Compensation Solutions Blog
Human Resources Outsourcing (HRO PEO ASO)

Illinois Bans Credit Checks for Most Employers

The Illinois legislature passed House Bill 4658, which creates the Employee Credit Privacy Act.  Bill 4658, signed into law by Governor Pat Quinn on August 10, 2010, takes effect January 1, 2011 and restricts employers’ ability to conduct credit checks on applicants and use the results for employment purposes.  Specifically, employers are prohibited from 1) inquiring about an applicant’s credit history; 2) ordering a credit report from a consumer reporting agency; or 3) making an employment decision based on an applicant’s credit history.

Certain employers are exempt from the law, including banks and other financial institutions; companies engaged in the insurance industry; state law enforcement or investigative units; qualified debt collection agencies; and any other state or local government agency that requires credit reports.

An employer that can establish that credit worthiness is a bona fide job requirement is also exempt.  One of the following factors must be present to meet that standard:

1. State or federal law requires bonding or other security covering an individual holding the position;
2. The job duties include oversight or custody of cash or assets totaling at least $2500;
3. The job duties include signatory power over business assets of at least $100 per transaction;
4. The position is managerial which involves setting the direction or control of the business;
5. The position involves access to personal or confidential information, financial information, trade secrets or State or national security information;
6. The position meets criteria in administrative rules, if any, that the U.S or Illinois Labor Department has promulgated to establish the circumstances in which a credit history is a bona fide occupational requirement; or
7. The employee’s or applicant’s credit history is otherwise required by or exempt under federal or Illinois state law.

 Click here for the text of the legislation.

Other states that have similar statutes or are proposing such legislation include Connecticut, Georgia, Hawaii, Indiana, Maryland, Michigan, Missouri, New Jersey, New York, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Vermont, Washington and Wisconsin.

Massachusetts Limits Employers’ Ability to Access Applicants’ Criminal History

Massachusetts passed a new law which impacts employer’s ability to use criminal and background checks as part of the hiring process.

The new law is part of the Criminal Offender Record Information (CORI) reform bill, signed into law by Governor Deval Patrick on August 6, 2010.  The overall intent of the bill is to make it easier for people with criminal records to rehabilitate themselves by making it easier for them to return to work.  The bill is also intended to encourage employers to hire them. 

The new law reduces the availability of criminal records from 15 to 10 years for people who have been convicted of a felony, and from 10 to 5 years for those who have committed misdemeanors.  In addition, the clock on sealing those records will run from the time the offender is released from prison, rather than from the time the offender ends state supervision.

All employers will have access to a new CORI database that lists only convictions or pending charges within the new time frame.  The only exceptions are murder and sex offense convictions, which will always appear in the database.  Because employers will have access to the database, they cannot ask for criminal history information on job applications.  The only exceptions to this rule occur when an applicant is being considered for the positions for which state or federal law or regulation requires disqualification based on a conviction, or to employers required by state or federal law or regulation not to hire such persons.  In all cases, however, employers may require criminal history information later in the application process.

Further, employers who take an adverse action regarding applicants because of their criminal history must supple the applicants with copies of the records upon which the decision was based.

There are several distinct advantages to employers from using the CORI database.  They will be protected from negligent hiring charges if they rely on the records provided to make their hiring decision up to ninety (90) days after obtaining the records.  Further, they will be protected from discrimination claims if it is found they relied on records that are incorrect or incomplete.

By November 4, 2010, employers will need to revise their application forms and eliminate questions regarding an applicant’s criminal background, and those employers who obtain information regarding an applicant’s criminal history must have a written CORI policy.

USCIS Redesigns Green Card

Effective immediately, U.S. Citizenship and Immigration Services (USCIS) reissued a redesigned Permanent Resident Card, otherwise known as the “green card,” which is proof of authorization to live and work permanently in the United States. 

The new card incorporates several features designed to enhance security and deter immigration fraud. 

 Holographic images, laser engraved fingerprints, and high-resolution micro-images will make the card virtually impossible to reproduce.  Secure optical media will store biometrics for rapid and reliable identification of the card holder.  Radio Frequency Identification capability will allow Customs and Border Protection officers to read the card from a distance and compare it immediately to file data. 

On a less technical note, a preprinted return address will enable someone to easily return a lost card to the USCIS.  Finally, the green card will be – green, for easy recognition. 

For more information, see http://www.uscis.gov/portal/site/uscis/menuitem.5af9bb95919f35e66f614176543f6d1a/?vgnextoid=34233893c4888210VgnVCM100000082ca60aRCRD&vgnextchannel=68439c7755cb9010VgnVCM10000045f3d6a1RCRD

IRS Issues Clarification on HIRE Act

The IRS clarified several provisions of the HIRE Act.

First, employers will be eligible for the HIRE Act Payroll tax exemption if they hire self-employed individuals, who are not regarded as “employed” for purposes of the Act.  Accordingly, an employer can also claim the exemption if they hire an independent contractor as an employee, although this is risky and a thorough analysis must be done to determine whether the employee was correctly classified as an independent contractor in the first place.  If the IRS takes the position that the new employee should have been hired as an employee initially, the employer could be subject to penalties and back taxes. 

Also, the HIRE Act states that an employee does not qualify for the exemption if hired to replace another employee.  The IRS has clarified exceptions to this rule.  An employee who replaces another employee who voluntarily terminated employment, or was terminated due to gross negligence, poor performance or due to a reduction in force, does qualify for the exemption.

Lastly, the IRS clarifies that a minor can sign the W-11 Form.

For more information, see the IRS FAQs at http://www.irs.gov/businesses/small/article/0,,id=220746,00.html

New Jersey State Supreme Court Limits LAD Over-Seventy Exemption

The New Jersey Law Against Discrimination (LAD) prohibits discrimination in employment on the basis of age.  An exception to this is that the LAD does allow employers to refuse to hire or promote people over the age of 70.  The State Supreme Court recently drew an important distinction in the rule, however, by holding that the exception does not apply to the renewal of an employee’s contract of employment.

The plaintiff, age 72, filed a discrimination claim against her employer because her employment contract was not renewed after 26 years with the company.  She claims she was told that people who stay on the job for twenty five years lose their effectiveness, and she had no right to be working at her age.  The matter was settled between the parties prior to the Supreme Court’s final decision, but the Court issued its opinion anyway because of its importance.

 The Supreme Court held that, because there was a pre-existing employment relationship, the non-renewal of the contract constituted termination and as such was not protected under the LAD. The court limited the exception to the LAD to new hires and excluded those workers subject to contract renewal. 

See Rose Nini v. Mercer Community College, et al., 2010 N.J. LEXIS 501; 109 Fair Empl. Prac. Cas. (BNA) 802.

U.S. Department of Labor Clarifies “In Loco Parentis” Under the FMLA

The U.S. Department of Labor (DOL) has issued guidance intended to clarify the definition of “son or daughter” in the Family and Medical Leave Act (FMLA) as it applies to an employee standing in loco parentis to a child.

Administrator’s Interpretation 2010-3, issued June 22, 2010, was generated in response to several requests for additional guidance on whether caregivers who do not have a biological or legal relationship may be eligible for leave under the FMLA for birth, bonding and care of that child.

The FMLA regulations define in loco parentis to include employees with day-to-day responsibilities to care for and financially support a child.  The interpretation, however, clarifies that both of those factors need not be present. 

Here are some examples of eligible employees:  1) an individual who provides day-to-day care for the child of his or her unmarried partner or same sex partner; 2) a grandparent who assumes responsibility for raising a child because the parents are incapable of providing such care; or 3) an aunt who assumes care of a child due to the death of the child’s parents.

New Jersey Updates Required Wage and Hour Poster

 The New Jersey Department of Labor (NJDOL) has issued an updated MW-17 Wage Payment poster that all New Jersey employers must conspicuously post in the workplace by July 13, 2010. The new poster is intended to comply with recent amendments to the state’s wage payment law.  The notice can be found at http://lwd.dol.state.nj.us/labor/forms_pdfs/lsse/mw-17.pdf, and the Spanish version can be found at http://lwd.dol.state.nj.us/labor/forms_pdfs/lsse/mw-17s.pdf.

Very Little Movement on Legislation Banning Credit Checks

In March 2010 we reported that many states and the federal government are considering legislation that would ban the use of credit checks in the employee screening process (“State and Federal Governments Consider Ban on Credit Checks for Most Applicants”).  To date, there has been very little movement.  Oregon enacted a law earlier in March, and Illinois approved a similar bill in May, but measures in nine other states died when their sessions ended, and Maryland’s proposed legislation never made it to the floor for consideration by either the House of Delegates or the State Senate. 

In New Jersey, the bill faces stiff opposition from the New Jersey Business and Industry Association and the New Jersey Chapter of the National Federation of Independent Business.  The legislation would ban employers from performing credit checks unless the candidates are in the financial services industry, or another type of job that involves handling money.  Opponents fear the legislation, if passed, would undermine employers’ legitimate hiring practices and put them at a competitive disadvantage.

U.S. Supreme Court Decides Text Messaging Case in the Public Forum

In December, the United States Supreme Court agreed to review a federal court appellate ruling that held for California police officers who filed suit alleging that their superiors improperly accessed their electronic exchanges (see “U.S. Supreme Court To Decide Whether Text Messages Subject to Employer Scrutiny”).  The plaintiffs filed suit against the city and the test-messaging service for accessing text messages a police officer wrote and received using his department-issued pager, arguing their Fourth Amendment rights were violated. 

On June 17, 2010, the Supreme Court issued its decision, reversing the Ninth Circuit’s decision in favor of the plaintiffs, but on narrow grounds.  The Supreme Court specifically held that, since the search was work-related, it was reasonable and permissible and was not excessive in scope, and thus was not done in violation of the plaintiff’s 4^th Amendment rights.  The Court was reluctant to address the issue of whether the employee had a reasonable expectation of privacy – in light of “rapid changes in the dynamics of communication and information transmission.” Assuming the public employee did have a reasonable expectation of privacy in his text messages, the Court found that the search was motivated by a legitimate work-related purpose and was not excessive in scope. Thus, the Court held that the city’s review of the officer’s text messages was reasonable.

Although the court did say its decision could apply to the private sector as well as public employers (the defendant in this case was a municipal police department), because the case was decided on such narrow grounds it is not much of a precedent-setting decision.  Nonetheless, this is a good example of why it is not only important for an employer to establish policies, but to put them into practice in day-to-day operations.

Tips on the Employment of Unpaid Interns

With the wealth of qualified employees available in this economy as well as the advent of the summer season, it is always a good idea to consult the Department of Labor’s regulations regarding the utilization of unpaid interns under the Fair Labor Standards Act (“FLSA”). 

Whether trainees or students are W-2 employees, as defined by the FLSA, will depend upon all of the circumstances surrounding their activities on the premises of the employer.

To classify trainees or students as “unpaid interns” they must meet all of the following criteria:

• The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school.
• The training is for the benefit of the trainees or students.
• The trainees or students do not displace regular employees, but work under close supervision.
• The employer who provides the training receives no immediate advantage from the activities of the trainees or students and, on occasion, his operations may even be hindered.
• The trainees or students are not necessarily entitled to a job at the conclusion of the training period.
• The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.

If all of the above criteria are met then the trainees or students are not considered employees under the FLSA.  Companies who employ unpaid interns should consult with their insurance carrier to ensure that they have the proper coverage.

For more information, see Fact Sheet #71 from the Department of Labor, at http://www.dol.gov/whd/regs/compliance/whdfs71.pdf.