Be Global is DLA Piper's snapshot of key global employment law developments designed to help you identify legal hotspots across your global operations and assess the impact on your employment practices and procedures.

HIGHLIGHTS: France: Finding a buyer before a shut down - the "Florange" law

As reported in February's Be Global, the French Government has introduced legislation (known as the "Florange" law) imposing an obligation on employers intending to shut down an establishment to search for a buyer before taking any definitive decision about the closure and the implementation of possible collective redundancy measures. The final version of the law came into force on 1 April 2014. Please click here to read more.

HIGHLIGHTS: France: Limits on use of settlement agreements for mutually-agreed terminations

A recent decision of the French Supreme Court means that it is no longer beneficial for an employer to secure a mutually-agreed termination with an employee by subsequently entering into a settlement agreement. Click here to read more.

HIGHLIGHTS: Russia: New laws for Russian work permits will require foreign nationals to prove knowledge of Russian language and history

A new law will come into force on 1 January 2015 which will require all foreign nationals who wish to live or work in Russia to demonstrate knowledge of the Russian language, the history of Russia and a basic grasp of Russian law. Click here to read more.  


Australia: Anti-bullying jurisdiction - first quarterly statistics released and important case confirms the importance of training managers to deal with bullying complaints

The Fair Work Commission (FWC) has released the first set of quarterly statistics for its new anti-bullying jurisdiction. The figures show that between January and March 2014, 151 bullying applications were lodged with the FWC. Given that the FWC had originally estimated that there may be up to 3,500 anti-bullying applications in the first year of the new law's operation, this is a relatively low number of complaints. Almost all of the applications were made by employees (rather than contractors, volunteers or others), and a large majority of the claims (approximately two thirds) were made against a manager of the employee in question. Only eight applications were subject to a final decision of the FWC, with one set of orders being issued. The overwhelming majority of applications were finalised at earlier stages of the process (for instance, as the result of a conference), and 28 applications were withdrawn even before a conference occurred. The process appears to be operating with some efficiency as the FWC began to deal with all claims well within a 14-day period.

A recent win for a bullied employee of the Sussan retail chain in the Supreme Court of Queensland has, however, highlighted that it has never been more important for employers to ensure frontline managers are adequately trained to respond appropriately to workplace bullying complaints. Further details can be found in our Be Alert bulletin. Click here to read more.

Australia: change to proposed paid parental leave scheme

The federal government has announced changes to its proposed paid parental leave scheme. The scheme had formerly provided for a maximum payment to new mothers of up to AUD 75,000, being six months' pay based on a maximum yearly income of AUD 150,000. The government has reduced this maximum payment to AUD 50,000, being six months' pay at a maximum yearly income of AUD 100,000. The proposed scheme is yet to be presented in legislation to parliament.

Australia: The Royal Commission into Trade Union Governance and Corruption

The Royal Commission into Trade Union Governance and Corruption commenced its first public hearings on 12 May 2014 in Sydney. The Commission received evidence from its first witness, who alleged that a slush fund was operated by the Australian Workers Union in the mid-1990s and that members' funds had been misused.

Australia: Federal Budget

The Federal Budget was handed down by Treasurer Joe Hockey on 13 May 2014. It is proposed that employers will be offered an incentive of up to AUD 10,000 (over two years) to hire job seekers who are over 50 years old, or who have been receiving income support payments for at least six months. The proposal will require the approval of the Senate of the Australian parliament to come into operation.

China: Average monthly salary for Shanghai announced: Relevant to severance payments

The average monthly salary (calculated based on published social insurance rates) in Shanghai has increased to RMB 5,036 (approximately USD 824). This represents a steady increase of approximately 7% on last year's average. The average salary figure is relevant to employers as it forms part of the calculation for severance pay in China. Severance pay is calculated based on an employee's monthly salary multiplied by years of service, with monthly salary capped at three times the relevant local average salary. Different cities and regions have different average salary rates; Beijing and many other major cities in China have not yet announced their average salary rates, we expect those announcements to be made in June or July and will update you as soon as that happens.

China: Latest labour dispute statistics for Central Shanghai published: Important lessons for employers

The Huangpu District of Shanghai Labour Bureau and the Huangpu District Court published on 29 April 2014 a report analysing labour disputes during 2013. Huangpu is a central district in Shanghai and deals with many of the labour disputes for multinationals based in Shanghai. As far as we are aware, although various district labour bureaus, district courts or intermediate courts in China have issued similar reports on labour disputes in recent years, this is the first time that such a report has been published jointly by a District Labour Bureau and a District Court. Key points to note, all of which relate to disputes during 2013, include:

  • 3701 disputes were filed with the Labour Arbitration Tribunal and mediation committees in Huangpu District;
  • The main issues in dispute were: remuneration, termination of employment, contracts, social insurance, claims for annual leave compensation, high temperature allowance and penalty compensation;
  • 40.14% cases were settled via mediation at Huangpu District Court- an increase of 45.28%;
  • District court cases increased by 25.14% (the District Court is the second stage in the litigation process after mandatory mediation);
  • Collective disputes (brought by more than 4 employees) are on the increase; in 2013, 53 collective cases were filed, involving 568 people;
  • Disputes involving labour dispatch are on the rise; in 2013, approximately 252 claims were brought by dispatched employees, relating to their dispatch arrangements;
  • The success rate in cases brought by employers against employees has increased to 12.7%, such claims include claims for breach of non-compete agreements, service-bond agreements and misappropriating company property.

The report comments on some of the possible reasons behind the increase in disputes which provide some important learning points for employers:

  • The system of goodwill or trust and confidence between employers and employees in China is not well established and this could be the cause of some of the disputes;
  • A company has the right to manage employees in the way that it chooses and this can lead to conflict between the rights of the company and the rights of employees, and the potential for conflict seems to be on the rise as employers' and employees' interests diverge;
  • Many labour dispatch issues are arising because, whilst the labour dispatch agency is the legal employer of dispatched workers, normally it is the client, rather than the agency, who acts as the employer e.g. by supervising and managing the dispatched employees. The report comments that the labour dispatch agency should be more closely involved in the management of its dispatched employees;
  • As companies rely more on electronic systems in the daily management of human resources and business operations, there is greater reliance than ever on electronic evidence when a dispute arises. In China, arbitrators and judges are reluctant to rely on electronic evidence as it can be difficult to collect and verify, which can make it difficult for companies to defend their positions. Employers should be aware of the risk of relying on electronic evidence and ensure that all key documents are signed and retained manually where possible.

Japan:  Proposed exception to five-year rule on fixed-term employees

In April 2013, an amendment to Japan's Labour Contract Act came into effect to institute a "5-year rule" with respect to the use of fixed-term employment contracts.  Under this rule, employers must move fixed-term employees onto indefinite term contracts if -

  • the employee has worked for the same company under fixed-term employment contracts for more than five-years starting from 1 April 2013;
  • there is no break in employment of six-months or more;
  • the fixed-term employment contract is renewed more than once; and
  • the employee asks to become an indefinite term employee. 

This amendment is significant because the acceptable grounds for terminating the employment of indefinite term employees are very limited in Japan.

The current government has been considering easing certain employment regulations including the 5-year rule.  This issue has come to the fore as a result of Tokyo's successful bid for the 2020 Olympics.  Employers are concerned that special projects in preparation for Olympic-related business opportunities will take more than five years to complete.  The 5-year rule would make the use of fixed-term employees difficult as an employer might be required to move an employee hired specifically for a long-term project onto an indefinite term contract after five years. 

In response to these concerns, the Government recently introduced legislation which provides limited exceptions to the 5-year rule.  The legislation is expected to come into effect from 1 April 2015. 

Under this legislation, an employer is not obliged to accept an employee's request to become an indefinite term employee after five years (for up to 10 years) if:

  • the employee has special knowledge and skills;
  • the employee is compensated above a certain threshold; and
  • the employee is employed to work on a project that is not indefinite but is expected to take longer than five years to complete.

The legislation also provides an exception for employees who have been rehired by the company on fixed-term employment agreements after reaching the company's mandatory retirement age.  Then, there is no limit on how long the employer can employ the rehired employee on fixed-term agreements. 

Note that the legislation does not require an employer to enter into a five-year or longer fixed term agreement.  Employers may use short fixed-term agreements, for example 6 months or 1 year and they will have some discretion as to whether to renew the fixed-term agreement. A decision not to renew during the planned term of the project would, however, have to be made for a reasonable reason.   

Currently, the legislation does not detail what will qualify as "special knowledge and skills" although the Government has suggested that employees with higher degrees, professional licenses or skilled engineers would probably qualify.   Similarly there has been no official indication of the threshold level of salary that will be necessary to qualify for the exception but an annual salary of JPY10.75 million yen (which is used as one of the criteria for "employees with special knowledge and skills" in a different context) has been referred to as a reference point to consider.   It is likely that further details will be provided later in the legislative process.


EU Wide: New Directive on supplementary pension rights

The European Council has endorsed a directive to improve the protection of rights under occupational pension schemes for mobile workers. The new rules help to remove current obstacles to free movement, such as the requirement for very long periods of employment to acquire rights or the risk of rights being lost when leaving a pension scheme. Member States will be required to implement the Directive by May 2018.   The directive improves the protection of mobile workers’ pension rights in three ways:

  • Acquisition: Pension rights should be guaranteed after a maximum of three years' employment. When a minimum age for vesting is stipulated, it must not be higher than 21.
  • Preservation: The rights of workers who leave an employer-run pension scheme before retirement must be preserved and treated fairly compared to the rights of those workers who remain in the scheme, for example as regards indexation.
  • Information: Workers have the right to know how potential mobility would affect their pension rights, and those who leave a scheme must be informed about the value of their rights.

EU Wide: Enforcement of the Posted Workers Directive

The EU Council has, this month, formally adopted a directive on the enforcement of the Posted Workers Directive. The aim of the new enforcement directive is to:

  • Aid implementation of the Posted Workers Directive and improve co-operation and co-ordination between member states' authorities.
  • Establish a set of clearly defined employment conditions which the posting undertakings must ensure.
  • Promote a climate of fair competition between all service providers by guaranteeing both a level playing field and legal certainty for service providers, service recipients, and workers posted for the provision of services.

Once the directive is published in the Official Journal,  Member states will have just over two years to introduce implementing measures.

Belgium: Harmonization of occupational pensions

The harmonization of blue-collar and white-collar worker status in Belgium, reported in our recent Be Global Special Report, is continuing and on 5 May 2014 a bill was passed which implements the gradual abolition of differences in treatment in relation to occupational pensions. This means that from 1 January 2015, any newly implemented occupational pension scheme which distinguishes between these two types of worker will be discriminatory. All distinctions will have to be eliminated entirely by 1 January 2025.

Belgium: extension to internal complaint procedures

On 1 September 2014, new legislation on "psychosocial risks" at work will come into force. Currently, an internal complaint procedure exists for employees who have been subject to violence or harassment at work. From September, this procedure will be extended so that it can be used by any employee who believes they have suffered damage to their health due to "psychosocial risks" at work. The procedure will be renamed "the internal psychosocial intervention procedure". "Psychosocial risks" are any risks which result from the organisation of an employee's work; the content of their work; their work conditions; the circumstances of their work; and interpersonal relationships at work over which the employer has influence and which objectively may involve some risk. Employers will have to amend their work regulations to take account of the requirements for an extended procedure.

France: Finding a buyer before a shut down - the "Florange" law

The final version of the "Florange" law came into force on 1 April 2014. The main change which the law implements is a new obligation for employers intending to shut down an establishment to search for a buyer before taking any definitive decision about the closure and the implementation of possible collective redundancy measures.

The new law applies to (i) companies employing at least 1,000 employees in France and/or Europe and (ii) companies or groups of companies meeting the legal requirements for a European Works Council or a Group Committee. Although there is no legal obligation to find a purchaser, any such company contemplating closing an establishment will now have to:

  • Inform their Works Council and the Labour Administration of their intention to close the establishment;
  • Inform potential buyers of their intention to sell the establishment;
  • Provide specified information to potential buyers (in particular by drafting a document presenting the site);
  • Provide access to any necessary information for potential buyers unless this information could be harmful to the company's interests or jeopardize its continued activity;
  • Consider purchase offers;
  • Provide a reasoned response to any purchase offers (for example, refusing a purchase offer on the grounds that the sale of the establishment could jeopardize the company's continued activity).

If a company fails to search for a buyer, it may be required to reimburse any State aid it has received. Note that the main financial penalties for non-compliance initially included in the new law (in particular for failing to provide a legitimate reason for rejecting a purchase offer) were held by the French Constitutional Court to be illegal in its decision of 27 March 2014.

As well as the obligation to search for a buyer, the "Florange" law has also contains measures which aim to limit hostile bids (OPA).

As a general principle under the new law, all individuals and entities with a stakeholding in a French registered company whose shares are listed in any European Union or European Economic Area state, must inform the French Financial Markets Authority (AMF) of any increase in its share ownership in cash or in voting rights. They must also submit to the AMF an OPA offer to acquire a determined quantity of shares. Shareholders who acquire less than 1% of a company's share capital in the 12-month period from implementation of the new law are, however, not subject to this obligation.

During the week following the submission of an OPA offer to the AMF, the Works Council may investigate the entity which made the OPA including considering its strategy and the possible impact of the OPA on the company, notably in terms of employment.

This new law also provides that the Works Council of a company which is subject of an OPA must be informed and consulted within one month from submission of the takeover offer to the AMF and that the Works Council may be assisted by an expert.

France: Limits on use of settlement agreements for mutually-agreed terminations

The French Supreme Court has recently ruled for the first time on the use of a settlement agreement after a mutually-agreed termination validated by the French Labour Administration. The Court decided that a settlement agreement can only be valid in these circumstances if -

  • the agreement is concluded after the effective termination of the employment contract. In other words, the parties cannot reach an settlement agreement at the same time as the mutually-agreed termination; and
  • the settlement agreement covers elements that are not mentioned in the mutually-agreed termination (e.g., overtime claim, bonus claim, etc.), and that are not related to the termination of the employment contract itself.

Given these restrictions, and bearing in mind an employee has 12 months to challenge a mutually-agreed termination, the Court has removed the benefit for an employer in securing a mutually-agreed termination with an employee by subsequently entering into a settlement agreement.

France: New law on vocational training, employment and social democracy

A new law, passed in March 2014, will implement significant reforms in relation to (i) vocational training and (ii) employers' professional bodies.

In terms of vocational training, a new system is to be implemented under which a personal training account (CPF) is introduced which will follow an employee, even during a period of unemployment or after a change of employment. The CPF will replace the current individual right to training (the DIF), which will no longer exist. Under the CPF, the employee receives training hours credits every year up to a maximum of 150 training hours over a 9 year period (instead of 120 hours maximum over 6 years the DIF). The CPF will come into effect in January 2015. Also, a meeting with the employer will be required every two years to explore opportunities for an employee's professional development.

As regards employers' professional bodies, the new law defines for the first time conditions for establishing and operating an employers' professional body. In parallel with trades unions, the legal criteria for determining whether an organisation qualifies as a professional body include:

  • Length of existence;
  • Influence of the organisation determined by its activity and its experience;
  • Financial transparency;
  • Independence;
  • Compliance with values of the Republic;
  • The reach of the organisation determined by number of members (i.e. at least 8%).

Germany: Union only benefits are permissible

The Federal Labour Court ruled on 21 May 2014 that it can be permissible to grant certain benefits only to employees who are a member of the union, and not to other employees.

The employer, Adam Opel AG, a subsidiary of General Motors, agreed with the union IG Metall on a reduction of tariff salaries. These salary reductions also applied to employees who were not a member of the union, as individual employment agreements incorporated the tariff agreements.  As part of the agreement with the union on the tariff reduction, Adam Opel agreed to pay 8.5m EUR to a separate union-related organisation which will pay EUR 200 as a"recuperation allowance" to employees of Adam Opel who are a member of IG Metall.  According to the Federal Labour Court employees who are not a member of the union cannot claim such payment from the employer based on the principle of equal treatment.

In the past, the Federal Labour Court has permitted clauses providing benefits only to union members in limited circumstances. Employers often nevertheless granted the same benefits to non-union members to avoid encouraging even more employees to become union members. The granting of benefits through a separate organisation will however further strengthen the unions and make it more difficult for employers to provide the same benefits to other employees.

Italy: Law Decree on fixed-term workers and apprenticeships now made law

As reported in our April edition of Be Global, a new Law Decree came into force on 21 March 2014. This Law Decree was converted into ordinary law (after several amendments) on 15 May 2014. This is the first piece of legislation under a major labour reform known as the "Jobs Act".

The Law Decree aims to increase the flexibility of employment contracts by introducing material changes to the current regime of fixed-term contracts and apprenticeship contracts.

Fixed-term contracts

Fixed-term contracts can now be executed even if there are no reasons justifying the limited duration. These contracts can be extended up to 5 times (irrespective of the number of renewals) provided that the overall duration (including renewals) does not exceed 36 months. The same maximum duration of 36 months (without the need to specify a reason for the fixed-term) also applies to temporary work contracts. The new regulation is expected to have a big impact as employers have, so far, been cautious in their use of fixed-term contracts as a result of a high rate of litigation triggered by the uncertainty over whether reasons for the fixed term are lawful. The Law Decree limits the use of such fixed-term contracts to 20% of the overall workforce. However, higher percentages provided by the applicable National Collective Bargaining Agreements will remain in force until those agreements expire. If an employer exceeds the relevant limits it will have to pay an administrative penalty equal to 20% of the monthly salary of the first fixed-term employee exceeding the limit. The sanction is increased to 50% in respect of any other fixed-term employees exceeding the limit. This sanction is intended to replace the previous regime under which the employer had to reinstate the employee and pay an indemnity ranging from 2.5 to 12 months' salary. However, although the Government's intention to replace the previous sanction regime is clear, the new law does not expressly repeal the old sanction system. Companies who are currently exceeding the relevant limits for fixed-term workers have until 31 December 2014 to comply.


The Law Decree repeals the requirement to convert into open-ended contracts at least 50% of expired apprenticeship contracts in order for employers to enter into new apprenticeship contracts. Now the limit is 20% and it applies only to companies employing more than 50 employees. The final provisions also require part of the employees' training to be carried out externally through specifically identified public entities. However, if within 45 days of the commencement of the apprenticeship, the relevant public entities do not inform the employer how the training will be carried out, employers may carry out the whole training internally.

Netherlands: Greater protection for fixed-term workers

As reported in April's Be Global, a number of the employment law changes currently being implemented by the Dutch Government aim to strengthen the legal rights of flexible workers. As part of these reforms, from 1 July 2014, it will only be possible for employers to include a probationary period in a fixed-term employment contract if the contract's duration is six months or more. Also, for an employee on a fixed-term contract of at least six months' duration, the employer must inform him/her of a decision not to extend the contract one month before the contract end date. If this does not happen, the employer will have to pay up to one month's pay as compensation, reduced pro-rata if the required notice is given, for example, two weeks before the termination date.

Netherlands: Introduction of a 20% bonus cap in Financial Services

The Dutch Parliament is currently considering a legislative proposal which, if enacted, will regulate the remuneration policy of Financial Services' companies and will impose a cap on bonus of 20% of variable remuneration. Further details can be found in Exchange, our international financial services newsletter. Click here to read more.

Russia: New laws for Russian work permits will require foreign nationals to prove knowledge of Russian language and history

A new law will come into force on 1 January 2015 which will require all foreign nationals who wish to live or work in Russia to demonstrate knowledge of the Russian language, the history of Russia and a basic grasp of Russian law by submitting a certificate from an accredited Russian institution. Proficiency in these areas can also be evidenced by education documents stemming from 1991 or earlier from former Soviet republics where Russian language was a compulsory subject in schools. One of these documents must be provided to the immigration authorities within 30 days of a work permit being issued. Individuals who are already resident or working in Russia prior to 1 January 2015 must also submit the relevant proof if they wish to have their permits extended.

The new proficiency requirements do not apply to so-called 'Highly Qualified Foreign Specialists' who are subject to a special procedure for obtaining work and residence permits.

Employers who employ, or wish to employ, foreign nationals in Russia must therefore plan ahead and put measures in place to ensure the appropriate evidence is obtained in advance to ensure there are no interruptions to the continued or expected employment of their staff.

South Africa: draft employment equity regulations published for comment

On 28 February 2014, the Minister of Labour published draft Employment Equity regulations under the Employment Equity Act 55 of 1998 (EEA), for comments. Employers should take note of two material aspects of the draft regulations. The first relates to the indicated comparator that all designated employers should apply, when determining whether its workforce is sufficiently representative for purposes of the EEA. Setting of affirmative action goals and targets should then adress under-representation identified in this way. No one single comparator will apply to every workforce, or indeed every category of employee within a workforce. Primarily however, employers should compare their workforce against the national "economically active population" (EAP), with use of the regional EAP only being appropriate in limited circumstances. This has caused controversy in South Africa as workforce demographics can vary significantly from region to region. Employers can however, for good cause (having regard to the provisions of the EEA) take into account certain alternative comparators.

The second material aspect dealt with in the draft regulations, relates to "equal pay" guidelines. The regulations seek to clarify implementation issues around equal pay, such as determining whether work is of equal value, factors justifying differentiation in pay, and consultation requirements over elimination of unfair discrimination.

These draft regulations, taken with the increased turnover based penalties for non-compliance with the EEA that will come into effect in the near future, requires that employers take careful stock of their compliance status under the EEA.

Switzerland: national minimum wage proposal rejected

Swiss voters have recently rejected the proposal of Swiss trades unions to introduce a national minimum wage of CHF 22 (USD 25) per hour. The proposal would have given Switzerland the highest minimum wage globally. Although the outcome of the recent referendum means that Switzerland will continue to have no minimum wage, around 90% of Swiss workers already earn more than the proposed minimum wage and a number of collective bargaining agreements applicable to certain Swiss workers include minimum wage levels.

UAE: Expats cannot benefit from their home pension scheme and end of service gratuity payments

The Employment and Litigation teams at DLA Piper Middle East have successfully defended a high value claim in a landmark case in the UAE regarding end of service gratuity in circumstances where the employee is also a member of the company's pension scheme.

The Court of Cassation has upheld the decision reached by the Court of Appeal that employees cannot benefit from both their home country pension scheme and the end of service gratuity payments usually made to expatriates in the region who do not have access to a company pension scheme. This is an extremely useful decision for employers who offer their expatriate employees access to such a pension scheme and provides some comfort to employers from the outset that their employees who have elected to be part of their company pension scheme should not also be entitled to an end of service gratuity payment upon termination. 

The Court of Cassation has confirmed that the decision as to which scheme is more favourable should not be taken at the end of employment but rather is made by the employee at the time of electing to continue their pension arrangements and, in accordance with Article 141 of the UAE Labour Law, there should be no need to compare the two benefits in financial terms upon termination of employment. The fact that an employee elects to continue with their home pension arrangements is sufficient to decide that they no longer qualify for an end of service gratuity payment although it is important to ensure appropriate waiver language is included in their contract of employment or in a suitable side letter to confirm that the employee will be continuing their pension arrangements and waive their rights accordingly to an end of service gratuity payment. Employees who have opted to be part of their company's pension scheme, therefore, cannot subsequently seek to double recover and benefit from both schemes and so would be wise to give this issue their full consideration at the outset of their engagement in the UAE.

UK: Updated Code of Practice on Preventing Illegal Working

UK employers have a duty to prevent illegal working and the offence of employing an illegal worker can lead to both civil and criminal penalties of imprisonment and/or a fine of up to GBP 20,000   An employer can avoid liability for a civil penalty if it can show that it undertook certain specified steps to verify an individual's immigrations status before their employment commenced.  The steps to be followed, which include checking and retaining copies of documents which evidence eligibility to work in the UK,  are set out in Government guidance,  This Guidance has been recently updated and the revised Code of Practice on Preventing Illegal Working came into effect on 16 May 2014.  The Code sets out which documents employers need to check if seeking to establish a defence to the offence of employing an illegal worker, and provides that an employer will have a "grace period" of 60 days to carry out fresh checks following a business transfer.


US:  Background checks: the risks of a one-size-fits-all approach

In January, the U.S. Department of Justice accused a background checking firm of taking shortcuts in 40% of the checks it performed for the U.S. government. Criminal background checks are complicated by the lack of centralized records while credit history systems are plagued with inaccuracies. Indeed, according to the Federal Trade Commission, 21% of all credit reporting agency (CRA) reports contain inaccuracies. Complicating these inherent difficulties, there are legal pitfalls to running one-size-fits-all background checks that further muddle the cost-benefit analysis of these checks.

First, employers are exposed to liability under the Fair Credit Reporting Act if there are flaws in the authorization forms the employer and its CRA utilize.  In addition, employers that rely on the CRA’s report in rejecting job applicants are liable for rejecting the applicant without providing enough time for the applicant to dispute the report.

Second, state and local human rights laws threaten lawsuits stemming from background checks. So-called “ban the box” laws prohibit employers from asking individuals about their conviction histories on job applications. Ten states and about 50 cities and counties have some form of ban the box laws, and while many apply only to government employers, the laws in Hawaii, Massachusetts, Minnesota and Rhode Island explicitly apply to private employers. Plus, New York law prohibits refusing to hire an applicant based on his or her criminal background unless (i) that background is directly related to the position applied for; or (ii) hiring the applicant would pose an unreasonable safety risk.

Finally, the Equal Employment Opportunity Commission (EEOC) is aggressively pursuing employers on the theory that either criminal history or credit history disparately impact minorities. So far, the courts have been unimpressed with the EEOC’s statistical arguments and have, for example,  granted summary judgment in one disparate impact claim based on criminal background checks because the EEOC did not meet its burden to present appropriate statistics,  A court also affirmed summary judgment for the employer in another claim alleging disparate impact in credit background checks because the EEOC’s expert testimony was based on “a homemade methodology”.

What are the practical solutions for employers?

  • Know what laws apply that may require background checks. In some cases, criminal history checks are mandatory (eg 18 U.S.C. §1033 forbids hiring individuals convicted of a felony for positions in the “business of insurance”).
  • Don’t ask about or attempt to investigate arrest records. The EEOC’s Enforcement Guidance points out arrests are not proof of criminal conduct, and a number of state statutes (eg the Illinois Human Rights Act) agree.
  • Decide position by position whether a background check is necessary and precisely what you need to check for that particular position.
  • If background checks are used, follow the FCRA protocols scrupulously.