The New York City Commission on Human Rights (the Commission) recently published final rules to clarify the procedures and application of the New York City Fair Chance Act. The rules became effective on August 5, 2017. In addition, the Commission also recently issued proposed rules implementing the Stop Credit Discrimination in Employment Act and is accepting public comments on the proposed rules through August 17, 2017. The effects of both of these developments are addressed below.
The Fair Chance Act
As we described in a previous client advisory, the Fair Chance Act (FCA) prohibits employers from asking about a job applicant’s criminal history until after they make a conditional offer of employment. If an employer wishes to rescind a conditional offer of employment, it must first conduct the Article 23-A Analysis to determine if an applicant’s criminal history is relevant to the job for which he or she is applying. The Article 23-A Analysis requires employers to consider eight factors, such as the applicant’s age at the time of conviction, to determine if (1) there is a “direct relationship” between the applicant’s criminal conviction and the employment sought or (2) hiring the applicant would involve an “unreasonable risk” to property or the safety and welfare of specific individuals or the general public. An employer may only rescind a conditional offer if a direct relationship or unreasonable risk is present. If the employer wishes to rescind the conditional offer of employment due to the 23-A Analysis, it must then follow the “Fair Chance Process”, which consists of (1) providing the applicant with a written copy of all inquiries made to collect information about his or her criminal history; (2) providing the applicant with a written copy of the 23-A Analysis; (3) giving the applicant a reasonable time to respond to the employer’s concerns; and (4) considering any additional information provided by the applicant.
While the final rules largely track the legal enforcement guidance the Commission published in 2015, there are some critical difference for employers. The rules (1) establish per se violations of the FCA; (2) clarify how the FCA applies to current employees, as opposed to applicants; and (3) potentially narrow the effect of the exemptions to the FCA.
Per Se Violations of the Fair Chance Act
The rules establish six “per se violations” of the FCA. A per se violation is an action or inaction that, standing alone and without reference to additional facts, constitutes a violation of the FCA. In other words, the per se violations create liability regardless of whether any adverse employment action was taken or any actual injury occurred. The following are per se violations of the FCA:
Application of the Fair Chance Act to Current Employees
Until the publication of the final rules, it was unclear how the FCA applied to current employees, as opposed to applicants for initial employment. The final rules make clear that certain portions of the FCA apply only to applicants and employees actively seeking promotion or transfer, while other requirements of the FCA apply to all applicants and all current employees.
Exemptions to the Fair Chance Act
Certain positions are exempt from the FCA. However, the rules create some uncertainty regarding the actual effect of these exemptions.
The FCA states that its substantive provisions – including the requirements that a conditional offer is made prior to a criminal history inquiry and that employers follow the Fair Chance Process prior to rescinding a conditional offer – do not apply to “any actions taken by an employer or agent thereof pursuant to any state, federal, or local law that requires criminal background checks for employment purposes or bars employment based on criminal history.” Federal law is defined to include rules or regulations promulgated by a self-regulatory organization as defined by the Securities and Exchange Act, such as FINRA. In other words, the text of the FCA suggests that when an exemption applies, an employer does not need to make a conditional offer prior to inquiring about criminal history or follow the Fair Chance Process before rescinding an employment offer.
However, the rules seem to limit the actions an employer may take when this exemption applies: According to the rules, if a federal, state, or local law bars employment with respect to a particular type of conviction, an employer may (1) notify applicants of the specific mandatory bar to employment prior to a conditional offer, (2) inquire at any time during the application process whether an applicant has been convicted of the specific crime that is subject to the mandatory bar to employment, and (3) disqualify any applicant or employee with such criminal history without following the Fair Chance Process.
Thus, even if the exemption applies, the rules suggest that the exemption is not a total one. Rather, the employer is still restricted in the type of criminal history it may ask about before a conditional offer and is only exempt from the Fair Chance Process if the applicant has the specific type of criminal history prohibited by state, federal, or local law. Given that the rules seem to limit the exemptions further than the text of FCA, it is unclear whether the Commission could enforce its interpretation of the exemptions.
The rules do expand the reach of the exemption for positions regulated by a self-regulatory organization, such as FINRA: The Fair Chance Process does not apply where the rules or regulations of a self-regulatory organization require criminal background checks or bar employment based on criminal history. This exemption now includes positions for which applicants are not required to be registered with a self-regulatory organization, if the applicant nevertheless either chooses to become registered while in the position or elects to maintain prior registration. However, as noted above, this exemption may still be limited. The rules seem to suggest that even in this situation, the employer is restricted in the type of criminal history it may ask about before a conditional offer and is only exempt from the Fair Chance Process if the applicant has the specific type of criminal history prohibited by the self-regulatory organization.
The Stop Credit Discrimination in Employment Act
The Commission also recently proposed rules to implement the Stop Credit Discrimination in Employment Act (SCDEA). As described in a previous client advisory, SCDEA prohibits employers from requesting or considering employees’ or job applicants’ consumer credit history (such as by requesting a credit check) when making decisions regarding hiring, compensation, or other terms and conditions of employment, with limited exceptions for particular positions.
The proposed SCDEA rules largely track the legal enforcement guidance published by the Commission in 2015. Most notably, the proposed rules:
The Fair Chance Act rules became effective on August 5, 2017. Public comments on the proposed rules implementing the Stop Credit Discrimination in Employment Act must be submitted by August 17, 2017. If you have any questions about how the new and proposed rules impact your current application and background check procedures, please contact Amanda M. Baker at (212) 758-7724, or any other attorney at the Firm.
This Advisory is intended for informational purposes only and should not be considered legal advice. If you have any questions about anything contained in this Advisory, please contact Collazo Florentino & Keil LLP. All rights reserved. Attorney Advertising.