Real estate employers accept background checks on candidates

The real estate industry and the people employed in it build and maintain communities that drive national growth. Naturally, real estate employers want to know that their employees are reliable and trustworthy. Therefore, employers are taking steps, including conducting background checks, to ensure that a single hire does not inadvertently result in liability.

Background checks have been the traditional way to ensure quality hires. Background checks are governed by the Fair Credit Reporting Act, which imposes certain requirements on employers and background check companies, such as requiring authorization, providing a stand-alone disclosure form to employees and job applicants before requesting a background check report and exposure to potential liability in the event of non-compliance.

In light of ongoing labor shortages and ever-changing legal requirements, employers across all sectors of the real estate industry are responding by changing their hiring standards and criteria. In some cases, employers may also have relaxed their previous standards as outdated or in response to requests from state and local agencies to be more lenient when screening applicants. On the other end of the spectrum, at least one state has enacted legislation requiring better employee background checks for certain segments of the real estate industry. However an employer decides to conduct background checks, they should keep the following recent legal developments in mind.

“Ban the box” laws enacted in states and cities

“Ban the box” laws (or “Fair Chance Acts”) limit employers’ access to pre-offering a job seeker’s criminal history. Generally, these laws require employers to consider qualifications first when considering an applicant’s eligibility for employment. Different states, and even some municipalities, have enacted their own requirements. Multistate employers should therefore be sure to confirm the requirements of any state or local laws, if any, before conducting a background check. If recruiting nationally, which many employers are currently doing in response to labor shortages, employers must consider the laws of the states where they are recruiting.

Additionally, the federal Fair Chance Act, effective December 20, 2021, only requires a post-offer background check; federal contractors must comply with its requirements.

Employers who make hiring decisions based on a criminal record are asked to complete an individualized assessment, where appropriate (and some jurisdictions have mandated this step). The Equal Employment Opportunity Commission (EEOC) has issued guidelines to help employers with this.

While balancing all of these considerations, employers must still protect themselves against potential liability in the form of negligent hiring and retention claims. Hiring and retention negligence claims examine an employer’s hiring and employment practices and seek to hold the employer responsible for the wrongful acts of its employee, where the employer failed to take all reasonable steps, when hiring and retaining such employee, to ensure that the employee was not dangerous or likely to harm others.

In the real estate industry, employers almost always juggle the interests of their employees, their company and third parties. “Ban the box” laws and the potential for negligent hiring and retention claims add another layer of complexity to this balancing act.

Marijuana Drug Testing Guidelines Amended

It has been nearly 10 years since Colorado and Washington became the first states to legalize recreational cannabis use. Since then, many other states have followed suit. Additionally, the United States House of Representatives passed the Marijuana Opportunity Reinvestment and Expungement Act (MORE Act) on April 1, 2022. The MORE Act seeks to decriminalize cannabis use nationwide and remove cannabis from federal lists of controlled substances. In July 2022, the US Senate unveiled its own bill to decriminalize marijuana, titled the Cannabis Administration and Opportunity Act.

Whether or not these proposed federal laws are enacted, the legal landscape governing cannabis use has changed significantly over the past decade and will likely continue to change. For example, some states that have relaxed cannabis restrictions have also enacted laws prohibiting discrimination against employees and job applicants because of their legal use of cannabis, both medicinal and recreational. As states continue to legalize or relax restrictions on cannabis use, employers in the real estate industry should exercise caution and ensure they understand state and local laws governing cannabis use as they relate to cannabis use. relates to drug and background testing and processing of job applicants. Failure to do so may expose employers to discrimination, failure to accommodate and retaliation. In contrast, employers still have to balance the risks created by employees (for example, those in safety-critical positions) use cannabis and may expose their employers to further liability claims.

Equal Employment Opportunity

Employers must continue to take proactive steps to ensure that their hiring practices comply with federal, state and municipal equal employment opportunity laws, particularly with respect to criminal background. In the past, the EEOC has been concerned that even if an employer has an employment-related legal reason for a background check, such a practice could have a disparate impact on protected classes of job applicants. Employers should review existing policies, even if they are neutral on their face, to ensure that they do not have a disproportionate negative impact on a particular category of people and to minimize the risk of complaints of discrimination. For example, some automated selection processes using artificial intelligence can inadvertently generate disproportionate results when hiring, requiring careful design and review. Such results, although unexpected, can be perceived as discriminatory. Additionally, inconsistent application of these policies and practices, such as making exceptions for some applicants and employees but not others, can create additional liability issues.

Employers should closely monitor the effects their policies may have on applicants to avoid unintended disparate results when reviewing and making hiring decisions based on applicants’ backgrounds.

© 2022 Jackson LewisNational Law Review, Volume XII, Number 221

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