24 Cal.4th 317, 100 Cal.Rptr.2d 352, 8 P.3d 1089 (2000). To prevail in such cases, the plaintiff must identify a specific hiring practice (such as a test) that has a substantial statistically disproportionate effect on a protected group. Even if the employer did not intend to discriminate, it is still liable for discrimination unless it can show that the practice is substantially job-related. The EEOC has adopted Uniform Guidelines on Employee Selection Procedures, which provide guidance for avoiding disparate impact claims.

In cases where there is evidence of both a discriminatory, and a non-discriminatory motive, employers may invoke the mixed motive defense. Desert Palace, Inc. v. Costa, 539 U.S. 90, 123 S.Ct. 2148 (2003); Heard v. Lockheed Missiles & Space Co., 44 Cal. App. 4th 1735, 52 Cal. Rptr. 2d 620 (1996). Under the FEHA, it is a complete defense. In Title VII cases, it limits the plaintiff's remedies.