The Right to Hire on Qualifications

Hiring Without Fear of Lawsuits

Employers want to be able to hire the best and most qualified to staff every position. Yet the myriad equal employment opportunity (EEO) laws often intervene to roadblock these efforts. Affirmative action—requiring an employer to hire a qualified minority candidate instead of a similarly qualified nonminority candidate—remains in play for public employers and those with certain equal employment opportunity obligations pursuant to federal contracts. Even without affirmative action obligations, though, employers have a difficult time hiring the best person for a position. And the Equal Employment Opportunity Commission (EEOC) is making it increasingly difficult to make hiring decisions by taking away the types of legitimate information businesses can consider in the hiring process.

Illegal Job Interview Questions

Most businesses know that there are certain topics that simply are off limits during job interviews. Questions about race, sex, age, religion, disability, and marital and family status, for example, are EEO no-nos. Yet some illegal questions are not as obvious. “What year did you graduate high school?” might seem like innocuous small talk, but such a question could lead to an illegal inference about a candidate’s age.¹

The fact is that many interview questions may seem innocuous enough yet create serious discrimination problems. The following is just a sample of the kinds of questions that are problematic, in contrast to legitimate questions to extract lawful information.

Age

  “When did you graduate high school/college?”

  “How old are you?”

  “How many years until you plan to retire?”

  “How many years seniority did you have at your prior company?”

in contrast to…

  “Can you submit a birth certificate or other proof of age if you are hired?”

  “Are you over 18?” [work eligibility]

National Origin

  “What country are you from?”

  “That is an interesting accent. Where were you born?”

  “Where were you or your parents born?”

in contrast to…

  “Are you eligible to work in the United States?” [work eligibility]

Criminal Records

  “Have you ever been arrested?” [race]

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in contrast to…

  “Have you ever been convicted of a crime?” [honesty, qualifications]

Sex/Gender

  “Are you comfortable traveling alone?”

  “Are you always this soft-spoken (to a man) / aggressive (to a woman)?”

  “How many children do you have living at home?”

Disability

  “What is your medical history?”

  “Do you have any medical conditions or disabilities?”

  “How often are your children ill?”

  “How will your apparent disability affect your future job performance?”

  “Have you ever filed a workers’ comp claim?”

  “Do you have a history of alcohol or drug addiction?”

  “What medications are you taking?”

in contrast to…

  “Do you need any accommodations to enable you to participate in the interviewing or hiring process?”

  “How would you perform this particular job task?”

Some of these examples are more obvious than others. Educating interviewers about these issues—and training them on how to avoid discriminatory questions—will go a long way toward preventing unconscious biases from tainting an interview and making what could have been an otherwise lawful hiring decision appear unlawful.

These lists give some guideposts to avoid liability. They are not meant to be exhaustive. The general rule of thumb is, that unless you are absolutely sure that an interview question is 100% job-related, do not ask it. Stick to the job requirements and how a candidate’s work-related background fits with those requirements.

Systemic Discrimination in Hiring Practices

Systemic cases are those that address a pattern, practice, or policy of alleged discrimination or class cases where the alleged discrimination has a broad impact on an industry, profession, company, or geographic area. The identification, investigation, and litigation of this category of cases are a “top priority” of the EEOC.

Discrimination comes in two basic flavors: disparate treatment and disparate impact. Systemic discrimination can occur with either.

Disparate treatment is intentional discrimination because of one’s protected trait: race, sex, age, religion, national origin, disability, or genetic information.

Disparate impact is discrimination that, while unintentional, is nevertheless unlawful because a particular employment practice disproportionately impacts a protected group. Under Title VII, unintentional employment discrimination occurs when an employer “uses a particular employment practice that causes a disparate impact on the basis of race, color, religion, sex, or national origin and fails to demonstrate that the challenged practice is job related for the position in question and consistent with business necessity.”²

The United States Supreme Court has devised a three-part burden-shifting test to determine whether an unlawful disparate impact exists in any particular case. First, the plaintiff must establish a prima facie case of discrimination—that an actual adverse impact has occurred. If the plaintiff succeeds, the employer must show that the protocol in question has a “business justification.” If the employer shows business justification, the plaintiff must then show that other tests or selection protocols would serve the employer’s interest without creating the undesirable discriminatory effect (i.e., that the proposed alternative is equally effective as the employer’s procedure).³

For a plaintiff to satisfy its prima facie showing, the plaintiff must not only identify the specific challenged employment practice but must also demonstrate through relevant statistical analysis that the challenged practice has an adverse impact on a protected group. “Relevant” statistical analyses encompass both a standard deviation analysis and what is known as the “four-fifths test.”

Under a standard deviation analysis, “if the difference between the expected value and the observed number is greater than two or three standard deviations,” then the hypothesis that the employment decision was made without regard to a protected characteristic would be suspect.⁴ Thus, typically a difference of at least two standard deviations is necessary for a plaintiff to make out it prima facie case under this statistical test.

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Under a four-fifths analysis, “a selection rate for any race, sex, or ethnic group which is less than four-fifths [80%] of the rate for the group with the highest rate will generally be regarded by the [EEOC] as evidence of adverse impact.”⁵ For example, assume that whites have a 75% pass rate for a test. For that exam not to have a presumptive disparate impact, the pass rate for minority candidates would have to be at least four-fifths of the white candidates’ pass rate, or 60%. Anything less would be a prima facie showing of disparate impact.⁶

All is not lost, however, if an employee shows a statistical disparate impact. At that point, the employer bears the burden of producing evidence demonstrating a business justification for the challenged employment practice.⁷ It is not enough, however, for an employer simply to articulate a business reason for the test. The employer must “validate” the test via content validation, construct validation, or criterion-related validation.⁸ Regardless of the variety of validation used, “under no circumstances will the general reputation of a test . . . its author . . . or causal reports of its validity be accepted in lieu of evidence of validity. Specifically ruled out are . . . nonempirical or anecdotal accounts of selection practices or selection outcomes.”⁹

The EEOC’s current attack on systemic discrimination focuses on unconscious discrimination. Company-wide policies that have the potential affect certain groups more than others on the EEOC’s enforcement radar. What are some of these issues for employers to heed?

• Arrest and conviction records
• Credit histories
• Employment status
• Age

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Arrest and Conviction Records

Conviction records have the potential to have a disparate impact on African Americans and Hispanics. Therefore, employers should only use them when “job related and consistent with business necessity.” To ensure that applicants’ criminal history information is used in a way that is consistent with Title VII, the EEOC recommends that employers limit criminal history inquiries to convictions that are related to the specific positions in question and that have taken place in the past seven years.

Arrest records are different than conviction records because of their inherent unreliability. For example, they are not persuasive evidence that the person engaged in the alleged conduct and may also be poorly reported or updated. If employers decide that arrest records serve a useful purpose in screening applicants, their use should be limited to offenses related to the specific position. To account for the potential unreliability of arrest records, employers should also provide applicants a reasonable opportunity to dispute their validity.

In April 2012, the EEOC announced its long waited—and, by employers, long dreaded—Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions under Title VII.¹⁰ This Guidance flushes out the EEOC’s prior positions on the use of conviction records and adds some hurdles for employers to overcome when using convictions as a hiring criterion.

For example, “as a best practice, and consistent with applicable laws,” the EEOC “recommends that employers not ask about convictions on job applications.” While I certainly appreciate the EEOC’s recommendation, I’m not sure what “applicable laws” it references. This attempt to codify “ban the box” is one clear example where the EEOC is overreaching.

Perhaps the most controversial piece of the new Guidance is the EEOC’s belief that to survive a potential disparate impact claim, employers must develop a targeted screen that considers at least the nature of the crime, the time elapsed, and the nature of the job, and then must provide an opportunity for an individualized assessment to determine if the policy as applied is job-related and consistent with business necessity.

In engaging in this individualized assessment, the EEOC directs employers to consider the following factors:

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• Individualized assessment generally means that an employer informs the individual that he may be excluded because of past criminal conduct; provides an opportunity to the individual to demonstrate that the exclusion does not properly apply to him; and considers whether the individual’s additional information shows that the policy as applied is not job-related and consistent with business necessity.
• The individual’s showing may include information that he was not correctly identified in the criminal record or that the record is otherwise inaccurate.

Other relevant individualized evidence for employers to consider includes:

• The facts or circumstances surrounding the offense or conduct;
• The number of offenses for which the individual was convicted;
• Older age at the time of conviction, or release from prison;
• Evidence that the individual performed the same type of work, post conviction, with the same or a different employer, with no known incidents of criminal conduct;
• The length and consistency of employment history before and after the offense or conduct;
• Rehabilitation efforts (e.g., education/training);
• Employment or character references and any other information regarding fitness for the particular position; and
• Whether the individual is bonded under a federal, state, or local bonding program.

There is no requirement under Title VII that requires an individualized assessment in all circumstances. In the EEOC’s opinion, however, foregoing a screen that includes the individualized assessment will make it difficult, if not impossible, for an employer to justify a criminal background check as job-related and consistent with business necessity. Yet applying this individualized assessment for all applicants will impose a heavy burden on employers. And the greater an employer’s attrition and hiring needs, the heavier that burden will become.

The EEOC concludes by suggesting some best practices for employers who consider criminal record information when making employment decisions:

• Develop a narrowly tailored written policy and procedure for screening applicants and employees for criminal conduct.
• The policy should identify essential job requirements and the actual circumstances under which the jobs are performed.
• The policy should also determine the specific offenses that may demonstrate unfitness for performing such jobs and the duration of exclusions for criminal conduct.
• Record the justification for the policy, procedures, and exclusions, including a record of consultations and research considered in crafting the policy and procedures.
• Train managers, hiring officials, and decision makers on how to implement the policy and procedures consistent with Title VII.

Credit Histories

Another potential selection criterion that has the potential to disparately impact minorities is employers’ reliance on creditworthiness. The EEOC is concerned that poor credit could become a barrier to landing a job. Statistically, African Americans and Latinos tend to have lower credit scores. Additionally, the EEOC disputes whether credit reports are an accurate way to measure an employee’s qualifications.

Conversely, however, employers believe that credit histories are an important screening tool for employers, as they can reveal whether one is responsible. Additionally, depending on the position for which one is being considered, an employer may want to know before one is hired if one has an incentive to steal or otherwise commit fraud.

Blanket prohibitions on any practice are usually not a good idea. In this area, there are good reasons to allow the use of credit checks for job candidates. Consider the following:

• While 60% of employers use credit checks to vet job candidates, only 7.8% use them for all candidates.¹¹
• Employers generally conduct credit checks when the information is relevant to the particular position: jobs with financial or fiduciary responsibilities (91% of employers), senior executives (46%), and jobs with access to confidential employee information (34%).¹²
• Employers do not use credit checks to screen out applicants before they can even get in the door. 57% of businesses only initiate credit checks after a contingent offer, and another 30% only after the job interview.¹³
• Credit checks can help protect against employee theft and fraud. In 44.7% of cases of employee fraud, the perpetrators were experiencing financial difficulties, and in 44.6% of cases they were living beyond their means.¹⁴
• According to credit report provider Experian, employers never see credit scores. However, most of the research on the disparities in credit histories between racial groups is based on those scores. It is unfair to hold employers accountable for the scores they never see.¹⁵

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Despite the EEOC’s efforts to limit the use of credit as a hiring criterion, it is not as if employees are without protections when employers seek to use credit histories in employment decisions. There is an entire federal statute— the Fair Credit Reporting Act—that provides myriad hoops for employers to jump through before and after using credit information. It also requires that employees give their consent before an employer can even request a credit history. And Title VII prohibits the discriminatory use of credit histories. The EEOC seems to be overreaching in its efforts to prohibit a practice that can prove relevant to many positions.

Employment Status

Another selection criterion under attack from the EEOC is employment status—that is, whether one currently is employed or unemployed. Increasingly, more and more employers are requiring as a condition of consideration for hiring that the candidate is currently employed. Indeed, many employers go so far as to write this requirement into the advertisement for a position.

As a management-side attorney, my natural inclination is to write this story off as the EEOC looking for another way to hamstring the ability of companies to use their best judgment in making personnel decisions. Then I considered the data from the Bureau of Labor Statistics, which shows that blacks have an unemployment rate almost two times higher than that of whites, and Hispanics almost 50% higher that of whites.¹⁶

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Given this disparity, can one argue in good faith that a disparate impact does not exist? I am not a statistician, but the impact of this data looks significant to me. Is the real question, then, not whether unemployment status has a disparate impact but whether using current employment status is job-related for the position in question and consistent with business necessity? I can envision lots of legitimate uses for employment status as a screening factor for lots of types of jobs.

According to the testimony of Algernon Austin, Director of the Program on Race, Ethnicity, and the Economy of the Economic Policy Institute, “any practice which disadvantages currently unemployed workers relative to similar employed workers will likely have a disproportionate negative impact on people of color.”¹⁷

At a recent EEOC public hearing on this issue, two advocates for employers, James Urban, an attorney with Jones Day, and Fernan Cepero, Vice President for Human Resources of the YMCA of Greater Rochester and representative of the Society for Human Resource Management, testified on the benefits of businesses using employment status as a hiring criterion.

Mr. Urban relied on his experience to cast doubt on the legitimacy of this issue as a real problem:

At end, under the widespread practice that I have seen employers follow, the simple fact that the applicant is or was unemployed does not operate to disqualify the applicant. The reason the employer may decline to hire the applicant will be the underlying reason the applicant became unemployed, and typically it is job-related. In sum, it is my experience and belief that there is not a widespread practice among employers to disqualify applicants on the basis of unemployment. I submit to you that the anecdotal examples contained in media reports over the past year or so regarding such circumstances are, when viewed in the broad scope, isolated incidents.¹⁸

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Mr. Cepero elaborated further, asserting that the blanket exclusion of the unemployed is not good HR practice and runs contrary to the best interest of companies that simply look to fill jobs with the best people available:

Employers, in SHRM’s experience, whether operating in the currently challenging economy or in more robust times, are focused on finding the right people for the job, regardless of whether or not they are currently employed. Our members recognize that any type of blanket exclusion raises concerns under Title VII. What’s more, exclusionary policies are poor business practices because they prevent organizations from accessing some of the best available knowledge, skills and abilities in a given labor force.¹⁹

As this issue illustrates, the EEOC is looking for systemic discrimination in new and unique places. Just because something might be bad business, however, does not mean it is discriminatory. Nevertheless, employers who use blanket screening tools such as employment status should be aware that the EEOC may be watching. Employers would be wise to document the job-relatedness and business necessity for all screening tools to be prepared if the EEOC appears on your doorstep.

Age

The EEOC is also attacking age and recently held a public meeting debating the use of age as a selection criterion. EEOC Commissioner Stuart J. Ishimaru said, “The treatment of older workers is a matter of grave concern for the Commission. We must be vigilant that employers do not use the current economy as an excuse for discrimination against older workers.”²⁰ Going forward, it is clear that the EEOC will target age discrimination as an enforcement priority. Any company that is either reducing ranks via layoffs or hiring to restaff as the economy rebounds should pay extra attention to age discrimination issues in light of this administrative enforcement.

The EEOC believes that the current economic climate is exacerbating this problem. At a minimum, it is increasing the number of employees who claim to be victims of age discrimination. Last year, the EEOC received 22,778 charges of age discrimination, which represented 24.4% of all charges filed, up from 16,548 charges and 21.8% in 2006.

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The EEOC heard the following testimony:

• William E. Spriggs, Ph.D., Assistant Secretary for Policy, U.S. Department of Labor, testified: “During a deep and long recession, the lengths of time that people remain unemployed increases. Older workers have been overwhelmed in this current recession and their numbers are high among the worst indicators. They are the slowest to be reintegrated from unemployment to employment, which indicates that their job search is longer and more challenging. This comes at the cost of human capital depreciation for older workers.”²¹
• Mary Anne Sedey, plaintiff-side employment lawyer, claimed that older workers rarely litigate discriminatory hiring claims and urged the EEOC to investigate age discrimination in hiring. She cited three reasons: applicants lack information about why they were turned down; they are reluctant to file a claim based on a hunch; and they cannot find lawyers willing to take their claims.²²
• Deborah Russell, Director of Workforce Issues in AARP’s Education and Outreach Department, discussed some proactive steps employers in the healthcare industry have taken to meet the needs of the over-50 demographic.²³
• Cornelia Gamlem, Society for Human Resource Management, discussed some suggested best practices for recruiting, retaining, and managing mature workers—including workplace flexibility, retention programs, targeted recruitment, and reductions in force management.²⁴

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Social Media

Would you believe that 91% of employers use social media to aid in their decisions of who, and who not, to hire? An employer can learn a lot about a prospective employee from information that is publicly available via social media and other websites. For example, an employer can learn that a candidate lied about his or her qualifications, posted inappropriate comments, trashed a former employer, divulged corporate confidential information, or demonstrated poor communications skills—any one of which could legitimately disqualify a candidate from further consideration. Conversely, an employer can discover that a candidate is creative, demonstrates solid communication skills, received awards or accolades, or is well regarded or recommended by his or her peers.

Despite the legitimate information an employer can discover, these informal background checks are subject to much debate. For one, there is a justified fear that information on the Internet is unreliable and unverifiable. An even more worrisome danger with employers performing unfettered background Internet searches on job applicants is the risk that search might disclose protected information such as age, sex, race, religion, or medical information.

Consider the following example. Jane Doe submits a job application to ABC Corp. The hiring manager types her name into the Facebook search bar. What happens if the search reveals that Ms. Doe belongs to a breast-cancer-survivor group? If ABC declines to interview Ms. Doe or hires another candidate, it is opening itself up to a claim that it failed to hire her because it regarded her as disabled or because of her genetic information. Now the company is placed in the unenviable position of having to defend its decision not to hire Ms. Doe from the imputation that it was based on its discovery of her medical information.

Another potential pitfall in using social media to screen job applicants is off-duty conduct laws. Twenty-nine states have laws that prohibit employers from taking an adverse action against an employee based on their lawful off-duty activities:

• 17 states have “smokers’ rights” statutes, which prohibit discrimination against tobacco users. (Connecticut, Indiana, Kentucky, Louisiana, Maine, Mississippi, New Hampshire, New Jersey, New Mexico, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Virginia, West Virginia, and Wyoming)
• 8 states have statutes that protect the use of any lawful product (e.g., tobacco or alcohol) outside of the workplace. (Illinois, Minnesota, Missouri, Montana, Nevada, North Carolina, Tennessee, and Wisconsin)
• 4 states have statutes that protect employees who engage in any lawful activity outside of work. (California, Colorado, New York, and North Dakota)

Despite all of these risks, Internet searches on job candidates hold real value for employers. They just have conduct done carefully and with certain built-in protections:

1. Consult with your employment attorney to develop policies, procedures, and guidelines for the gathering and use of Internet-based information without conflicting with discrimination and other laws.
2. Print a clear disclaimer on the job application that you may conduct an Internet search, including sites such as Facebook, LinkedIn, and Twitter, and general searches using search engines such as Google and Bing.
3. Only conduct the search after you have made the candidate a conditional job offer.
4. Consider using a third party to do the searching, with instructions that any sensitive, protected, or EEO information not be disclosed back to you. This third party can either be a trained employee insulated from the hiring process or an outside vendor specializing in these types of background searches.
5. Do not limit yourself to Internet searches as the only form of background screening. Use this information as part of a larger, more comprehensive background-screening program.

Social media background checks are starting to receive legislative attention. In response to an alleged trend by employers requiring job applicants to turn over their Facebook passwords as part of the hiring process, United States senators have called for action to outlaw this supposed practice, Already three states—Maryland, Illinois, and California—have passed legislation banning this practice, while many others are considering similar legislative prohibitions.

Ohio’s proposed legislation, for example, is similar to laws proposed or enacted in states nationwide. Ohio Senate Bill 351 would amend Ohio’s employment discrimination statue to make it an “unlawful discriminatory practice” for employers to do any of the following:

• Ask or require an applicant or employee to disclose usernames or passwords associated with, or otherwise provide access to, a private electronic account of the applicant or employee;
• Fail or refuse to hire an applicant for employment, or discharge, discipline, threaten to discharge, discipline, or otherwise penalize an employee, if the applicant or employee refuses.

The bill defines “private electronic account” as “a collection of electronically stored private information regarding an individual, including such collections stored on social media Internet web sites, in electronic mail, and on electronic devices.” It then broadly defines a “social media Internet web site” as “an Internet web site that allows individuals to do all of the following”:

• Construct a public or semipublic profile within a bounded system created by the service;
• Create a list of other users with whom the individual shares a connection within the system; or
• View and navigate the list of users with whom the individual shares a connection and those lists of users made by others within the system.

The bill does not prohibit an employer from monitoring the electronic accounts of employees or applicants on the employer’s own email or Internet system.

As far as enforcement, the bill would permit aggrieved individuals to file a charge of discrimination with the Ohio Civil Rights Commission (OCRC) or a private cause of action in court. It also allows the OCRC to levy fines of up to $1,000 for the first violation and up to $2,000 for each subsequent violation.

Public outrage over the practice of requiring job applicants to hand over social media and other online passwords is so loud that Facebook itself officially weighed in on this issue via a post on its blog by its Chief Privacy Officer:

If you are a Facebook user, you should never have to share your password, let anyone access your account, or do anything that might jeopardize the security of your account or violate the privacy of your friends. . . . That’s why we’ve made it a violation of Facebook’s Statement of Rights and Responsibilities to share or solicit a Facebook password. We don’t think employers should be asking prospective employees to provide their passwords.

If you believe all of the outrage, you would think that this practice is rampant. In reality, I would be surprised if 0.01% of all employers have even considered asking a job applicant for access to his or her Facebook account, let alone carried through on the thought by making it a hiring requirement. Simply, this problem does not need fixing.

These issues raise another, more fundamental, question—what type of employer do you want to be? Do you want to be viewed as Big Brother? Do you want a paranoid workforce? Do you want your employees to feel invaded and victimized as soon as they walk in the door, with no sense of personal space or privacy? Or do you value transparency? Do you want HR practices that engender honesty and openness and that recognize that employees are entitled to a life outside of work?

Social media provides many benefits to employers. It opens channels of communication between employees in and out of the workplace. And, when used smartly, it enables employers to learn more about potential employees than ever before. You can learn if an employee has good communication skills, is a good cultural fit, or trashed a former employer. But this tool has to be used smartly to avoid legal risks. Requiring passwords is not smart.

Social media is still new, and the rules and regulations that govern it are still evolving. The government is looking for opportunities to regulate social media. If a small minority of business continues pursuing this poor HR practice, legislatures will continue pursuing legislative solutions and calling for regulatory action. Do not provide the government the opportunity. Can we all just agree that requiring Facebook passwords is a bad idea, and move on?

The Fair Credit Reporting Act and Background Checks

When an employer obtains background information on an individual from a third party to make employment-related decisions, it must comply with the Fair Credit Reporting Act (FCRA) if the background information is either a “consumer report” or an “investigative consumer report” and the third party from whom the information is obtained is a “consumer reporting agency.”

The FCRA defines a “consumer report” as any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for employment. Examples not only include credit reports, but also criminal background checks, workers’ compensation histories, motor vehicle reports, reference checks, and verifications of education or past employment.

The FCRA defines an “investigative consumer report” as a report on an individual’s character, general reputation, personal characteristics, or mode of living that is obtained through personal interviews with neighbors, friends, or associates of the individual.

The FCRA defines a “consumer reporting agency” as any person who regularly engages in the assembling or evaluating information for the purpose of furnishing consumer reports to third parties. In other words, it’s anyone or any company that regularly engages in background screenings as its business.

The bottom line? If your business is using a third party to obtain background information for you on applicants or employees, the FCRA likely applies. If you are conducting the background searches yourself (such as by directly checking job references or pulling court records), then the FCRA does not apply.

What Must an Employer Do to Comply with the FCRA?

You must take certain steps before you can obtain a consumer report, and before and after you take an adverse action based on that report.

Before You Get a Consumer Report

Before you get a consumer report on an applicant or employee, you must:

• Tell the applicant or employee that you might use information in their consumer report for decisions related to their employment. This notice must be in writing and in a stand-alone format. The notice cannot be in an employment application. You can include some minor additional information in the notice, like a brief description of the nature of consumer reports, but only if it does not confuse or detract from the notice.
• Get written permission from the applicant or employee. This can be part of the document you use to notify the person that you will get a consumer report. If you want the authorization to allow you to get consumer reports throughout the person’s employment, make sure you say so clearly and conspicuously.
• Certify compliance to the company from which you are getting the applicant or employee’s information. You must certify that you:
  • notified the applicant or employee and got their permission to get a consumer report;
  • complied with all of the FCRA requirements; and
  • will not discriminate against the applicant or employee or otherwise misuse the information, as provided by any applicable federal or state equal opportunity laws or regulations.

Before You Take an Adverse Action

Before you reject a job applicant, reassign or terminate an employee, deny a promotion, or take any other adverse employment action based on information in a consumer report, you must give the applicant or employee:

• a notice of your intention to take adverse action that includes a copy of the consumer report you relied on to make your decision; and
• a copy of A Summary of Your Rights Under the Fair Credit Reporting Act,²⁵ which the company that gave you the report should have given to you.

Giving the person the notice in advance gives the person the opportunity to review the report and tell you if it is correct or incorrect. You must then wait a reasonable amount of time (at least five days) before taking the adverse action based on information contained in the consumer report.

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After You Take an Adverse Action

If you take an adverse action based on information in a consumer report, you must give the applicant or employee a notice of that fact—orally, in writing, or electronically.

An adverse action notice tells people about their rights to see information being reported about them and to correct inaccurate information. The notice must include:

• the name, address, and phone number of the consumer reporting company that supplied the report;
• a statement that the company that supplied the report did not make the decision to take the unfavorable action and cannot give specific reasons for it; and
• a notice of the person’s right to dispute the accuracy or completeness of any information the consumer reporting company furnished and to get an additional free report from the company if the person asks for it within 60 days.

Investigative Reports

Employers who use “investigative reports”—reports based on personal interviews concerning a person’s character, general reputation, personal characteristics, and lifestyle—have additional obligations under the FCRA to provide to that person:

• A statement that the investigative consumer report may include information about the individual’s character, general reputation, personal characteristics, or mode of living.
• A statement advising the individual of his or her right to make a written request to the employer for a complete and accurate disclosure of the nature and scope of the investigation requested by the employer.
• A statement that the employer is required to disclose the nature and scope of the investigation to the individual, in writing, within five days after the date the employer receives the individual’s request for disclosure or the date the employer requests the investigative consumer report, whichever is later.
• A copy of the A Summary of Your Rights Under the Fair Credit Reporting Act.

What Information Must Be Excluded from a Report?

Employers also need to understand that the FCRA places limitations on the content of a consumer report or investigative consumer report, primarily based on the age of the record. The following information may not be included or requested in a consumer report:

• Bankruptcies older than 10 years.
• Civil lawsuits, civil judgment, and arrest records older than the longer of seven years or the governing statute of limitations.
• Paid tax liens older than seven years from the date of payment.
• Accounts placed for collection or charged to profit and loss older than seven years.
• Any other adverse items of information, other than records of convictions of crimes, older than seven years.

Other Unique Hiring Issues

There are many other issues that could hamper employers’ legitimate efforts to make the best hiring decisions. Two issues warrant further explanation: English-only requirements and preemployment personality tests.

English-Only Requirements

Immigration reform continues to be a hot button issue, and a rash of lawsuits and high-profile stories has fueled a debate over whether an English-only rule constitutes national origin discrimination.

The EEOC and federal appellate courts have issued differing interpretations as to whether an English-only rule constitutes national origin discrimination. The EEOC’s stated position is that a “rule requiring employees to speak only English at all times in the workplace is a burdensome term and condition of employment” and presumptively “violates Title VII.”²⁶ According to the EEOC, an “employer may have a rule requiring that employees speak only English at certain times where the employer can show that the rule is justified by business necessity.”²⁷ At least one court has applied the EEOC guidelines.²⁸

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The majority of federal courts, however, have shown a greater willingness to tolerate English-only rules despite the EEOC’s regulations. Generally, courts will uphold an English-only rule if the employer can show a legitimate business justification for the requirement. Examples of legitimate business justifications that have been found to justify an English-only requirement are:

• Stemming hostility among employees.²⁹
• Fostering politeness to customers.³⁰
• Promoting the ability to communicate with customers, coworkers, or supervisors who only speak English.³¹
• Enabling employees to speak a common language to promote safety.³²
• Where cooperative work assignments are necessary.³³
• Facilitating a supervisor’s ability monitor the performance of an employee.³⁴
• Addressing employee complaints that they felt uncomfortable and intimidated when coworkers spoke to each other in Spanish.³⁵
• Furthering interpersonal relations among employees.³⁶

Employers should be careful, however, to limit the reach of an English-only requirement only as far as necessary to articulate the business rationale for the policy. For example, in Garcia v. Gloor,³⁷ the Fifth Circuit found that an employer’s rule forbidding bilingual employees from speaking anything but English in public areas while on the job did not discriminate on the basis of national origin, where such policy was confined to the workplace and work hours and did not apply to conversations during breaks or other employee free time. In Maldonado v. City of Altus,³⁸ the Tenth Circuit struck down an English-only requirement as discriminatory where the policy “extended beyond its written terms to include lunch hours, breaks, and even private telephone conversations, if non-Spanish-speaking coworkers were nearby.” Court found there was no business necessity for the policy to reach that far, because “there was no written record of any communication problems, morale problems or safety problems resulting from the use of languages other than English prior to implementation of the policy.” Moreover, in EEOC v. Premier Operator Servs.,³⁹ another federal court struck down an English-only policy despite the employer’s articulation that it was necessary to foster interemployee communication. The court concluded that there was evidence that there was discord amongst the employees or communication problems that required harmonization through an English-only policy. Furthermore, there was no evidence sufficient to establish that there was any inability of the employees to communicate with their supervisors and managers.

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English-only rules have their time and place. If you have a legitimate problem—such as safety, communication with customers, or communication among employees—such a rule will probably pass muster. If, however, you are enacting such a rule to discourage non-Americans from working at your place of business or if the rule overreaches by banning foreign languages in nonwork spaces (lunch rooms, etc.), you should prepare yourself to unsuccessfully defend a lawsuit.

Personality Tests

One particular type of preemployment testing that can be particularly troublesome is preemployment personality tests. Indeed, according to one recent report, as many as 56% of companies do some form of personality testing before hiring an employee. Before you can conclude whether these tests help businesses make good hiring decisions, you have to answer a very important threshold question: Are they legal? These tests not only must pass muster under a disparate impact validation but also must likely pass muster as a lawful medical examination under the Americans with Disabilities Act (ADA).

The ADA has specific rules in place for medical examination of employees:

• When hiring, an employer may not ask any questions about disabilities or require medical exams until after a conditional job offer is made to the applicant.
• After making a job offer, but before the individual starts working, an employer may ask disability-related questions and require medical exams as long as it does so for all individuals entering the same job category.
• With respect to current employees, an employer may ask questions about disabilities or require medical exams only if doing so is job-related and consistent with business necessity. Examples of permissible inquiries of testing of current employees would be if the employer has a reasonable, objective belief that an employee cannot perform the job’s essential functions or will pose a direct threat because of a medical condition or if an employee requests a reasonable accommodation.
• Reasonable accommodations must be made in any employment testing or screening to enable a qualified individual with a disability to take the test, unless such accommodation poses an undue hardship.
• All employee medical information must be kept confidential, maintained securely and separately from personnel files, and only disclosed to supervisory personnel on a need-to-know basis.

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Despite the apparent widespread administration of preemployment personality tests, there is very little guidance available on their legality. Karraker v. Rent-A-Center⁴⁰ is the seminal case. As Karraker points out, the legality of a personality test by an employer hinges on whether it qualifies as a “medical examination” protected under the ADA. The Karraker court concluded that the ADA covered the Minnesota Multiphasic Personality Inventory (MMPI) as a protected medical exam.⁴¹ In reaching its decision, the court drew a key distinction between psychological tests that are designed to identify a mental disorder or impairment (medical examinations) and psychological tests that measure personality traits such as honesty, preferences, and habits (not medical examinations). Because the MMPI revealed, in part, potential medical diagnoses such as paranoid personality disorder, the court concluded that it was a protected medical examination. Other personality tests may not dictate the same result, depending on the types of results provided.

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Merely because something is a “medical examination” does not mean its use is illegal under the ADA. It merely means that the ADA places certain limits on its use, depending on when in the hiring cycle the MMPI is administered. Prior to an offer of employment, personality tests are prohibited. After an applicant is given a conditional job offer, but before he or she starts work, personality tests are permitted, regardless of whether they are related to the job, as long as the employer does so for all entering employees in the same job category. After employment begins, personality tests are permitted only if they are job-related and consistent with business necessity. There are no limits at any stage on the use of personality tests that are not considered ADA-covered medical exams.

What does all this mean? The use of personality tests raises complex legal and business issues. If you are considering using personality tests to screen applicants or current employees, tread carefully and understand that you are taking a calculated risk.

Concluding Thoughts: A Chocolate Cupcake by Any Other Name . . .

In July 2010, the EEOC settled a race and sex discrimination case against a Cleveland-area temporary agency. The EEOC alleged that the agency used code words to identify the race, color, and sex of candidates it placed with employers. For example, “hockey player” meant white male; “small hands” referred to females; “basketball player” equaled African American men; and “chocolate cupcake” meant a young African American woman. The temporary agency, according to the EEOC, would attach note cards containing the coded phrases to job applications submitted to employers. The settlement paid $650,000 to a nationwide class of 11,000 people.⁴²

The easy lesson from this case is that businesses should never use code words as a proxy to identify protected characteristics such as race and sex. The deeper issue, however, is that discrimination comes in all shapes and sizes. It is incumbent upon businesses to self-regulate their hiring practices, to weed out both the intentionally and unintentionally discriminatory.

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