Today, the Equal Employment Opportunity Commission (EEOC) released the first updates in nearly 25 years to its guidelines on when and how employers may inquire into an applicant’s arrest and conviction history.  According to the EEOC, the new Guidance clarifies and updates the EEOC’s longstanding policy concerning the use of arrest and conviction records in employment, which will assist job seekers, employees, employers, and many other agency stakeholders.  Our preliminary analysis confirms that the Guidelines do not appear to represent a fundamental shift in the EEOC’s positions, but rather summarize pre-existing guidelines and principles based on applicable case law and available demographic research.

The EEOC’s Updated Guidance

No federal law explicitly prohibits employers from so inquiring into an applicant’s past criminal history, however, court decisions and EEOC guidelines have previously recognized that, in some cases, disqualifying an applicant because of an arrest or conviction record could violate the Civil Rights Act of 1964, as amended (Title VII), which prohibits employment discrimination based upon race, color, religion, sex and national origin.  The updated Guidance notes that the use of criminal history may violate Title VII in one of two ways.  First, Title VII may be violated when an employer treats criminal history information differently for different applicants or employees, based on their race or national origin (i.e., disparate treatment liability).  Second, a violation may occur where an employer’s facially neutral policy of excluding applicants from employment based on criminal history disproportionately impacts African American and/or Hispanic applicants and is not job related and consistent with business necessity (i.e., disparate impact liability).

The Guidance distinguishes between the use of arrest and conviction records. According to the EEOC, an employer’s reliance on an arrest record in and of itself is not job related and consistent with business necessity because the fact of an arrest does not establish that criminal conduct has occurred.  However, an employer may make an employment decision based on the conduct underlying an arrest if that conduct makes the individual unfit for the position in question.  The EEOC further recognizes that a conviction record in most cases will usually serve as sufficient evidence that an individual engaged in particular conduct, but notes that in certain circumstances there may be reasons why an employer should not rely on a conviction record alone.

The Guidance cites to nationwide statistical data showing that African American and Hispanic individuals are arrested and convicted at a rate 2 to 3 times their proportion of the general population and states that this nationwide data provides a basis for EEOC to investigate an employer’s use of criminal records.  During an investigation, the EEOC will look to whether the particular employer’s use of criminal history has a statistically significant disparate impact on any protected group.

Once a disproportionate impact is shown, the employer may only avoid liability if it can show that the reliance on criminal history is job related and consistent with business necessity.  The revised Guidance sets out two circumstances in which the EEOC believes employers will consistently meet this defense:

1. The employer validates the criminal conduct exclusion for the position in question under the EEOC Uniform Guidelines on Employee Selection Procedures; or

2. The employer develops a targeted screen that considers at least the nature of the crime, the time elapsed, and the nature of the job.  The employer’s policy must also provide an opportunity for an individualized assessment of those people identified by the screen to determine if the policy as applied is job related and consistent with business necessity.

As to the first defense, the Guidance recognizes that in most cases this will not be a viable option because of the lack of currently available studies that could provide a framework for formal validation.  For the second defense, the Guidance notes that while an “individualized assessment” is not required under Title VII under all circumstances, the lack of an individualized assessment is more likely to result in a violation.

Best Practices Identified by the EEOC

The Guidance provides several examples of best practices for employers who consider criminal record information when making employment decisions (beyond a recommendation for more training).  In general, the EEOC advises employers to eliminate policies or practices that “exclude people from employment based on any criminal record” and to replace them with “narrowly tailored” policies that provide for targeted, individualized screening of specific offenses based on a job’s essential requirements and actual duties.  The Commission also recommends that employers keep a record of the justifications and research that supports those policies.  Finally, the EEOC suggests that when asking questions about criminal records employers should limit their inquiries to records for which an exclusion would be job related for the position in question and consistent with business necessity.

Conclusion

Background checks remain fraught with potential pitfalls for employers.  However, employers should not let those hazards stop them from performing proper due diligence on potential employees, provided that they do so in a targeted and individualized manner that relies only on criminal history in a manner that is consistent with the EEOC Guidance.  We will be providing clients with more detailed guidance and training opportunities in the coming weeks on this important update of the EEOC’s views on the use of criminal history records in hiring.

Article written by attorneys Doug Hass and Mike Warner and provided courtesy of Worklaw® Network firm Franczek Radelet.

Forecasters predict that the amount of information companies have to manage will quadruple in the next ten years. Data management and security protocols are a growing risk management concern. Companies need to protect proprietary and confidential information including everything from their latest designs, internal communications, client data, marketing strategies, financial information, and the list goes on. Fact is, every aspect of your operations has information and data attached to it that competitors or worse would love to have access to. What can and should a company do to help manage this ever growing risk?

1. Make sure you have cyber-liability and other insurance coverages to cover against these losses.
2. Do a complete assessment of the most important risks. Not all are weighed equally. Make sure there is someone fully responsible for managing each one of those risks.
3. Make sure you know where the information flows and who has access to it. Chances are, your employees have access to more information than they need to.
4. Have protocols surrounding all information devices including servers, desktops, laptops, and mobile devices, video conferencing, online chats, and social media platforms.
5. Train your employees on the risk associated with not properly managing this information or data.
6. Hire a third party service to check your vulnerabilities.
7. Employ today’s technologies to help better manage data. For example, Symantec and Web Sense are the leaders in data loss prevention. Their software is often used to prevent social security and credit card numbers from leaving a company.
8. Have protocols around the use of social media. HR That Works members should take a look at the Social Media Training Module and related tools.
9. Have clear protocols about people who are telecommuting to work or are third-party vendors.
10. Make sure how you manage the departure of terminated or defected employees. Of course, you can have non-compete and confidentiality agreements as well as taking a checklist approach to making sure all equipment, passwords, etc. have been collected. If necessary you can employ counsel to file an injunction against use of any confidential information.
11. Don’t forget about low-tech espionage including dumpster divers and the Xerox machine.

These suggestions are just a start. You should conduct an extensive risk management and technology assessment and there are plenty of vendors willing to help you with that effort.

These are desperate times and more and more employees are doing desperate things. How do you handle it if someone has been arrested before they were hired or even after they were hired? To begin with, the answer to this question varies on a state-by-state basis. That’s one reason why we encourage you to work with companies like our strategic partner, Global HR Research, because they conduct background checks and give you advice based on jurisdictional constraints. In some states it’s a free-for-all, if you decide not to hire someone because they were arrested, that’s OK. In other states, there is a prohibition against not hiring people because they were arrested. In fact, we know of some government contracts that require employers to hire people with an arrest record (only in America).

“Just how bad is it?” is the next question. Assuming work-related arrests are a legitimate reason for not hiring somebody, how bad was the situation? Did they steal something off a delivery truck? Did they swipe confidential data? Did they get busted smoking pot on the job or off the job? As Cicero famously said, let the punishment fit the crime.

Employers also have to be aware of negligent hiring causes of action where an arrest record was overlooked or not even looked into in the first place. For example, in one case I handled years ago, a nursing facility did not conduct background checks because it was so desperate for attendant. As a result, they hired somebody recently released from Folsom Prison for robbery and rape who, in turn, raped and murdered one of the patients. Of course, they were rightfully sued for millions of dollars. This was simply negligence on their part and doing no background checks at all is one of the greatest risk a company faces. Lastly, if the arrest occurs while in your employ, you’re certainly entitled to do your own independent investigation into the situation to determine if it makes sense to keep the employee on board. The recent fiasco at Penn State provides plenty of examples.

Of course, the smartest move to make in a situation like this is to work both with your attorney and, if it’s an executive, your public relations person.

We are witnessing a great deal of M&A activity once again. While tough times produce many wonderful buying opportunities, all come with inherent risks. There are numerous risks you want to audit for from a human resource perspective including:

1. How do the cultures of the two organizations different? Peter Drucker claimed that 2 out of 3 M&A’s fail due to cultural reasons. As Dr. Deming taught us, you have to drive the fear out of the situation. Fear that the acquired executives and employees will not respect your ways of doing business and fear on the part of the newcomers that you won’t be considerate of their insights. Great leaders take these fears head-on so that the M&A doesn’t get destroyed by unnecessary dramas.
2. You want to look at the best HR practices from each organization. Does one company hire employees better than the other? How do they manage performance or motivate employees? What standards do they set for promotions? How do they manage compliance concerns? What sorts of training programs do they operate? Who has the “best practices”?
3. The M&A process implies there will be a culling of the herd. How will you identify who is left off the bus in a way that doesn’t let go of the wrong employee and prevents you from getting sued in the process? Have your criteria for the inevitable layoffs and terminations been reviewed by employment counsel?
4. Compensation and benefits is another very important consideration during the M&A process. Inevitably, executives and employees will be paid differently for doing the same or similar work. This will be an excellent time to revisit your compensation and benefit plans and strategies in general. Are you paying competitive salaries and wages? You have to look to the marketplace for that answer. What would you have to hire one of these employees for today? Are you using competitive benefits? As mentioned in previous posts, a dollar spent on benefits versus a dollar spent on compensation has a greater perceived value to employees. Consider this fact at a time when many companies are looking to shed benefits. Lastly, what can you learn from each other’s incentive programs? What boosts sales or productivity?

HR should be instrumental in making sure the “soft stuff” is addressed during the M&A process. HR That Works Members have access to an entire M&A audit that they should consider using during such a process.

In this 5-minute video HR That Works president, Don Phin, discusses the reason why HR is high risk. To download the 149 Things to Worry About in HR PDF, please click here.

We were fortunate to have Cindy Ventrice, author of Make Their Day: Employee Recognition That Works, conduct a webinar for us on Low Cost Recognition Strategies. It is archived on HR That Works in both WMV and MP3 versions. Here are some of the salient points made:

1. The most important recognition comes directly from the manager or supervisor.
2. The most impactful recognition is no cost praise.
3. Employees like time off as a reward.
4. Come up with some fun ideas with your management team. Learn from each other!

HR That Works Members should also look at the Keeping Great Employees Training Module.

In the recent case of Mustafa Rehmani v. Ericsson, Inc., the court introduced the facts as follows:

“Petitioner Rehmani, a Muslim born in Pakistan, worked as a System Test Engineer for Ericsson from February 2007, when Ericsson acquired Rehmani’s prior employer, to November 13, 2009, the day he was terminated. During his tenure at Ericsson he had coworkers from at least 12 different countries, including India, China, and Pakistan. Three of those coworkers — Amit Patel, Aneel Choppa, and Ashit Ghevaria — originally were, along with Ericsson, the objects of the underlying lawsuit in this case.” As the case then explains Rehmani claimed the Indian dudes pretty much treated the Pakistanis, Chinese and other non-Indians as second class citizens. From there the facts are like any other “traditional” discrimination case. I recently reported on a case filed the EEOC against an oil refinery because they hired Hispanics over both African Americans and Whites.

Here’s my point: Discrimination is no longer by the black and white thing. It’s growing as a nationality thing. Many immigrants have different cultural views related to the subject and may have long standing rivalries brought to our shores. The solution: Know your legal obligations, be clear about what you won’t tolerate and realize all of us could use a bit of training!

“If you are not prepared to be wrong you’ll never come up with anything creative.” —Sir Ken Robinson, author and educator

This issue discusses:

• Editor’s Column: Podcast Learning
• I-9 Employer Handbook
• How Companies Get Busted for Independent Contractor Violations
• Questions for Leaders
• Benefits and the Social Contract
• Inviting Employees to Leave
• IRAC – A Lawyer’s Way of Thinking
• EEOC Sues Trucking Company for Improper Pre-Hire Testing

We have also provided you with the Form of the Month.

Please click here to view the newsletter in PDF.

Editor’s Column: Podcast Learning

I’m a big fan of podcast learning. During the past four years, I’ve educated myself on a wide variety of subjects from business to personal growth, financial matters, and spiritual ones.

I would encourage all businesses to make their managers and employees podcast learners. For starters, your HR person should be listening to our monthly podcast. It’s not as fancy as the big guys’ podcast, but the information is there. I would then make sure all my managers listen to the Harvard Business Review podcasts, which provide an MBA-level education. They’re excellent — and they’re free. I would encourage you to consider TED videos and audios, which are outstanding. Pick out a few you think might apply to your business and encourage your team to watch them. They are 15 minutes long. Start one of your business meetings with one of them (maybe even every business meeting).

I also like the Stanford Entrepreneurial School podcasts. The Stanford graduate network has started more entrepreneurial businesses than anywhere else. Tap into this wisdom, even if you have a 50-year-old business. Podcast learning can stimulate thought and innovation at any company.

I’m most familiar with iTunes. Go there and check out all of their free podcasts. You can hire a high school intern to download about 20 podcasts each into a $50 player, so your employees can listen to them in their cars or at the gym. In the end, they will thank you for it.

Here are the links to the podcasts:

• HBR
• TED
• Stanford
• HR That Works

P.S. You can also develop a comprehensive leadership training program by taking advantage of the more than a dozen leadership webinars and podcasts stored on HR That Works. If you haven’t checked these out yet, do yourself a favor.

I-9 Employer Handbook

The government has an excellent publication covering everything about I-9s that all employers should know about. Here’s what it covers:

• Obtaining Forms and Updates
• Part One — Why Employers Must Verify Employment Authorization and Identity of New Employees
• Part Two — Completing Form I-9
• Part Four — Unlawful Discrimination and Penalties for Prohibited Practices=
• Part Five — Instructions for Recruiters and Referrers for a Fee
• Part Six — E-Verify: The Web-based Verification Companion to Form I-9
• Part Seven — Some Questions You May Have About Form I-9

Click here to access the handbook.

How Companies Get Busted for Independent Contractor Violations

Business owners love the idea of independent contractors. They afford flexibility, expertise, outside perspective, and of course, reduced insurance, benefit and tax burdens. Unfortunately, for these same owners, the Federal and state authorities are coming down big time on what they claim are independent contractor misclassification schemes. They don’t like the idea of you not collecting payroll taxes and not providing employees with Workers Comp, healthcare, and other benefits they might otherwise enjoy. Here are four of the more common ways employers get into trouble when they misclassify employees:

1. They get hurt on the job– Guess what? Since these people are not considered employees, your Workers Comp policy doesn’t cover them; which means they can sue you directly for negligence, expanding their recovery potential dramatically. What’s more, you might face a fine for not treating them as employees and providing them with Work Comp coverage.
2. They file for unemployment– A number of HR That Works Members have told us that because one person filed for unemployment, the authorities are trying to attack their independent contractor relationship with dozens of people. If a company in this situation comes out on the wrong side of a misclassification judgment, it could go out of business. Part of the thinking involved is that you can somehow “control” employees, but not independent contractors. For example, when I hire an independent contractor to paint my house, I pay them to get the job done and I don’t tell them how to apply the paint.
3. They didn’t pay self-employment taxes– When the IRS comes knocking on an independent contractor’s door and asks them about their tax payments and the work they did, they tend to conclude that they were an employee and you should have been withholding that 14% annually. If they can’t collect this from the independent contractor, they’ll try to collect it from you — not to mention fines and penalties. Some states, such as California, have kicked this up a notch and are making it a criminal offense to engage in intentional misclassification. Unsurprisingly, these bills are introduced into the legislature by the plaintiffs’ bar, which makes sure that the legislation includes handsome attorneys’ fees for enforcement.
4. Finally, the NLRB is getting interested too — Independent contractors don’t have the ability to organize the workplace, only employees do. This means that the National Labor Relations Board, which is very pro-union, doesn’t like it when you classify folks as independent contractors. Recently, because of one or two disgruntled employees, they ruled that independent contractors from a small orchestra were really employees, which will probably end up shutting down that business. I wrote an article about this called “The Day the Music Died.”

The bottom line: This fight is not about common sense or economics. It’s about political power, plain and simple. The pendulum has swung and employers have been pushed up against a wall. The problem is that they’re powerless to do anything about this situation and have to change the way they do business, even when they don’t think it makes sense to do so. That’s the beauty of living in a democracy.

Questions for Leaders

The quality of our lives and of our companies depends on the questions we ask and the challenges we set for ourselves. For example, you might ask yourself “Do I dare to be great?” That’s a good question. You can also ask yourself what kind of nonsense would get in the way of believing that you can be great. That’s a good question, too! With this spirit in mind, here are questions that could open you up to higher thoughts.

1. How clear is the vision for your company? Does everyone at the company know what it is? Have you branded it in your employee literature, on your intranet, on your walls, and so on? Would I know it simply by walking into your place or visiting your website?
2. Is your vision for your company a big, hairy, audacious one? It’s better to really go for it and succeed at 50% than to shoot for average — and end up average.
3. Have you played the movie forward to the end? If you got everything you had hoped for, what would it look like? How would it feel? How would your life be different?
4. What personal sacrifices are you willing to make to create a great company or career?
5. What personal sacrifices are you willing to ask others to make to build a great company or career?
6. What effort have you made to guarantee you bring the right people on every seat of the bus?
7. How do you stimulate your workforce to think for itself?
8. How do you create an employee suggestion system that works?
9. What have you done to eliminate the possibility of people making unnecessary mistakes?
10. What “one big thing” could wipe out your business tomorrow?
11. How could your business die from a series of 1,000 cuts?
12. Do you really want to do this anymore? If not, what would you rather be doing instead?
13. How could you stay in your business/career and reinvent how you work in it?

Have fun with the answers!

Benefits and the Social Contract

In his book Predictably Irrational, Dan Ariely provided two interesting observations related to employee benefits. First, he pointed out that benefits are more of a social contract than an economic one. The distinction between the two is very powerful. For example, if you have a department with 15 employees and someone walks in with a tray of 15 cookies and says that she baked cookies for the department today, under a social contract analysis, most employees would realize quickly that they should take one cookie each. However, if that was now turned into an economic arrangement in which the person stated that those cookies were baked for her child’s fundraiser, there would be no guilt or judgment associated with someone who proceeded to gobble up half the tray. Ariely reminds us that social contracts are much more powerful than economic ones.

Second, Ariely argues that asking employees to chip in for the payment of benefits or providing total compensation statements (something that we’ve recommended for years) diminishes the cohesiveness of the social contract.

These are provocative thoughts — and surveys about employee motivators mirror them to a certain degree. Although book after book after book talks about the “work experience,” in reality, most people go to work to be paid. The other motivational factors kick only after they feel they’re being paid a fair days’ wage. In today’s economy, employees rank benefits over compensation as their top concern. Benefits fulfill a security need more than does straight compensation. In a sense, the workforce is telling us that a dollar spent on benefits (which is a tax-free payment) is worth more than a dollar spent on straight compensation. Consider this if you’re considering a cut in benefits.

Inviting Employees to Leave

During the past year, I’ve read at least a dozen articles citing statistics that anywhere from a quarter to 42% of employees intend to look for new jobs once the economy recovers. My reaction to these articles: Seriously? Where are these folks going to go? To the companies where one-third of their employees are leaving? I wonder how much energy employees who plan on leaving are putting into their current job. My bet is that if they took the energy they’re using to think about employment elsewhere and applied it in their current job, they wouldn’t need to go anywhere!

Management should take these surveys as a sign of dissatisfaction — which shouldn’t come as a surprise. By definition, half of your employees are always happier in their jobs than the other half. The solution: Try to limit your hiring to these happy folks and to do everything possible to keep them that way.

Suppose you were bold enough to invite your dissatisfied employees to quit? Zappos does this with its new trainees. After they complete training, the company offers them a $3,000 bonus if they decide to quit. Zappos CEO Tony Hsieh believes that he’s better off giving an employee who has only one foot in the door $3,000 to leave, rather than keeping them. Even if these dissatisfied workers were only 10% less productive than the other Zappos’ employees, this loss of productivity would cost the company far more than the $3,000 “quitting bonus,” over the long run.

Invite your employees to one-on-one conversations about job satisfaction. Chances are, if an employee believes something feels “unfair” in the relationship, you can deal with the situation like two adults who don’t need unnecessary dramas. If the employee would feel better leaving, that’s their choice. However, if they’d like to feel better about their job, and you want them to stay, make it clear that you’re willing to work with them.

As I discuss in the Victims, Villains and Heroes book, even though there are few real workplace victims today, there’s a growing victim mentality. Anyone who wishes to educate themselves and work hard can enjoy employment opportunities; your job is to keep only the best on the bus.

IRAC – A Lawyer’s Way of Thinking

At the beginning of law school, every student learns “the method” used to help clients solve problems. IRAC stands for Issue, Rule, Analysis, and Conclusion.

• Issue: Issue spotting is a lawyer’s tool in trade. Never assume you know what the issues are without changing viewpoints or getting outside input. For example, HR executives not highly experienced in the law might assume the issue might relate to a Workers Comp return-to-work situation when in fact it’s also related to both the ADA and the FMLA. They might assume that the issue is getting rid of a poor performing employee when the real issue is what the manager did to create this poor performance. One reason that appellate tribunals consist of multiple judges is so that there can be a variety of viewpoints, especially when establishing the true issue. The ability to spot issues is one reason you should have a lawyer check your head when you have a serious problem.
• Rule: Rules come in many forms. There are hard and fast rules, such as those promulgated by legislatures and the court system. Then there are softer ones, such as those that relate to culture or values. In many cases, a whole host of rules can apply to a situation. You might have a contract, policy, procedure, habit, government requirement, vendor requirement, or some other rule that applies.
• Analysis: Now that you know what the issues are, as well as the rules, it’s time to do your analysis. As lawyers know, tough facts make for tough cases. There are times when applying a rule is not in your best interest. For example, the normal rule of the road is that you walk facing traffic; however, there might be a situation in which it’s safer to walk with traffic. In this case, complying with the law would generate an unsafe outcome. Experts make their money by knowing how to judge a situation for what it is, and not for what you’d like it to be. Their detached analysis is your best friend.
• Conclusion: Last, but not least, you need to make a decision. Of course, doing nothing is a decision in itself (sometimes this is the best course of action). In other cases, you need to take swift and immediate action. One of the main questions in deciding what path to take is to ask “Is there a way to get to the outcome we’re seeking that benefits all parties?” When we come to a conclusion, we must consider all stakeholders to a situation.

After answering questions from professors and law school exams for three straight years, IRAC becomes part of who lawyers are. There are many ways to “frame” a situation; IRAC adds one more arrow in your problem-solving quiver. May you use it well!

EEOC Sues Trucking Company for Improper Pre-Hire Testing

According to the EEOC’s suit, Celadon, a trucking company headquartered in Indianapolis, performed medical examinations on applicants for driving positions before making conditional offers of employment to them. The agency alleged that Celadon conducted these examinations in a manner inconsistent with the standards set by the U.S. Department of Transportation / Federal Motor Carriers Administration, and then used the results of those non-compliant examinations to reject qualified applicants Celadon thought were disabled.

Such alleged conduct violates the ADA, which prohibits employers from subjecting applicants to medical examinations before making a conditional offer of employment, and also prohibits discrimination based on disability or perceived disability. The EEOC filed suit (EEOC v. Celadon Trucking Services, Inc., Cause No. 1:12-cv-0275-SEB-TAB) in U.S. District Court for the Southern District of Indiana, Indianapolis Division, after first attempting to reach a pre-litigation settlement through its conciliation process.

“Celadon and all motor carriers must conduct medical examinations in accordance with the ADA,” said Laurie Young, regional attorney for the Indianapolis District Office of the EEOC. “Under the ADA, an employer cannot conduct a medical examination of a job applicant until the employer has given the applicant a job offer conditioned upon the applicant passing the examination. The EEOC will enforce these obligations.”

The EEOC is seeking compensatory and punitive damages against the company, as well as other relief, including a permanent injunction to prevent Celadon from engaging in any further employment practice that violates the ADA.

Lesson to employers: If you’re going to do pre-hire physicals make sure to do so only after you make a conditional job offer. See the report and forms in HR That Works.

Form of the Month

Sage Advice for Managers and Leaders (PDF) – An issue of Volleyball USA shared sage advice from 12 of the top volleyball minds in the nation. As someone who has coached not only kids’ teams, but also many executives, I found valuable guidelines in this article that have helped me be a better manager and leader.

Podcast

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