The Growing Threat of State Penalties for Non-Compliant Employers

March 7 2024
6 min read

HR Compliance, More Impactful Now than Ever Before

The compliance landscape has become increasingly challenging for employers over the past several years. As they navigate the already intricate patchwork of federal, state, city, and county legislation, various new laws and regulations continue to be passed across the country. Traditionally, the complexity surrounding this patchwork landscape stemmed from criminal justice reforms and marijuana legalization. But now, it continues to evolve with the emergence of laws surrounding comprehensive data privacy, clean slate, pay transparency, and AI restrictions, among others. The growing set of standards only further complicates compliance efforts for employers, especially those operating across state borders. Many are left concerned about the consequences of noncompliance and specifically the enforcement actions taken by states.

Ready to create your own background screening package with a provider who can help you navigate through HR compliance? Get Started Now. 

Non-Compliance Enforcement Actions

Employers are justifiably concerned. Several jurisdictions have appointed agencies dedicated to enforcing these emerging laws. This is not necessarily a new phenomenon, but it is increasing. For example, back in 2019, Washington, D.C. enforced its Ban the Box law to the tune of $500,000 and more than 1,100 administrative charges filed against employers who were continuing to ask about criminal histories on job applications. Regarding the violations, a vast majority of them (more than 90%) were related to criminal background questions that appeared on job applications, while less than 5% were related to questions an employer asked in an interview. Since then, there are more laws, more lawsuits, more civil penalties, and more scrutiny, including from the federal government.

Federal Communications Commission Partners with States for Data Protection

In December of 2023, the Federal Communications Commission (FCC) announced a first of its kind partnership with four states to collaborate on enforcement actions related to consumers’ privacy, data protection, and cybersecurity. In this joint task force, the attorneys general of Connecticut, Illinois, New York, and Pennsylvania have pledged to share their expertise, resources, and coordinate efforts to conduct investigations for the protection of consumers. In consideration for their efforts, the FCC has offered partner states not only the expertise of its enforcement staff but also important resources and remedies to support their investigations.

State Enforcement Headlines of Interest

The California Civil Rights Department recently filed a lawsuit against a grocery chain, Ralph’s Grocery Company, for alleged violations of California’s Fair Chance Act. Enacted in 2018, the Fair Chance Act prohibits employers from inquiring about conviction history before a conditional job offer and limits disqualifying convictions to those directly related to job responsibilities. The California Civil Rights Department (CRD) enforces the Act to combat discrimination and enhance public safety, reflecting California’s commitment to fair employment practices. In the lawsuit, the CRD claims that the employer denied employment opportunities to applicants with criminal histories. It goes further in alleging that the company unlawfully screened out qualified candidates based on irrelevant criminal backgrounds. The Department is seeking monetary damages for the workers who were denied jobs or lost jobs as a result of the grocery chain’s screening practices, as well as a court order to require it to come into compliance with the Fair Chance Act.

New Jersey Issues Violations under Fair Chance Housing Act

Fair Chance Acts also often apply to housing, as many are now aware in New Jersey, where the state issued 30 notices of violation to housing providers in 2022. The state alleged violations of its Fair Chance Housing Act (“Act”), which prohibits landlords from asking about an applicant’s criminal history on an application or in an interview prior to making the applicant a conditional offer of housing. It also prohibits them from stating in any housing advertisements that they will not consider applicants with a criminal record. The violations were centered on allegations that the housing providers asked prohibited questions on housing applications, posted housing advertisements, and maintained policies that did not comply with the law. Recipients of violation notices faced civil penalties of up to $1,000 for a first offense, up to $5,000 for a second offense, and up to $10,000 for any subsequent offense.

Colorado Enforces Wage Transparency Law

Colorado’s Wage Transparency Law is considered one of the most aggressive to date because of the requirement to post salaries publicly. The Colorado Department of Labor and Employment (CDLE) has similarly demonstrated that enforcement may also be more aggressive. While the CDLE had been more lenient regarding enforcement in the past, when the law was still relatively new, it has since notified more than 200 companies regarding violations and issued fines for noncompliance. It sent over 125 Compliance Assistance Letters for remote jobs and over 120 Opportunity to Cure Letters (giving employers an opportunity to cure violations) in response to complaints of violations and fined multiple employers. The extent of the violations varies from listings that shared no wages at all to others that had no maximum amount (only a “+” sign, such as “Salary Range: $50,000 – 75,000+”) to others that offered “full benefits” without a description of those benefits.

How to Stay Compliant as an Employer

The examples above are only a select few that illustrate the steadfast commitment of states to enforcing these compliance laws. In a rapidly evolving regulatory landscape, staying informed isn’t just beneficial; it’s essential. Proactively monitoring and understanding legislative shifts is key to maintaining compliance and mitigating risks in this ever-changing environment. Employers should consider developing a comprehensive HR compliance strategy that, at a minimum, includes:

  1. A process for a regular (at minimum quarterly) review and audit of the organization’s hiring practices, including, but not limited to: (a) application questions; (b) interview questions; (c) salary ranges posted in job positions; (d) how consumer data is being used, and; (e) written HR policies regarding hiring.
  2. A system for the review of any new or amended laws in the jurisdictions in which business is conducted.
  3. An HR compliance assurance checklist to ensure hiring practices are in alignment with these laws’ requirements.
  4. A provision to consult a background screening partner or legal counsel on all compliance matters.

In a landscape of uncertainty, one thing appears certain, states are taking enforcement of these laws very seriously. Compliance is an ongoing endeavor that requires continuous monitoring. While this prospect may seem daunting for employers, using the above strategies will help provide a more efficient and risk-adverse navigation of it all.

Why Orange Tree Employment Screening?

Employers must remain diligent regarding state developments to ensure their policies and procedures remain in compliance. Additionally, those that use a consumer reporting agency for their background screening services should prioritize partnering with one that has achieved accreditation with the Professional Background Screeners Association (PBSA).

Orange Tree is an expert in background screening services, including legal and compliance. We are proud to be members of the PBSA. Orange Tree clients enjoy regular communications with updates to laws and legislation that impact them. Schedule time to Speak with Our Team to design a background screening program tailored to your unique needs.

Share this post: