Legislative Trends in Pre-Employment Background Investigations

1. Legislative Trends in Pre-Employment Background Investigations CRHRA One Day Conference March 24, 2017 www.allianceinvestigative.com

2. Partnerships/Affiliations

3. Mario Pecoraro is an Industry Thought Leader Sought by National Media! Alliance is the gold standard for those who want to screen out the fakes! -Deborah Roberts/ABC’s 20/20

4. Overview of What Will Be Covered: TOP Legal Trends in Background Investigations • Fair Chance Act a/k/a Ban the Box • Changing Workforce: Independent Contractors • FCRA, EEOC, FTC: How they fit in • New York Centric (NYFCRA, Article 23A) • Litigation Trends • Certainty in Enforcement Act of 2015 • Credit Checks/Compliance • Post-Hire Ongoing Screening & Compliance • Use of “FBI” Check in Investigations Process

5. Fraud & HR: • A Study on Resume Fraud Concluded: 53% of resumes and job applications contain falsifications; Job Titles, Degrees, Dates, Salary “Background verification services are essential…” - Society for Human Resource Management • Business Failure: 1/3 of all business failures are the result of employee theft or other employee crime. – US Department of Commerce • Employee Theft: $50 Billion is stolen annually in U.S. businesses by employees. – Statistic Brain • Work place Fraud: Fraud costs organizations 5% of revenues each year: In 2014 work place fraud resulted in 3.7 trillion of loss profits globally? - ACFE 2016 Report to the Nations

6. # 1 Ban the Box Legislation (Fair Hiring Policies) • PURPOSE: Major US Cities and Counties adopt fair hiring policies to remove unfair barriers to employment of people with criminal records • Nationwide, over 150 cities and counties have adopted “Ban the Box” Policies • 25 States have adopted the policies • CA, CO, CT, DE, GA, HI, IL, KY, LA, MA, MD, MN, MO, NE, NJ, NM, NY, OH, OK, OR, RI, TN, VT, VA, WI • 9 States have removed the conviction history question on job applications for private employers in CT, HI, IL, MA, NJ, OR, RI, VT, VA www.allianceinvestigative.com

7. # 1 Ban the Box Legislation (Fair Hiring Policies continued) • Federally, the EEOC has endorsed removing the question from the job application as a best practice! • Nearly 70 Million Americans have some sort of record, that is 1 in 3 Americans of working age! • What to do? • Review your state(s) and cities of operation, determine if this applies to you? • Review your process to ensure that your practice is non-discriminatory • Document changes to your process and training of your staff. If the question is asked in a varying format (ie, in an interview), you are still liable www.allianceinvestigative.com

8. #2: Independent Contractors vs. Employees Workforce Adaptability & Contingent Workforce • Freelancers on the Rise, how this is impacting us? • Examples include Uber, Fedex Ground, Lyft, Amazon.com, testing legislation on “employee” or not? • 2014-15 Fedex paid $228M to settle with over 2000 drivers (California only), other states in question • Still maintains that drivers are Independent Contractors and not employees, as of 3/7/17 US Court of Appeals Decision www.allianceinvestigative.com

9. #2: Independent Contractors vs. Employees • Employer vs. Contractor Relationship? • Examples of unique situations include… • Gig workers signing up to perform services using a mobile app • Crowd-based gigs that are only paid if the customer chooses the project • Ensure that you are compliant! www.allianceinvestigative.com

10. #3: FCRA, EEOC, FTC and how they impact you! FCRA: Designed to protect individuals by promoting accuracy, fairness, and privacy of information in the files of every Consumer Reporting Agency (CRA); EEOC: Ensures that employers are non discriminatory and treating everyone fairly. Latest Panel gathered in 2016 discusses use of “big data” and algorithms for future; FTC: Promotes consumer protection and eliminating and preventing antitrust business practices. Enforces FCRA! Ensure all compliance is met or FTC can enforce, they can litigate; www.allianceinvestigative.com

11. #3: FCRA, EEOC & FTC: Scrutiny on the rise…. LATEST TREND: EEOC & FTC are actively pursuing companies that are in violation of FCRA. 1.) BEFORE the Background: Treat everyone equally! Do not base decision a person’s race, national origin, color, sex, religion disability, genetic information, or age. 2.) DURING the Background: Ensure proper protocol with respect to release, disclosure, and commitment to FCRA requirements 3.) USING the Background: Same as step 1, take special care when basing decisions that may be more common among people of certain race, color, religion, disability, etc. Give applicant ample notice to review results, etc. 4.) DISPOSING: (FACTA-Fair and Accurate Credit Transactions Act) Records (including forms, regardless of whether they were hired) must be preserved for 1 year after records made/action taken. Requirement is for 2 yrs. for federal contractors with 150 employees or more/$150K government contract. www.allianceinvestigative.com

12. #4: NY Centric Laws you should know… • NY Corrections Law aka Article 23A: • Promotes employment of individuals with one or more convictions • Provides a legal playing field for individuals with convictions • Essentially, an employer may not deny or terminate employment on the basis of prior criminal convictions except for • Direct relationship between past and current role • Hiring said person presents an unreasonable risk to employer’s property or specific individuals www.allianceinvestigative.com

13. #4: continued….NY Centric Laws • NY General Business Law aka NYS FCRA • Must be used in conjunction with FCRA (Federal) • 380j; Requirements in use of consumer reports, restrictions on what may be used, civil and criminal • Thresholds on reportable information • Often overlooked in New York by employers • $25K annual salary threshold, see section 380j, 2, iii. www.allianceinvestigative.com

14. #5: Litigation Trends • 2015: Whole Foods and Class Action Litigation: $803,000 paid for failing to properly disclose that employees were consenting to background investigations in the application process; • 2015: Chuck E Cheese, $1.75M settlement; Failing to provide applicant’s with a clear and conspicuous disclosure; • 2016: Rosario vs. Starbucks sued over inaccurate results, applicant denied employment, never given the opportunity to refute contents/FCRA process; • 2017: Riley vs UPS, sued for failing to give applicant an opportunity to refute contents. UPS facing fines per violation, per applicant and more! Riley is seeking to bring a large action against employer gathering other victims.

15. #6: Certainty in Enforcement Act WHAT IT DOES…. Amends EEO Requirements under Civil Rights Act of 1964 to deem an employer’s consideration of use of credit or criminal information as mandated by law to be JOB RELATED and serve a BUSINESS NEED. WHY: EEOC litigating against companies who were innocent, increasing their business costs. Examples include EEOC vs. Peoplemark; $751K in attorneys fees granted; EEOC vs. Kaplan Education, use of credit reports, wrongfully litigated INTENDED USE: Helps an employer and candidate ensure that everyone’s best interest are taken into consideration to avoid unnecessary litigation that is costly! CURRENT STATUS: No movement; Introduced in 2014, not inacted, reintroduced again 2015

16. #7: Credit Reports in Hiring Decisions Illegal to use as a means to make an employment decision in… • CA, CO, CT, DE, DC, HI, IL, MD, OR, VT, WA, • Some cities have also passed laws – including Chicago, NYC and additional legislation is pending in several other states • FACTS: • Discriminatory and Subjective • Per SHRM, 47% of employers conduct credit on some or all applicants • Pending Senate Bill proposed to prohibit employers from asking applicants to disclose credit history www.allianceinvestigative.com

17. #7: Credit Reports in Hiring Decisions continued.. Is there an alternative that is non-discriminatory? Bankruptcies, Liens and Judgments • Use when applicable to position (s) • Comprehensive, non-discriminatory • Clear/Black and White • Identifies major “red flags” www.allianceinvestigative.com

18. #8: Post-Hire Screening: How to be compliant • Employers conduct background investigations at the onset of an employment decision, HOWEVER what is being done throughout the employment process? • Ensure that the initial release form is compliant and sets the groundwork for future screening for various purpose(s) • Retention, Promotion, etc. etc. • Establish groundwork and budget for due-diligence required • What to do if you suspect an “issue”, does FCRA apply?

19. #9: Use of the “FBI” Check: • How is it accessed? • Inaccurate, missing data in several states • What does it contain? • Arrest Information without disposition • Lacking a disposition is useless for employment decision • Who can utilize this method? • Over 30M checks annually as reported in 2014-15, but inaccurate! • INTERESTING FACT: Biometrics and Facial Recognition Database?: Has been tested outside of the US! www.allianceinvestigative.com

20. In closing…………. • Background Investigations are evolving, we must remain vigilant and compliant; • Beware of the “easy” Red, Yellow, Green Light approach to results, it is not that cut and dry! • Continually assess your current process to ensure compliance, easy is not necessarily best!; • Ensure legal or partner reviews process at least annually, from application through final decision; • Ensure your provider is educating you on the changes in legislation;

21. QUESTIONS? Mario PecoraroAlliance Worldwide Investigative Group Inc.Office: (518) 514-2944Cell: (518) 365-1004mpecoraro@allianceinvestigative.com