On February 16, 2016, the New York City Commission on Human Rights (“Commission”) published proposed rules (“Proposed Rules”) to the City’s Fair Chance Act (“Act”). The Act controls when New York City employers can inquire into an applicant’s or employee’s criminal background.^[1] The Proposed Rules follow the Commission’s November 5, 2015, Legal Enforcement Guidance on the Act but with some notable differences, including several defined terms within the Act (described below). The Commission will hold a public hearing on March 21, 2016, and all written comments to the Proposed Rules must be submitted by that date.

This Advisory summarizes the various areas addressed by the Proposed Rules, as follows:

Per Se Violations

Under the Proposed Rules, the following will be considered per se violations of the Act, meaning that they violate the Act regardless of whether any adverse action was taken or any actual injury to an employee or applicant occurred:

• Circulating a solicitation, advertisement, or publication that suggests, directly or indirectly, any limitation or specification in employment regarding criminal history

• Making any statement or inquiry relating to an applicant’s pending arrest or criminal conviction before making a conditional offer of employment

• Using employment applications that require applicants to either grant employers permission to run a background check or provide information regarding criminal history

• Using a standard application form, intended for multi-jurisdictional use, containing a disclaimer that applicants in New York City should not answer specific questions^[2]

• Failure to comply with any of the requirements listed in the Fair Chance Process (described below) before revoking a conditional offer of employment

Inadvertent Discovery or Disclosure of Criminal Conviction History

The Proposed Rules clarify how employers should proceed if, prior to making a conditional offer of employment, they inadvertently discover, or the applicant provides unsolicited disclosure of, an applicant’s criminal conviction history. In these instances, the Proposed Rules state that an employer is not liable for a violation unless the employer “further explores” the applicant’s criminal conviction history upon the discovery or disclosure of such information.

The “Direct Relationship” and “Unreasonable Risk” Exceptions

Under the Act, employers that wish to take an adverse action based on an applicant’s criminal history must first conduct an analysis of the applicant’s criminal history using an eight-factor balancing test set forth under Article 23-A of the New York Correction Law (“Article 23-A Analysis”). An employer may not withdraw an offer of employment unless, after evaluation of the eight factors, the employer can show that the criminal conviction history fits within one of two permissible exceptions: (i) the “Direct Relationship Exception” or (ii) the “Unreasonable Risk Exception.” Under the Proposed Rules, employers would be prohibited from altering the duties and responsibilities of a position upon learning of an applicant’s or employee’s criminal history.

The Direct Relationship Exception

The Proposed Rules establish that, in order to claim the Direct Relationship Exception, the employer must draw a connection between (i) the nature of the conduct that led to the conviction(s) or pending arrest and (ii) the position for which the applicant is applying. Even if such connection exists, the employer must examine the eight Article 23-A factors to determine whether the concerns presented by the relationship have been mitigated. The Proposed Rules define a “direct relationship” as “a finding that the nature of the criminal conduct underlying a conviction or pending case has a direct bearing on the fitness or ability of an applicant or employee to perform one or more of the duties or responsibilities necessarily related to the … terms and conditions of employment in question.”

The Unreasonable Risk Exception

In order to use the Unreasonable Risk Exception,an employer must consider and apply the eight Article 23-A factors to determine if employment of the individual would involve an unreasonable risk to property or to the safety or welfare of specific individuals or the general public.

The Fair Chance Process

If the employer determines that one or both exceptions apply, the employer must follow the Fair Chance Process. The Fair Chance Process requires the employer to (i) provide the applicant or employee with written copies of any information relied upon in connection with the employer’s decision not to move forward with the hire (e.g., copies of consumer reporting agency reports, Internet searches, or written summaries or oral conversations, including whether any such conversations were with the applicant or someone else) and a copy of the Article 23-A Analysis, and (ii) inform the applicant or employee that he or she will have a reasonable time to respond to the employer’s concern. Finally, the employer must consider any additional information provided by the applicant or employee.

Importantly, if the employer used a third-party to perform the background check, the employer should also send to the employee or applicant a notice of intent to take adverse action, a copy of the Summary of Your Rights under the federal Fair Credit Reporting Act (“FCRA”) document, and a copy of Article 23-A of the New York Correction Law.

Under the Proposed Rules, when providing the Article 23-A Analysis, the employer may choose to use the Fair Chance Notice created by the Commission or a comparable notice. The Proposed Rules provide that a comparable notice must (i) include specific facts that were considered pursuant to the Article 23-A Analysis and the outcome, (ii) articulate the employer’s concerns and basis for the determination that there is a direct relationship or an unreasonable risk, and (iii) inform the applicant or employee of his or her rights upon receipt of the notice, including how he or she can respond to the decision, and the time frame within which he or she must respond.

Additionally, applicants or employees must be provided with a “reasonable time” to respond. Under the Proposed Rules, a “reasonable time” is determined by what additional information the applicant or employee is purporting to gather and whether that additional information would change the outcome, the reason why more time is required, an employer’s need to fill the position, and any other relevant information. The employer, however, must provide the employee or applicant a minimum of three business days to respond. If the employer has used a third-party background check company, the FCRA also requires a reasonable period of time to respond, and the Federal Trade Commission has opined that a minimum of five business days is reasonable in most cases.

If, after receiving and reviewing a copy of his or her background check, the applicant or employee discovers an error, he or she must inform the employer of the error and request time to gather supporting documentation. The Proposed Rules state that, if the applicant or employee can establish that he or she does not have a criminal history or that any conviction history that he or she has resulted in non-conviction, then the employer cannot withdraw its offer or take any adverse employment action. If the applicant or employee can establish that the conviction history is different than what was presented in the background check, the employer must conduct a second Article 23-A Analysis based on the corrected information.

The Proposed Rules also state that an employer may revoke an offer or take adverse action if the background check exposes that an applicant or employee has intentionally misrepresented his or her criminal history.

Clarification of Exemptions Under the Act

The Proposed Rules clarify that the exemption under the Act for positions where federal, state, or local law requires criminal background checks or bars the employment of persons with criminal convictions does not apply to employers authorized, but not required, to conduct such checks. The Proposed Rules further clarify that the exemption does not cover positions that require licensure or approval by a government agency. Instead, employers hiring for these types of positions may only ask whether the applicant has the necessary license or approval or whether he or she can obtain it within a reasonable period of time.

With respect to the exemption for positions regulated by self-regulatory organizations, where such rules or regulations require criminal background checks or bar employment based on criminal history, the Proposed Rules expand this exemption to include positions where the applicant or employee voluntarily or permissively registers with the regulatory body while in the position or elects to remain registered even though registration with a self-regulatory organization is not mandatory in the new position.

Rebuttable Presumption

Under the Proposed Rules, an employer that revokes a conditional offer of employment without adhering to the Fair Chance Process is presumed to have done so because of the applicant’s (or employee’s) criminal history. This presumption, however, can be rebutted by demonstrating that the offer was revoked under one of the following circumstances:

• the results of a medical exam in situations in which such exam is permitted by the American with Disabilities Act;

• information that the employer could not have reasonably known before the conditional offer but, if known, would have prevented the offer, and the employer can show that the information is material; or

• evidence that the employer did not have knowledge of the applicant’s or employee’s criminal history before revoking the conditional offer.

Early Resolution for Per Se Violations (Only Available to Small Employers)

The Proposed Rules provide for an expedited settlement of Commission-initiated complaints pertaining to per se violations. This process, available only to employers with 50 or fewer employees, is called “Early Resolution.” Under the Early Resolution process, employers are permitted to admit liability and pay a penalty instead of entering into litigation. Employers that employ 50 or fewer employees^[3] at the time of the alleged violation may exercise the option to expedite if the employer has:

• committed one of the following per se violations:

  • the employer has circulated a solicitation, advertisement, or publication that suggests, directly or indirectly, any limitation or specification in employment regarding criminal history;

  • the employer has used an employment application that require applicants to either grant employers permission to run a background check or provide information regarding criminal history; or

  • the employer has used a standard application form intended for multi-jurisdictional use;

• no other pending or current allegations concerning violations of the New York City Human Rights Law (“NYCHRL”); and

• one or fewer previous violations of the NYCHRL in the past three years.

Under Early Resolution, the Commission will mail a notice of Early Resolution to the employer, along with a copy of the initial complaint. The employer must, within 90 days, either (i) admit liability and agree to pay the fine or (ii) file an answer to the complaint.

The penalties provided under the Early Resolution process differ from penalties by the Commission after litigation. The Proposed Rules provides the following penalty schedule for Early Resolution:

Even if an employer wishes to participate in Early Resolution and all the requirements are met, the Commission retains discretion to proceed with a full investigation and a referral to the Office of Administrative Trials and Hearings when the offer of Early Resolution will not serve the public interest.

Penalties Outside of the Early Resolution Process

Instead of setting a fixed amount for penalties for violations under the Act, the Proposed Rules provide that the Commission must take certain factors into consideration when making a determination for that amount. These factors include:

• the severity of the particular violation;

• whether the employer has additional or previous violations under the NYCHRL;

• the size of the employer, including the number of employees and total revenue; and

• other mitigating factors.

What Employers Should Do Now

• Submit any written comments concerning the Proposed Rules before the March 21, 2016, deadline by:

  • Website. Comments can be submitted to the Commission through the NYC Rules website at http://rules.cityofnewyork.us.

  • Email. Comments can be emailed to policy@cchr.nyc.gov.

  • Mail. Comments can be mailed to:

Dana Sussman
Special Counsel to the Office of the Chairperson
New York City Commission on Human Rights
P.O. Box 2023
New York, NY 10272

• • Fax. Comments can be faxed to Dana Sussman, Special Counsel to the Office of the Chairperson, at 646-500-6734.

  • Public Hearing. Anyone interested in commenting on the Proposed Rules at the public hearing must sign up to speak. Individuals may sign up prior to the hearing by emailing policy@cchr.nyc.gov. Alternatively, individuals may sign up in the hearing room before the hearing begins on March 21, 2016, at 1:00 p.m. Individuals may speak for up to three minutes.

• If desired, review with counsel the difference between the text of the Act and the Proposed Rules, and how those differences may affect your background checking procedures and documents and influence your legal and compliance strategies and options.

• Review the background checking portion of your hiring process to ensure compliance with the timing and other requirements of the Act and the Proposed Rules.

• If you use multistate applications, either (i) create a separate application without the criminal history question for positions in New York City or (ii) remove the criminal history question from multistate applications completely.

_{[1] The Act, which amended the New York City Human Rights Law, became effective on October 27, 2015. The Act covers all employers with four or more employees in New York City. For more information on the Act, “Now That New York City’s Credit Check and ‘Ban the Box’ Laws Are in Effect, How Do Employers Comply?”}

_{[2] A similar restriction is included in Philadelphia’s Ban-the-Box law.}

_{[3] While the Proposed Rules do not specify whether these 50 employees must work in the employer’s New York City office(s), in other circumstances, the Commission has held that employees outside of New York City should be counted in determining such jurisdictional thresholds.}