Wrong recruitment questions can get you in big trouble

Robert P. Mollen, Counsel at Fried, Frank, Harris, Shriver & Jacobson (London) LLP.

I’m not an employment lawyer. 

Consequently, I’ve shied away from advising non-US startups/scale-ups hiring US employees about acceptable questions to ask in the interview process.

I also previously haven't considered it necessary. For example, there is a lot of material on the web addressing acceptable employee recruitment practices in the US.

More generally, I’ve thought that employers exercising common sense could manage to stay out of trouble. For example, in the 21st century, it seems obvious that you cannot ask a female candidate if she is pregnant, or intends to get pregnant, or ask a candidate about childcare arrangements. It also seems obvious that you should refrain from discriminating based on race, age, gender, marital status, religion, disability, sexual preference, military service/discharge, citizenship or national origin, or other similar criteria.  Consequently, questions/comments relating to any of these are problematic (other than questions relating to essential job characteristics, such as the right to work in the United States, the ability to travel, or, perhaps, the ability to work on specified days of the week). Employers in Europe face similar restrictions, so none of this should come as a surprise.

Additionally, I’ve recommended that non-US companies coming to the US use professional employer organizations (PEO’s) to address not only payroll and tax withholding, but also mandatory employment-related insurance (unemployment compensation and workers compensation insurance) and employee benefits. Many PEO’s can provide HR support to address recruitment-related questions.

So why this blog?  Because, increasingly, US state and local regulation of employee recruitment can pose a minefield for employers. Some of the more recent restrictions aresurprising, even for US domestic employers. The purpose of this blog is to identify areas of risk rather than provide definitive advice.

“Ban the Box”

There have always been some tricky areas, such as inquiries about criminal history. Questions relating to arrest have long been impermissible. Those relating to convictions are also potentially problematic, although offers can be made subject to checks. Based on an employer showing of business necessity, job-related convictions may be a basis for withdrawing an offer. 

Increasingly, though, US state and local jurisdictions are going further, and expressly banning inquiries into a job applicant’s criminal history (so-called “ban the box” statutes, prohibiting asking prospective employees to confirm the absence of convictions and pending proceedings) until after a conditional offer of employment has been made. Some jurisdictions also bar all inquiries into juvenile convictions.

Still, I think most employers would understand why, as a matter of public policy, these questions are potentially problematic. 

Most recently, though, US states and municipalities are adopting restrictions on permissible questions that I think are not so obvious. Here are a few examples.

Credit Checks

Many states and municipalities, including California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington, as well as New York City and Chicago, prohibit employer credit checks, although these laws frequently have exceptions for certain occupations or otherwise where creditworthiness is clearly necessary for the job. Legislators are concerned that people who get into credit problems should not be foreclosed from securing employment, since otherwise these individuals are unable to recover from their financial difficulties. Employers should not ask prospective employees to authorize credit checks without confirming with professional advisors that such requests, as well as the checks themselves, are lawful.

Salary History

In an increasing number of states and municipalities, it is impermissible to ask about an applicant’s salary and benefits history during the interview process. These include New York City, Philadelphia, and Massachusetts (as of 1 July 2018).  The rationale is that questions relating to salary and benefits history reinforce historical gender discrimination. Additionally, New York City law prohibits employers from relying on compensation history provided by the prospective employee in order to determine the level of an offer unless the applicant willingly discloses that history on an unprompted basis (and query how the employer will prove that).

Furthermore, the California Fair Pay Act, as applied, may have a similar impact, since it prohibits wage differentials based on gender, race or ethnicity, and specifies that prior salary will not, by itself, justify a disparity between the salaries of similarly situated employees.

Unemployment, and Current Employment, Status

A number of cities, including New York City, Washington, D.C., Chicago, Madison, Wisconsin, and the states of New Jersey and Oregon, prohibit discrimination, or discriminatory advertisements, based on an individual’s present employment status. The scope of these laws varies, and there are exceptions. The New York City law, which is one of the broadest, prohibits basing an employment decision regarding hiring, compensation or terms of employment on an applicant's unemployment -- however, the employer is allowed to consider substantially job-related qualifications and inquire into the circumstances surrounding an applicant’s separation from prior employment (and can consider an applicant’s unemployment where there is a substantially job-related reason for doing so).

Conclusion

This survey is not intended to be comprehensive. As with much legislation of this type, the devil is in the detail.  The point, however, is “employer beware.”  Being on the wrong side of an employment discrimination claim, whether brought by a disappointed applicant or by a governmental agency, is expensive and distracting, and can also get in the way of completing funding rounds.

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This discussion is not intended to provide legal advice, and no legal or business decision should be based on its contents. If you have any questions or comments, feel free to contact [email protected].

You will find a listing of Bob’s startup and scale-up blogs on US and international expansion and other startup and scale-up matters here: http://bit.ly/StartupGuidesIndex