CA: Background Check Vendors Reckon With Increased Job Bias Scrutiny

Source: bloomberglaw.com 8/23/24

Third-party employee screening companies are finding themselves more in the litigation fray in California for blocking job seekers with criminal records thanks to a growing advocacy and legal movement that’s pushing to hold them accountable alongside employers.

A group of background check companies—DISA Global Solutions Inc., the Health and Safety Council, and the North American Background Screening Consortium—and three oil refinery businesses are accused of using a rating system that screens out otherwise qualified candidates solely based on their previous convictions that have no adverse relationship with the jobs they applied for.

The complaint filed Aug. 8 in Los Angeles Superior Court claimed that the defendants violated California’s Fair Employment and Housing Act and Fair Chance Act’s prohibition against employers inquiring about an applicant’s criminal history until after a conditional offer of employment has been made to them.

Litigation—some of which resulted in millions of dollars in settlements with companies like DHL Supply Chain, Macy’s Inc., and Target Corp.—has historically accused employers of running afoul of a broad range of state fair-chance hiring laws that curtail the use of job applicants’ criminal histories during the hiring process.

Now it’s the third-party administrators that find themselves the focus of lawsuits over practices that disproportionately impact job applicants or employees from protected groups, advocates and employment law attorneys say.

“It’s an important movement to ensure that people with records are able to participate in our economy,” said Beth Avery, a senior staff attorney at the National Employment Law Project, a worker-side attorney and advocacy group.

Contractors performing human resource functions for employers should be held responsible for bias “if we’re going to have any chance of effectively enforcing them,” she said. “Otherwise, there’s just going to be this huge loophole for them to be insulated from liability.”

While employers will remain on the hook for liability, they must be vigilant when delegating HR functions to party vendors to avoid consequential legal trouble, said Arthur Gaus, a partner at Kaufman Dolowich LLP.

“You can’t just hand off the work to them,” he said. “Make sure there’s open communication.”

The move to impose liability on background check service providers is fueled by concerns that their systems sometimes contain errors and outdated or incomplete information about someone’s criminal history, advocates and worker-side lawyers said.

A study published in February by Criminology found that the growing issue of background check errors and false employment reports is partially attributed to lax regulation within the industry.

Ruling Provides Fodder
The lawsuit against the trio of background checkers—filed by nonprofit organizations Legal Aid at Work and Root & Rebound—came months after the California Civil Rights Department brought a first-of-its-kind complaint accusing Ralphs Grocery Co. of violating the state’s Fair Chance Act by asking job candidates about their conviction history.

The attorneys behind it are banking on the state Supreme Court’s 2023 decision in Raines v. U.S. HealthWorks Medical Group that FEHA allows workers to sue third-party agents for discriminatory actions performed on behalf of employers. The ruling gave the plaintiff’s bar more of a legal basis to start pursuing such agents in court, legal observers said.

“It cleared one of the gates that have been in existence” for lawsuits, said Joshua Kim, national director of litigation for economic opportunity at Root & Rebound.

The 2018 law, an amendment to FEHA, requires specific procedures for considering an applicant’s criminal history after a conditional job offer and limits convictions that employers can consider disqualifying to those with a direct relationship with job responsibilities.

“We are aware of this fundamental problem with background checks and want to see how defendants can justify the use of background checks” that don’t involve an individualized assessment of an applicant’s qualifications, history, and circumstances, Kim said.

Individualized assessment of applicants aligns with the US Equal Employment Opportunity Commission’s guidance on the limitations on using arrest and conviction records in employment decisions, as well as the policy goals behind many state and local second-chance hiring laws.

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The case is Roe v. DISA Global Sols., Inc., Cal. Super. Ct., No. 24STCV20158, lawsuit filed 8/8/24.
 

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