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In February 2013, identical bills aimed at reducing employment discrimination against individuals with criminal histories were introduced in the New Jersey Senate (S2586) and the New Jersey Assembly (A3837). Both bills propose the adoption of the Opportunity to Compete Act (the “Act”) which would impose multiple restrictions and requirements on employers in connection with seeking and using criminal background information about job applicants. If the Act is adopted, New Jersey will join a growing list of states, cities, and localities which have passed similar anti-discrimination legislation.

Effective July 1, 2012, Vermont will be the eighth state to regulate the use of credit-related information for employment purposes. Although similar in many ways to laws already enacted in California, Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington, Vermont’s requirements under Act No. 154 exceed those of other state laws as they prohibit even exempt employers from using an applicant or employee’s credit history as the “sole factor” in employment decisions. Additionally, Vermont exempt employers who take adverse action based in part on a credit history must return the report to the individual or destroy it altogether. Neither the Fair Credit Reporting Act (FCRA) nor any of the other similar state laws imposes such a requirement.

Generally, the Act prohibits employers from inquiring into an applicant’s or employee’s credit report or credit history, and further bans employers from discriminating against or making employment decisions (e.g. hire, fire, alter the compensation or any other term or employment condition) based on a credit report or credit history. Notably, credit history in this context includes credit information obtained from any third party that reflects or pertains to an applicant’s or employee’s “borrowing or repaying behavior, financial condition or ability to meet financial obligations,” even if that information is not contained in a “credit report.”

The trend in restricting credit report use for employment purposes will continue as several other states and the federal government are considering comparable legislation. Soon to follow most likely will be New Jersey. In May 31, 2012, the Senate approved S455 that would prohibit employers from seeking credit checks on employees or applicants under most circumstances. A parallel bill (A2840) was introduced by the Assembly on May 11, 2012, and a similar bill (A704) in December 2011.

After receiving widespread criticism for the lack of guidance and compliance clarification, the U.K. Bribery Act of 2010 (Bribery Act) originally scheduled for implementation in April 2011, is now set to take effect July 1, 2011. The act’s jurisdiction extends to commercial organizations incorporated or formed in the U.K. or “which carr[y] on a business or a part of a business in the U.K. irrespective of the place of incorporation or formation.” Determination of such existence will be made by the U.K. courts and will require “a demonstrable business presence.” The official guide states that an organization will not be deemed to be carrying on a business in the U.K. merely by virtue of having its securities listed on the London Stock Exchange or by having a U.K. subsidiary.

Unlike the anti-bribery provisions of the U.S. Foreign Corrupt Practices Act (FCPA), which focus primarily on corruption involving non-U.S. government officials, the Bribery Act  widens its scope to prohibit domestic and international bribery across both private and public sectors. And while the FCPA allows exceptions for facilitation payments (generally small payments to lower-level officials for “routine government actions,”) the Bribery Act does not. These payments were illegal under the previous legislation and the common law, but the difference under the Bribery Act is that non-U.K. organizations are broadly subjected to these restrictions for the first time.

The Bribery Act specifically criminalizes the offering, promising or giving a bribe (active bribery) and the requesting, agreeing to receive or accepting a bribe (passive bribery) to obtain or retain business or secure a financial or other advantage. It also contains a provision whereby an organization that fails to prevent bribery by anyone associated with the organization can be charged under the Bribery Act unless it can establish the defense of having implemented preventive “adequate procedures.” The official guide recommends the following six principles as foundation for developing “adequate procedures” to prevent bribery:

• Proportionality – Actions should be proportionate to the risk, nature, size and complexity of the organization.
• Top-level Commitment – Board of directors, owners, officers or equivalent top level- management should establish and promote a culture where bribery is never acceptable and be committed to preventing bribery, both within the organization and with anyone associated with the organization externally.
• Risk Assessment – Various risk exposures, both internal and external, such as country of operation, business sector, types of transaction, new markets, and business partnerships should be evaluated and documented on an ongoing basis.
• Due Diligence – Proportionate, risk-based approach to due diligence procedures assessing existing and proposed relationships should be taken to ensure trustworthy associations and mitigate identified bribery risks.
• Communication – Appropriate channels of communication, awareness and training, both internal and external, on anti-bribery policies and procedures should be implemented and evaluated on a regular basis.
• Monitoring and Review – Anti-bribery policies and procedures should be monitored on an ongoing basis and amended as quickly as possible when activities and risks change.

The penalties for violating the Bribery Act are severe, with individuals facing up to 10 years in prison and organizations facing unlimited fines. Violations also may result in damaging collateral consequences such as director disqualification, ineligibility for public contracts, and asset confiscation.

According to September 2010 congressional testimony by the Society for Human Resource Management (SHRM), credit checks are a useful tool to “assess the skills, abilities, work habits and integrity of potential hires.” However, SHRM states that only 20 percent of employers conduct credit checks on all applicants. Fifty-seven percent of these employers perform the checks only after contingent offers, and 30 percent after job interviews; 65 percent allow job candidates to explain their credit results before the hiring decision is made, and 22 percent accept explanations after the hiring decision.

A bill in the U.S. House, called the Equal Employment for All Act, would amend the Fair Credit Reporting Act (FCRA) to ban the use of credit checks on prospective and current employees for employment purposes, with the following exceptions:

• jobs that require national security or Federal Deposit Insurance Corp. clearance;
• jobs in state or local government that require the use of credit reports;
• supervisory, managerial, and executive positions in financial institutions.

The states of Illinois, Oregon, Hawaii, and Washington already have passed laws to prevent employers from using credit reports in employment decisions.

As of November 4, 2010, Massachusetts employers are prohibited from asking about criminal records on the initial job application, except for positions for which a federal or state law, regulation or accreditation disqualifies an applicant based on a conviction, or if the employer is mandated by a federal or state law or regulation not to employ
individuals who have been convicted of a crime.

The new law also has two provisions that will become effective February 6, 2012. Under the first provision, an employer in possession of criminal record information must disclose that information to the applicant, prior to asking about it. And similar to the requirements of the Fair Credit Reporting Act, if an employer decides not to hire an
applicant in whole or in part because of the criminal record, the employer must provide the applicant with a copy of the record.

The second provision requires employers who conduct five or more criminal background investigations annually to implement and maintain a written criminal record information policy. The policy, at minimum, must specify procedures for (1) notifying applicants of the potential for an adverse decision based on the criminal record, (2) providing
a copy of the criminal record and the written policy to applicants, and (3) dispensing information to applicants about the process for correcting errors on their criminal record.

The law imposes penalties (including imprisonment for up to one year or a fine of up to $5,000 for an individual and $50,000 for a company) for those who request or require an applicant to provide a copy of his/her criminal record except under conditions authorized by law, and prohibits harassment of the subject of the criminal record (punishable by imprisonment of up to one year, or a fine of not more than $5,000.)

A qui tam is a provision of the Federal False Claims Act that allows private citizens, also known as whistleblowers or relators, to bring a lawsuit in the name of the U.S. Government against entities or persons suspected of fraud in the use of government funds. The qui tam plaintiff, if successful in the suit, is entitled to a percentage of the funds recouped by the government, which generally is between 15 to 30% of the recovered amount. Qui tam verdicts and settlements can reach into billions of dollars. In the fiscal year ending September 30, 2009, the Justice Department recovered $2.4 billion in false claims cases, and posted total recoveries of more than $24 billion since 1986.

The Oregon Bureau of Labor and Industries published its final administrative rules regarding Senate Bill 1045 (OL 2010. Ch. 102). The regulations go into effect July 1, 2010. The Oregon Revised Statute 659A.885 specifically prohibits an employer from obtaining or using credit history for employment purposes of an applicant or employee unless that credit history information is “substantially job-related, and the employer’s reasons for the use of such information are disclosed to the employee or prospective employee in writing.” The state of Oregon set up a hotline (at 971-673-0824) to explain the new regulations. The regulations can also be viewed online at http://www.oregon.gov/BOLI/LEGAL/docs/RulesSoS0052010.pdf

Try the U.S. Department of Health & Human Services – Office of Inspector General Web site (http://oig.hhs.gov/.)

For many years the Congress of the United States has worked diligently to protect the health and welfare of the nation’s elderly and poor by implementing legislation to prevent certain individuals and businesses from participating in federally-funded health care programs. The OIG, under this congressional mandate, established a program to exclude individuals and entities affected by the various legal authorities, contained in sections 1128 and 1156 of the Social Security Act, and maintains a list of all currently excluded parties called the List of Excluded Individuals/Entities, at http://oig.hhs.gov/fraud/exclusions.asp. Basis for exclusion include convictions for program-related fraud and patient abuse, licensing board actions and default on Health Education Assistance Loans.

A new California case came out March 23, 2010 that gives a background firm protection when it reports sexual offender data from the Megan’s Law Web site, and also clarifies that the prohibition of using sex offender registration information for employment does not apply when there is a person at risk.
For a quick review of the case, see:
http://www.esrcheck.com/wordpress/1440/california-case-protects-constitutional-right-of-background-screening-firm-to-report-sex-offender-registration.
The actual case can be found at:
http://www.courtinfo.ca.gov/opinions/documents/B214653.PDF