Seyfarth Synopsis: The New York City Commission on Human Rights released its Legal Enforcement Guidance on the Fair Chance Act and Employment Discrimination on the Basis of Criminal History (the “Guidance”) on July 15, 2021. The Guidance provides explanations, clarifications, and valuable insights into the Commission’s interpretations of the Fair Chance Act and the 2021 Amendments going into effect on July 29, 2021, which regulate protections for applicants’ and employees’ criminal background checks.

As the agency charged with enforcement of the Fair Chance Act (FCA), the New York City Commission on Human Rights (Commission) issued the Guidance to share its interpretations and opinions in order to provide a guide on compliance and to flag certain focal points of its enforcement efforts. The Guidance builds on prior law and prior similar pronouncements, which we reviewed here, here, here, here, and here.

The Guidance contains multiple noteworthy and important points.

Conditional Offers of Employment: Two-Step Background Check / Criminal History Questionnaire Process

The Guidance explains that according to the Commission, a conditional offer of employment, promotion, or transfer is one that can be revoked only based on the results of a criminal background check (one that is compliant with the FCA), a medical exam as permitted by the Americans with Disabilities Act, or “[o]ther information the employer could not have reasonably known before making the conditional offer….” The Commission explains in its Guidance that to comply with the FCA amendments and this definition of a “conditional offer,” employers should utilize a two-step background check process. First, the employer should obtain and evaluate all non-criminal information before making a conditional offer. This may include verifications of prior employment, academic/educational history, drug tests, Social Security traces, reference checks, and other background checks (not including criminal and motor vehicle records). After this is complete and the conditional offer has been extended, the employer may then ask about any self-disclosed criminal history and request a criminal background check.

If an employer cannot perform a two-step background check, it must establish a system to internally segregate criminal history information to ensure that it is available to decision-makers only after a conditional offer has been made. Employers that opt to follow such process will bear the burden of proving that the criminal information was inaccessible to decision-makers until after a conditional offer. Employers should consider their application processes and the information that is being sought at each stage of the hiring process to ensure compliance.

The Commission recommends that employers omit mention of a criminal background check when seeking an applicant’s authorization for a background check prior to a conditional offer. Employers are encouraged to use terms such as a “consumer report” or “investigative consumer report” rather than “background check” in their disclosure and authorization forms if used prior to a conditional offer. In effect, the Commission appears to suggest that employers may have to use two disclosure and/or authorization forms to advise applicants of the scope of the inquiry during this two-step process. Employers should evaluate their background check forms and processes in light of the Guidance.

Notably, because (according to the Commission) a conditional offer can only be revoked based on criminal history or an ADA-compliant medical examination, an employer seeking to disqualify an applicant post-conditional offer based on non-criminal information will have to prove that: (1) it could not have reasonable known the information before the conditional offer; and (2) regardless of the results of the criminal background check, the employer would not have made the offer if it had known the non-criminal information before the offer was extended. The Commission takes that position that any non-criminal information could reasonably have been known before a conditional offer if the information existed prior to the conditional offer and could have been obtained by the employer exercising reasonable due diligence.

The Commission recognizes that it is often impracticable to separate criminal and non-criminal information contained in a driving abstract or motor vehicle report. So, driving abstracts should also not be requested or at least not reviewed until after the conditional offer has been extended.

For purposes of analyzing criminal information, the Guidance provides the list of specific Article 23-A factors that employers should use in considering conviction history, as well as the list of specific factors employers should use when considering pending cases. The Commission provides a revised model form (available here) for employers to use, but points out that employers can create their own form so long as the material substance of the employer’s form is the same.

Employers Cannot Consider Or Ask About Non-Convictions

Employers cannot inquire about or consider non-conviction information of applicants or employees. This includes criminal charges that have been adjourned in contemplation of dismissal, terminated in favor of the individual, adjudicated as a youthful offender, or resulted in a conviction for a violation, non-criminal offense, or that was sealed. The Guidance provides a list of non-convictions that fall into these categories, and points out that non-conviction information from other jurisdictions that is comparable will also be barred. The Guidance also provides model text that employers can use in their inquiries so that they can avoid soliciting or considering non-conviction information when inquiring into criminal history after a conditional offer of employment. Employers and consumer reporting agencies may consider analyzing the lists and examples in the Guidance to determine whether to limit certain reporting or revising certain procedures to optimize compliance with this restriction.

Job Postings and Recruitment Materials

The Guidance reiterates that no reference to criminal background checks can be made in job postings or recruitment materials. However, the Commission may permit “people-first language,” such as “People with criminal histories are encouraged to apply” and other examples. The Guidance clarifies that neutral statements, however, such as ones that advise that “criminal history will be considered consistent with the requirements of the New York City Fair Chance Act,” are not permitted.

Inadvertent Disclosures

The Guidance recognizes that employers may be put in a difficult position if an applicant inadvertently discloses criminal information during the application process that the employer is otherwise prohibited from soliciting or considering prior to a conditional offer. The Commission offers that employers who make a good faith effort to exclude information regarding criminal history before extending a conditional offer of employment will not be liable under the Fair Chance Act. The Guidance suggests that in a situation of such inadvertent disclosure, the employer should state that, by law, it will consider the applicant’s record if it decides to make them a conditional offer. If the applicant asks whether there will be a criminal background check, the employer may state that a criminal background check will be conducted only after a conditional offer of employment. Then, the employer must move the conversation to a different topic.

Intentional Misrepresentations

An employer can disqualify an applicant based on an “intentional misrepresentation” about the applicant’s conviction history or pending case. The Guidance defines that a misrepresentation is “intentional” if it is made with knowledge of its falsity and with intent or purpose to deceive the employer. Before taking action based on a perceived intentional misrepresentation, the employer must: (1) provide the applicant a copy of any information that led the employer to believe that the applicant intentionally misrepresented their criminal record; and (2) afford the applicant a reasonable period of at least 5 business days to respond. If the applicant credibly demonstrates either that the information provided was not a misrepresentation or that a misrepresentation was unintentional, the employer is required to perform the Fair Chance Analysis before taking adverse action against the applicant.

Withdrawing a Conditional Offer

The Guidance explains that once an employer determines that there is a basis to withdraw an offer, it must:

(1) provide the applicant with a copy of everything the employer considered—for example, this includes a background report, print-outs of any internet searches, and summaries of any oral conversations where relevant information was obtained;

(2) provide the applicant a written copy of the Fair Chance Analysis; and

(3) allow the applicant a reasonable time period of at least 5 business days from receipt of the inquiry and analysis to respond to the employer’s concerns.

Notably, the employer cannot permanently place someone else in the position while the Fair Chance Process is underway. The Guidance also explains that the 5-business day period runs from when the applicant receives both the inquiry and the notice, and employers should use a communication method that is agreed-upon by the applicant that also provides a record of receipt, such as delivering the information in person, electronically, or by registered mail.

For current employees, the Guidance explains that they can be placed on unpaid leave for a reasonable period of time. The Commission views delays beyond 5 business days from when the employee receives the Fair Chance Notice (i.e., the time frame for the employee to respond) to be presumptively unreasonable and an employer’s continuing unpaid leave thereafter may be viewed by the Commission as having taken an adverse employment action.

The Guidance also cautions that a consumer reporting agency could be liable for aiding and abetting discrimination if it advised an employer to approve or deny an applicant based on a list of specified conviction history that the employer wishes to categorically exclude. The Guidance explains that doing so would unlawfully deny the applicant an individualized assessment of their conviction history and violate the Fair Chance Process.

Temporary Help Agencies

For temporary help agencies, the Guidance explains that the conditional offer of employment and Fair Chance Process occurs prior to the applicant being placed in the agency’s labor pool. Then, employers who accept placements and wish to inquire about a worker’s criminal history have to follow an independent and additional Fair Chance Process. The Guidance explains that temporary help agencies can be subject to liability for aiding and abetting discrimination by, for example, sending only applicants with “less serious” criminal histories to their employer clients.

Exemptions

The Guidance explains that there is an exemption for legally-mandated background checks, but points out that even where a background check is required, the employer is still required to follow the Fair Chance Act to the extent it does not conflict with that federal/state/local law. In this situation, the employer may advise the applicant once they apply for a position that a background check will be required. The background check can be conducted prior a conditional offer of employment, but otherwise the Fair Chance Act procedures must be followed.

Where an employer is prohibited by another federal/state/local law from hiring/employing someone based on a particular criminal offense, the employer may advise applicants once they apply about any such criminal histories that are disqualifying for the position due to a legally-mandated exclusion. The employer can conduct a criminal background check prior to the conditional offer and can disqualify an applicant based on an conviction that is subject to a legally-mandated exclusion, and can do so without following the Fair Chance Process. However, the employer must provide the job applicant of copies of any information the employer relied upon and the legal citation for the exclusion.

The Commission recommends that employers who are availing themselves of exemptions should inform the applicants/employees of the exemption that applies and keep a record of using the exemptions for a period of 3 years from the date the exemption is used, as the Commission anticipates requesting exemption logs in the event of an investigation. The Commission also recommends that the results of any inquiry into an applicant’s/employee’s criminal history should be maintained separately, and only people involved in making decisions about the applicant/employee should have access to that information.

Enforcement

The Guidance explains that the Commission “vigorously enforces” the Fair Chance Act, and civil penalties are based on (1) the severity of the particular violation; (2) the existence of previous or contemporaneous violations; (3) the employer’s size, considering both the total number of employees (e.g., 4-9 employees, 10-20 employees, 21-50 employees, 50+ employees) and revenue; and (4) whether or not the employer knew or should have known about the law.

By statute, the Commission is able to enforce civil penalties for a violation of the law of up to $125,0000. Willful, wanton, or malicious actions found on the part of an employer may result in the Commission’s imposition of a civil penalty of up to $250,000. These civil penalties are in addition to other remedies available under the Fair Chance Act, which may include compensatory damages (e.g., back pay, front pay, emotional distress damages), punitive damages, and attorney’s fees, as applicable.

The Guidance provides insights into the interpretations and perspectives of the Commission, which is the active enforcement agency for the Fair Chance Act. Although certain of these interpretations and perspectives have not been tested before the courts, they nevertheless provide valuable information to employers and consumer reporting agencies that have to navigate these new restrictions and requirements when performing background checks. Employers (and perhaps their consumer reporting agencies) should use the issuance of the Guidance as an opportune time to examine the background check process, especially the nuances of the two-step process surrounding the conditional offer, as well as the forms that are utilized at various stages, and also any applicant tracking systems or other systems utilized during the hiring process. Further, employers and consumer reporting agencies may consider the restrictions on what information, and when, can be considered for employment purposes and make adjustments to ensure optimal effectiveness and compliance.