Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
For years, Philadelphia has maintained ordinances substantially restricting employers’ use of criminal record and credit histories in employment screening.1 These regulations are in addition to, not in lieu of, the federal Fair Credit Reporting Act (FCRA) restrictions applicable nationwide and Pennsylvania’s state-wide Criminal History Record Information Act (CHRIA). The FCRA governs the process for ordering background reports, including criminal background reports, from background check companies (known as “consumer reporting agencies”). The CHRIA restricts the use of criminal records whether or not they are included in a criminal background report.
On January 20, 2021, Mayor Jim Kenney signed three bills amending Philadelphia’s Fair Criminal Record Screening Standards (FCRSS) and credit ban ordinances. Taken together, the bills: (1) expand coverage; (2) eliminate exceptions; and (3) change certain procedures required by the ordinances. The amendments become effective March 21, 2021 and April 1, 2021.2
Expansion of FCRSS to Gig Work and Independent Contractors
Bill No. 200479 expands the FCRSS ordinance’s definition of covered “employee” to “any person employed or permitted to work at or for a Private Employer within the geographic boundaries of the City, including as an independent contractor, transportation network company driver, rideshare driver, or other gig economy worker.” The bill also expands the definition of a covered “private employer” to “any third-party person or entity that facilitates the relationship of work for pay between two other parties, as full-time or part-time employees or as independent contractors.” Therefore, businesses must assess the impact of the panoply of FCRSS regulations and procedures for timing and use of criminal record history information on their independent contractor screening practices.
This may represent a substantial shift in contractor screening practices for some companies because the CHRIA applies only to applicants for employment. (It is unsettled precisely how the FCRA applies to independent contractors. Some authorities recognize such screening as screening for “employment purposes” just like with job applicants and employees.)
Expansion of FCRSS to Current Employees
Before the amendments, most of the FCRSS’s significant restrictions on use of criminal convictions in employment decisions applied by the FCRSS’s plain terms only to “applicants” for employment. These included the FCRSS’s “fair chance” process requirements and prohibitions against automatic exclusionary rules and consideration of criminal convictions over seven years old. The amendments in Bill No. 200479 change that and specify that all of these restrictions and procedural requirements apply also to current employees.3
Change in FCRSS Remedies
The FCRSS affords a private right of action. Pre-amendment, it allowed for the recovery of “punitive damages.” Bill No. 200479, however, changes “punitive damages” to “Liquidated damages, equal to the payment of the maximum allowable salary for the job subject to the complaint for a period of one month,” up to a maximum of $5,000. Given the expansion of the FCRSS in the same bill to independent contractors and gig economy companies, it is unclear how the “maximum allowable salary” will be determined for flexible work arrangements. Likewise, it is unclear if the city council intended the liquidated damages to apply to purely technical violations, such as the timing or procedural requirements under the ordinance, as it would make little sense to afford salary-calculated damages for violations that did not actually cause any income loss. Employers may be concerned that the inclusion of liquidated damages is designed to facilitate class action or mass action cases. In recent years, class action FCRA claims have exploded based on theories of technical violations with little to no real-life harm, in large part because of the FCRA’s provision of statutory damages for violations.4
Elimination of Exceptions to Credit Ban Ordinance
Philadelphia’s credit ban law, which makes employment credit screening off-limits for most employers and jobs, previously exempted “any law enforcement agency or financial institution” from its prohibitions. Bill No. 200413 removes those bright-line exceptions to the credit ban. Now, law enforcement agencies or financial institutions will be allowed to conduct credit screening only if one of the other exceptions in the credit ban ordinance applies, such as where the applicant or employee’s credit information “must be obtained pursuant to state or federal law” or where the “job requires an employee to be bonded under City, state, or federal law.”
Change in Procedures under Credit Ban Ordinance
Bill No. 200614 aligns previously unique procedural requirements when an employer uses credit history for an adverse employment decision with existing FCRA requirements. Before the amendment, the credit ban ordinance required employers to disclose their reliance on credit information to the applicant or employee in writing, and to identify and provide the particular information upon which the adverse decision was based, and also to “give the employee or applicant an opportunity to explain the circumstances surrounding the information at issue before taking any such adverse action.” Now, the amendments make clear that an employer need simply follow the FCRA’s pre-adverse action and adverse action requirements for credit screening. (Employers should be mindful the FCRA’s name – which refers to credit reporting – is somewhat misleading, because it governs all background checks for “employment purposes.”) Because the pre-amendment language did not exactly track the FCRA’s wording, it was unclear whether FCRA compliance alone was sufficient to satisfy the credit ban’s requirement. The amendment puts to rest any question whether the FCRA preempts the ordinance insofar as the ordinance requires such notices.
Philadelphia employers have faced a rash of new and modified obligations in recent months impacting many employment practices, of which the new amendments regarding employment screening are only a part.5 Thus, any employer with operations in Philadelphia must take care to review each area of their employment practices and determine whether modifications are needed to comply with Philadelphia’s many local rules. Meanwhile, gig economy companies and businesses that conduct independent contractor screening may need to make substantial practice changes to comply with the FCRSS’s individualized assessment and attendant “fair chance” requirements. Finally, given the continuing rise in background screening litigation nationwide, the new Philadelphia amendments provide a reminder for employers to review their overall screening programs for compliance under the FCRA, Title VII of the Civil Rights Act of 1964, and local law.
1 See William Simmons and Thomas Benjamin Huggett, Beyond “Ban the Box” – Philadelphia Makes Sweeping Changes to Criminal Records Screening Ordinance, Littler Insight (Dec. 16, 2015); Jennifer Mora, Philip Gordon and William Simmons, Philadelphia Becomes the First Jurisdiction in 2016 to Restrict Employers from Using Credit Information in Employment Decisions, Littler Insight (June 20, 2016).
2 Bill Nos. 200413 and 200614 take effect on March 21, 2021; Bill No. 200479 takes effect April 1, 2021.
3 Due to the pandemic, many businesses are hiring subject to passing a background check later. See, e.g., Rod. M. Fliegel, Updates to California’s Restrictions on Using Criminal Records in Employment Decisions, Littler Insight (Oct. 8, 2020).
4 See, e.g., Alison Hightower and Rod Fliegel, Ninth Circuit Holds Employers May Provide a Standalone Background Check Disclosure Concurrently With Other Documents, Littler ASAP (Apr. 27, 2020); Rod M. Fliegel, Ninth Circuit Reinforces Prohibition Against “Extraneous” Information In Background Check Disclosures, Littler ASAP (Mar. 21, 2020); William J. Simmons and Rod M. Fliegel, Ruling Raises Important Considerations for Independent Contractor Background Screening, Littler Insight (May 8, 2019); Rod M. Fliegel, The Ninth Circuit Adopts an Expansive Reading of the FCRA’s Provision Governing Background Check Disclosures, Littler ASAP (Jan. 29, 2019).
5 See, e.g., Barbara Rittinger Rigo, Adama K. Wiltshire, and Sebastian Chilco, Philadelphia Pandemic Laws Require Additional Paid Leave for Employees and Gig Workers, Other Pay and Benefits for Healthcare Workers, Littler Insight (Sept. 18, 2020); Matthew J. Hank and Kayleen Egan, Philadelphia Enacts Anti-Retaliation Ordinance for COVID-19 Workplace Complaints, Littler ASAP (July 23, 2020); Kayleen Egan, Marc Esterow, and Martha Keon, Philadelphia Expands Employment Protections for Domestic Workers, Littler Insight (June 9, 2020); Barbara Rittinger Rigo, Daniel Thieme, and Shawn Matthew Clark, Philadelphia Clarifies City’s WARN Act to Account for COVID-19-Related Closures, Littler ASAP (Apr. 22, 2020).