Background checks are key to ensuring a safe, secure workplace; however, they also require taking specific steps to ensure compliance with the Fair Credit Reporting Act (FCRA) – and that is no small task, especially considering the onslaught of ban-the-box and other laws protecting ex-offenders that have been enacted at the state and local level. This webinar will help you better understand what you need to do to stay compliant with the numerous laws that regulate your background screening program. Join EPAY Systems and Seyfarth Shaw's employment law expert Jennifer Mora as she addresses: - The latest insights as they relate to the Fair Credit Reporting Act (FCRA). - What you need to know to remain FCRA-compliant. - How to align your screening practices with FCRA regulations. - How to navigate the wave of ban-the-box laws sweeping the nation. - Understanding other legal issues that touch on an employer’s background screening process. About EPAY Systems EPAY Systems is a leading SaaS provider of human capital management technology and services designed to help medium to large businesses better manage their workforce. Our solutions include recruiting and applicant tracking, new hire onboarding, benefits administration, HR management, time tracking, workforce management, payroll processing, tax management, performance management, ACA reporting, COBRA administration, and more. At EPAY Systems, we understand the challenges of people management, especially when dealing with the complexities of an hourly workforce. That’s why our number 1 priority is to make your life easier. Our services, complete with easy-to-use cloud software and 24/7 customer support, manage everything for you—from pre-hire to retire. And when it comes to pricing, there are no surprises. You pay one straight-forward, all-inclusive monthly price.

1. Background Checks
How to Stay Compliant with the
Onslaught of Legal Changes and Updates

2. 2
Agenda
• Who is EPAY Systems
• The Fair Credit Reporting Act
• Litigation Update
• Ban the Box Deep Dive
• Best Practice Recommendations

3. Who is EPAY Systems
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99%

4. 4
Speakers
Jennifer L. Mora
Senior Counsel
Seyfarth Shaw LLP
Michelle Lanter Smith
Chief Marketing Officer
EPAY Systems

5. 5
Disclaimer
This presentation has been prepared by Seyfarth Shaw LLP for informational purposes
only and is not legal advice. This information is not intended to create, and receipt of it
does not constitute, an attorney-client relationship. Participants should not act upon this
information without seeking professional counsel. The material discussed during this
webinar should not be construed as legal advice or a legal opinion on any specific facts
or circumstances. The content is intended for general information purposes only,
and you are urged to consult a lawyer concerning your own situation and any specific
legal questions you may have. Any tax information or written tax advice contained here
in (including any attachments) is not intended to be and cannot be used by any taxpayer
for the purpose of avoiding tax penalties that may be imposed on the taxpayer.

6. The Fair Credit
Reporting Act

7. consumer reporting agencyfrom a
individualabout an
informationImpacts employers who want to obtain
When does it Apply?

8. Disclosure and Authorization Requirements
• Employers/Independent Contractors utilizing consumer reports
for employment purposes must:
• Disclose in a document consisting of only the
disclosure/authorization, that a consumer report may be obtained.
• Obtain written authorization from the individual prior to ordering the
report.
• Keep in mind state and local requirements
• Check-box in CA, MN and OK

9. • Adverse Action = any action taken based in whole or in part on
the report, that is adverse to the interest of the consumer
• Defined broadly
• Pre-Adverse Action Notice Before Taking Adverse Action
• Copy of background report
• Summary of Rights
• State/local notices
Pre-Adverse Action

10. Waiting Period and Adverse Action Notice
• Wait A Reasonable Period Of Time
• FTC has opined five days
• Some local requirements have defined period
• Consider mail period
• Adverse Action Notice
• CRA contact information
• Statement the CRA is not the decision-maker and cannot explain the
reason for the decision
• Right to obtain a free copy of the report
• Right to dispute with the CRA information in the report

11. Certifications to Consumer Reporting Agency
• Must have a permissible purpose (e.g., employment screening,
tenant screening)
• Must certify to the CRA that you:
• Have a permissible purpose
• Will provide the stand-alone disclosure and obtain consent
• Will follow the pre-adverse action process

12. Commonly Alleged FCRA Violations
• Disclosure not stand-alone
• Liability release; commingled; state law language; name of CRA; credit
(when not getting credit)
• Insufficient pre-adverse action disclosure
• No background report
• No Summary of Rights
• Wrong, outdated Summary of Rights
• Insufficient pre-adverse action process
• Insufficient waiting period
• Rejection ahead of pre-adverse action notice

13. No Pre-Adverse Action Notice?
• Key Facts:
• Employer relied on CRA to send pre-adverse action and final adverse
action notices
• Talent Acquisition Manager apparently added to the process an e-mail
to the applicant:
• Subject Line: “Urgent/Rescinded Offer”
• Body: applicant was “ineligible for hire” but advised the applicant to contact the employer
if there was a mistake in the report. Applicant “will receive a notification from our third-party
vendor as well as an explanation of your rights in regards to this decision.”
• CRA subsequently sent pre-adverse action notice

14. No Pre-Adverse Action Notice? Cont.
• Claim: Applicant did not receive a pre-adverse action notice before
employer made final decision
• Court: Summary judgment for employer denied
• Reasoning: Jury could conclude the e-mail was an “adverse action.”
• Note: “The FCRA is not violated until an adverse employment decision is
communicated…and an employer has until that time to take the necessary
steps to comply with the FCRA’s requirements.”
Cox v. Teletech@Home, Inc., 2015 U.S. Dist. LEXIS 14000 (N.D. Ohio Feb. 5, 2015)

15. Recent FCRA Adverse Action Settlements
• Ernst v. DISH Network LLC (S.D.N.Y. 2016) (pending approval)
– approximately $1 million for a class of about 8,000 consumers.
• Marcum v. Dolgencorp Inc. (E.D. Va. 2015)
– $4.08 million for a class of about 104,000 consumers.
• Goode v. LexisNexis (E.D. Pa. 2014)
– $2 million in attorneys fees for injunctive relief for adverse action violations; class
members allowed to pursue claims for actual damages.

16. FCRA – Adverse Action Ambiguities
Questions
➢ Who is a user?
➢ What constitutes adverse action?
➢ When can adverse action be taken after providing
pre-adverse-action notice?
➢ Does a user have to consider a consumer’s dispute?
Answers
➢Courts have issued conflicting and/or unclear rulings interpreting the
FCRA’s adverse action requirements.

17. FCRA Adverse Action Rulings
• Costa v. Family Dollar Stores (E.D. Va. 2016)
➢ Internal coding is not an adverse action. An adverse action is conduct, such as sending a denial letter, that
“affects the applicant.”
• Williams v. First Advantage LNS Screening Solutions (N.D. Fla. 2015)
➢ “[A]n adjudication cannot itself be an adverse action, because it is, in effect, an evaluation that results in a
decision to take adverse action.”
• Ramos v. Genesis Healthcare, LLC (E.D. Pa. 2015)
➢ Internal coding is not an adverse action if the applicant has “a real opportunity to challenge this internal
determination.”
• Manual v. Wells Fargo Bank (E.D. Va. 2015)
➢ Internal coding may be an adverse action if the employer is “comfortable adhering to that decision” if the individual
does not file a dispute.

18. Disclosures and Authorizations
• FCRA requires that disclosures be in a stand-alone document, consisting “solely” of
the disclosure
– 15 U.S.C. § 1681b(b)(2)(A)(i)
• Written authorization must be obtained prior to ordering the report
• Statute indicates that disclosure and authorization CAN be together
– Increased litigation alleging “extraneous” information in the Disclosure violates
stand-alone requirement
– New cases dealing with “investigative” consumer reports

19. Ban the Box
Legislation

20. Summary of Legislation for Private Employers
• Ban The Box
▪ State Level Statutes
- Hawaii, Illinois, Massachusetts, Minnesota, New Jersey, Oregon, Rhode Island, Washington, DC,
Connecticut, Vermont, California, Washington.
▪ Local Ordinances
- Los Angeles & San Francisco (CA); Chicago (IL); Baltimore, Montgomery County & Prince
George’s County (MD); Columbia (MO); Buffalo, New York City & Rochester (NY); Philadelphia
(PA); Austin (TX); Seattle (WA); Spokane (WA); Kansas City (MO); and Portland (OR).
• Additional Adverse Action Requirements from Ban the Box laws
▪ California (including separately for Los Angeles and San Francisco (CA)); Seattle (WA); Montgomery County & Prince Georges
County (MD); Chicago (IL); Austin (TX); and New York City (NY)

21. When to Ask about Criminal Background
• Hawaii, Baltimore (MD), Columbia (MO), Portland (OR), Washington, D.C., and
California
– After conditional offer
• Illinois
– After applicant selected for an initial interview or conditional offer
• Massachusetts
– After initial written application
– BUT MCAD interprets this to mean after the first interview
• Minnesota
– After applicant selected for an initial interview OR conditional offer
• Washington
– After the applicant has been deemed “otherwise qualified”
– Similar in Kansas City, although must also be after an interview

22. When to Ask (Cont.)
• New Jersey, Oregon, Montgomery & Prince George’s Counties (MD), Buffalo (NY),
Rhode Island, Rochester (NY)
– After first interview
• Rhode Island
– During the first interview or thereafter
• Vermont
– During an interview or once the applicant has been deemed otherwise qualified for the
position.
• San Francisco
– After the first interview OR conditional offer
• Chicago
– After applicant selected for an initial interview and notified as such OR conditional offer

23. When to Ask (Cont.)
• Seattle
– After the employer has completed an initial screening of applicants
to eliminate unqualified applicants
• Austin (TX), Los Angeles (CA), New York City (NY) &
Philadelphia (PA)
– After extending a conditional offer that is only conditioned on the
result of the check
• Connecticut
– After the initial written application is submitted

24. Time Limitations
• Time Limitations:
– Illinois (& Chicago), Minnesota, Rhode Island, Oregon, Baltimore, Montgomery &
Prince George’s Counties (MD), Austin (TX), Buffalo (NY), Columbia (MO), New
York City (NY), Philadelphia (PA), Rochester (NY), Washington, D.C., California –
None
– Hawaii & Seattle – 10 years
– Philadelphia & San Francisco – 7 years
– Massachusetts – Misdemeanors over 3 years old, unless convicted for
another offense within 3 years
– New Jersey – Depends on the crime

25. Number of Employees
• For example (not all inclusive):
– Minnesota, Oregon, Chicago (IL), Columbia (MO), Seattle
(WA) and Washington – all private employers
– Prince George’s County (MD) – 25
– San Francisco (CA) – 20 (regardless of location)
– Illinois, New Jersey, Montgomery County (MD), Austin (TX),
Buffalo (NY) – 15
– Baltimore (MD), Los Angeles (CA), Washington, D.C. – 10
– Portland (OR) or Kansas City (MO) – 6
– Rhode Island, New York City (NY), Rochester (NY) – 4
– Philadelphia (PA) – 1 or more within the City

26. Carve Outs
• For example (not all inclusive):
– Hawaii, Illinois, Massachusetts, Minnesota, New Jersey, Rhode Island, Baltimore
(MD), Chicago (IL), New York City (NY), Seattle (WA), Washington, D.C.:
▪ where a state or federal law requires an employer to consider or prohibits an employer
from hiring an individual with certain criminal convictions
– Austin (TX):
▪ does not apply to jobs for which a federal, state, or local law, or compliance with legally
mandated insurance or bond requirements, disqualifies an individual based on a
criminal history

27. Other Requirements
• For example (not all inclusive):
– Massachusetts
▪ No inquiries regarding first convictions for drunkenness, simple assault,
speeding, minor traffic violations, disturbing the peace
▪ Prior arrests, court appearances, and adjudications in all cases of delinquency or
as a child in need of services which did not result in a complaint transferred to the
Superior Court for criminal prosecution
– Chicago (IL)
▪ Individualized assessment – 9 factors
▪ Identify specific information in adverse action letter
– Washington, D.C.
▪ If applicant requests explanation, employer must provide all records and
statement of denial for each factor listed in ordinance within 30 days

28. Other Requirements (Cont.)
– Montgomery & Prince George’s Counties (MD)
▪ Modify pre-adverse and adverse action letters to include reference
to specific items which form the basis for the decision
▪ Seven-day waiting period before adverse action
– Seattle (WA)
▪ Applicants may exclude a criminal conviction that has been the
subject of a certificate of rehabilitation or other equivalent
procedure based on a finding of the rehabilitation
▪ Before taking an action “solely” based on a criminal record,
employer must:
- Identify the specific records
- Hold the job open for 2 business days

29. Other Requirements (Cont.)
– Portland (OR)
▪ Employers cannot consider:
- Any Arrest History that did not lead to conviction or juvenile adjudication, unless the related crime or act that
would be a crime if committed by an adult is unresolved, or related criminal charges or juvenile adjudication
are still pending against the Applicant;
- Any Conviction History, and related Arrest History, that has been judicially voided or expunged;
- Any Criminal History that was resolved through the completion of a diversion or deferral-of-judgment
program for offenses not involving physical harm or attempted physical harm to a person
▪ Written notification requirement:
- Identify specific item of criminal history on which adverse action is based
- No voicemail or text message

30. Other Requirements (Cont.)
• NY: Buffalo, Rochester, New York City
• Must consider NY Article 23-A
• Columbia (MO)
• Individualized assessment – while not specifically required, decision must be made on all available
information (the Green factors & more)
• San Francisco (CA)
• No inquiries about:
• Participation in or completion of a diversion or deferral of judgment program
• A conviction judicially dismissed, expunged, voided, invalidated, or otherwise rendered inoperative
• A conviction or any other determination or adjudication in the juvenile justice system
• A conviction over 7 years old from the date of sentencing
• Decriminalized convictions
• Notice requirements of reason for prospective adverse action, 7-day response period prior to taking adverse
action & OLSE form

31. Additional Adverse Action Requirements:
New York & New York City
• New York Article 23-A notice requirements
• New York City Fair Chance Act
• Notice Form
• Provide a copy of “inquiries” or “statements”
• FCRA Summary of Rights
• Keep job open for three business days

32. Additional Adverse Action Requirements:
Los Angeles
• Written assessment that links the specific aspects of the applicant’s criminal
history with risks inherent in the duties of the position sought
• “Fair Chance Process”
• Opportunity to provide information regarding the accuracy of criminal history, evidence
of rehabilitation, other mitigating factors
• Wait 5 business days after pre-adverse action
• If applicant provides information, written assessment
• If adverse action follows, must provide applicant with a copy of the written
assessment
• Must retain all records and documents related to applications, written
assessments, and reassessments for 3 years

33. Do’s and Don’ts
• Do: Ask after conditional offer unless federal or state law requirement
• Don’t: Ask about arrests which did not result in a conviction
• Don’t: Ask about sealed, expunged, restricted, juvenile or pardoned records
• Do: Conduct a job-relatedness inquiry
• Do: Consider centralized background screening role
• Do: Review policies, applications and procedures
• Do: Follow FCRA and specific adverse action requirements

34. Best Practice
Recommendations

35. Best Practice Recommendations
• Disclosure and authorization:
• Review disclosures/authorizations annually
• Purge disclosures of extraneous information
• Consider separating disclosure and authorization
• Separate release of liability from disclosure

36. Best Practice Recommendations
• Adverse action
• Train managers/recruiters
• Turn off auto rejection letters
• Set state law notices based on position of location and
address
• Understand myriad of new ban the box laws
• Don’t allow people to start before a check is done

37. Do’s and Don’ts
• Do: Use language, such as “review,” requiring action by the employer.
• Don’t: Use conclusory language like “ineligible for hire.”
• Do: Require action by the employer before sending pre-adverse-action notice.
• Don’t: Automatically send pre-adverse-action notices without any intervening action by the employer.
• Do: Wait at least 5 business days after mailing the pre-adverse-action notice before mailing an
adverse-action notice.
• Do: Require an employer to review any dispute filed by a consumer before an adverse-action notice is
mailed.
• Do: Follow state and local ban-the-box and adverse-action requirements

38. Now What?
• Form a “working group”
• Designate one or more “SMEs”
• Consider a privileged program audit
• Objective: identify opportunities to fortify compliance
• Look at FCRA compliance in particular
• Evaluate whether the identified opportunities
“make sense” for your company

39. 39
Questions?

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