News and Articles

December 2015 Newsletter

Yogi Patel - Wednesday, December 02, 2015

Dear valued clients and supporters: This month's newsletter will focus on: (1) The nation-wide increase in the usage of arbitration clauses in employment agreements; (2) Negotiating a more favorable employment offer/agreement; (3) The "Alter Ego" doctrine; and (4) New York City's Fair Chance Act.

 

Arbitration Agreements
In recent years, there has been a nation-wide spike in the usage of arbitration clauses by employers in their employment agreements. The motivation for employers to include such clauses is that they typically require employees to settle any grievances through arbitration, effectively preventing them from bringing an action in court. The clauses also usually require that all disputes be brought individually, which can have the effect of prohibiting employees from bringing class action suits. In the wake of United States Supreme Court decisions upholding the validity of arbitration clauses that prevent employees from bringing a collective suit, many employers are now requiring that all employees agree to arbitration as a term of employment. Employers and employees are advised to consider the implication of this trend, as employers may seek to include arbitration clauses while employees may seek to negotiate the removal of this term when possible.


Negotiating A More Favorable Employment Offer/Agreement
Many employees may not be aware that when they are offered a new position, they often have significant leverage at their disposal to negotiate for better terms of employment. Prospective employees who bring years of experience or unique skills and knowledge should not sell themselves short at the bargaining table, especially prior to accepting an offer of employment. From increases in salary, stock options and other benefits, to more favorable terms of severance, grounds for termination, and restrictive covenants, employees should consider what they can gain through such negotiations. An in-depth article addressing terms that an employee should consider negotiating as well as how to negotiate effectively so that an employer is not "put-off" by your ask is now available here on our website.


"Alter Ego" Liability
The number one reason why business owners form corporate entities is to insulate their personal assets from the liabilities of the company--if the business has an issue that causes it to owe money, the owner's house, bank account, and other personal property cannot be used to pay the company's debt. However, when a business owner abuses this protection and primarily uses the entity for her own personal gain rather than to transact the corporation's business, a court may find that the business is actually the "alter ego" of the owner. Upon such a finding, the owner and the business are treated as one and the owner's personal assets become at risk. To find out more about the factors New York courts look at under an "alter ego" analysis and the consequences of a determination stripping a business owner of the protections of her corporation, please read a more in-depth article posted here on our website.


New York City's Fair Chance Act
On October 27, 2015, the New York City Fair Chance Act went into effect. The law makes it illegal for employers to ask applicants about a criminal record before making a job offer. The Act bans reference to criminal histories or background checks in employment ads, job applications and during interviews. An in-depth article analyzing the Act and an employers obligations under the new law are now available here on our website.


Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on this and other issues throughout the month.

NYC Fair Chance Act Limits If and How Employers Can Consider Criminal Histories in the Hiring Process

Erin Lloyd - Tuesday, December 01, 2015

On October 27, 2015, the New York City Fair Chance Act went into effect. The law makes it illegal for employers to ask applicants about a criminal record before making a job offer. The Act bans reference to criminal histories or background checks in employment ads, job applications, and during interviews. Only once the employer has made a conditional offer of employment is the employer allowed to inquire into an applicant’s criminal record and determine whether there are grounds to revoke the offer consistent with New York Correction Law Article 23–A (“Article 23–A”). The Fair Chance Act applies to all employment decisions—including hiring, firing, and promoting individuals with criminal histories. This article focuses on the hiring of applicants with criminal records and outlines what employers must do to comply with the new law when they offer a position to someone they discover has a criminal record.

How Do I Comply with the Fair Chance Act?

Prior to Making a Conditional Offer

The first step is to eliminate any reference to criminal histories or background checks in an employer’s employment ads, job applications, and interview practices. Advertisements with phrases such as “no felonies,” “must pass background check,” or “must have clean record” are illegal. As for print and online job applications, employers must rid them of any language inquiring into an applicant’s criminal history or asking an applicant to authorize a background check. This practice is the same during the interview, where the interviewer is prohibited from asking about an applicant’s criminal history.

If during the interview, an employer or hiring manager accidentally discovers the applicant has a criminal record, the interviewer should give the applicant a basic overview of the NYC Fair Chance Act. Explain that employers are only allowed to consider the applicant’s criminal record after making a conditional offer and that it would be inappropriate to discuss the record until that point, if at all. Interviewers may want to make a note in the applicant’s file should disclosure later become an issue.

After Making a Conditional Offer

Only after an employer extends a conditional offer of employment may it ask the applicant, either in writing or orally, whether he/she has a criminal history or pending criminal case. The New York City Commission of Human Rights recommends employers style their written inquiry as follows:

Have you ever been convicted of a misdemeanor or felony? (Answer “NO” if your conviction: (a) was sealed, expunged, or reversed on appeal; (b) was for a violation, infraction, or other petty offense such as “disorderly conduct;” (c) resulted in a youthful offender or juvenile delinquency finding; or (d) if you withdrew your plea after completing a court program and were not convicted of a misdemeanor or felony.)

If an employer runs a background check to determine or confirm the applicant’s criminal history, it is legally obligated to give the applicant the exact information used to inquire into his/her background. For example, if the employer hired a third party to conduct the check, it must turn over a copy of its report; if it found the information online, it should print a copy of the page; if it accessed the information by public record, it must print that page; or if it relied on the applicant’s oral testimony about the record, best practice would be to present a written summary of that information back to the applicant.

Once the employer has the applicant’s criminal record, if it decides the information discovered in the applicant’s criminal history is irrelevant and makes a final offer of employment without regard to the criminal history, and the employer complied with the above requirements, no other steps are required to be in compliance with the law.

Revoking a Conditional Offer

An employer that is unsure whether to hire the applicant based in any part on the information you discovered in this criminal history must carefully and deliberately evaluate whether that criminal record outweighs the reasons the applicant was selected for the position.

For forty years, New York State Article 23–A, has prohibited employers from denying applicants work based solely on a criminal record, and has governed how employers make this determination. Article 23–A requires employers evaluate job seekers and current employees with conviction histories fairly and on a case-by-case basis. It lists eight factors employers must use to determine whether there is a direct relationship between the criminal record and the prospective position or whether, based on the conviction, the employer can show the applicant poses an unreasonable risk to the company’s safety:

  • 1. New York State’s public policy of encouraging the employment of persons with prior convictions;
    • 2. The specific duties and responsibilities necessarily related to the . . . employment sought;
    • 3. The bearing, if any, the criminal offense or offenses for which the person was previously convicted will have on his ability to perform one or more such duties or responsibilities;
    • 4. The time which has elapsed since the occurrence of the criminal offense or offenses;
    • 5. The age of the person at the time of the occurrence of the criminal offense or offenses;
    • 6. The seriousness of the offense or offenses;
    • 7. Any information produced by the person, or produced on his behalf, in regard to his rehabilitation and good conduct; and
  • 8. The legitimate interest of the . . . private employer in protecting property, and the safety and welfare of specific individuals or the general public.
  •  

If after weighing these factors, an employer still wishes to hire the applicant, again, there is nothing more to do.

If, on the other hand, the employer decides to revoke the offer based on the applicant’s criminal history, it must: (1) explain to the applicant why, using the City’s Fair Chance Notice; (2) provide the applicant with a copy of the background check or criminal history information you obtained; (3) and give the applicant three business days to respond to the notice. The Fair Chance Notice acts as the employer’s application of Article 23–A to the applicant’s criminal history; it gives the applicant the employer’s reasoning for wanting to rescind the offer. The applicant has three days to respond to the Notice and should include information about errors in his/her record and any additional information the employer should consider before making the final determination to retract the offer.

The New York City Commission offers free trainings on the Fair Chance Act. Given how dramatically this law changes former employment practices in hiring people with criminal histories, it is important all employers and employees are aware of all its requirements to avoid unlawful discrimination against job seekers with criminal histories. If you are unsure how to apply the new law in your business, or if you feel you have been a victim of unlawful discrimination in the hiring process, our attorneys can help. Contact us today.

Erin Lloyd, Esq. is an employment and business lawyer and partner at Lloyd Patel LLP, a general practice law firm. She can be reached directly at el@lloydpatel.com.

Whitney McCann is a second year law student at City University of New York School of Law, interning at Lloyd Patel LLP, and expects to graduate in May 2017.

July 2015 NEWSLETTER

Yogi Patel - Tuesday, June 30, 2015

Dear valued clients and supporters: This month's newsletter will focus on: (1) proposed changes to the overtime rules by the U.S. Department of Labor that could potentially extend overtime protection to 5 million white collar workers; (2) New York City's passage of the The Fair Chance Act impacting an employers ability to inquire about a job applicants criminal history prior to hiring and (3) a closer look at selling a company or buying back shares in the context of our continuing series of articles on start-up entrepreneurs.

Proposed changes to overtime rules

The U.S. Department of Labor announced today that it was proposing a rule change that would effectively make millions of white collar employees who are currently considered "exempt" from over-time - eligible for overtime. One of the many factors that currently determines whether an employee is exempt or not from overtime is the total amount of wages earned annually. Today, certain professionals and managers are exempt from overtime if they make more than $23,660 a year and perform specific duties. The proposed rule would now set the overtime threshold to $50,440.00. Additionally, the proposed rule would simplify the identification of nonexempt employees, thus making the executive, administrative and professional employee exemption easier for employers and workers to understand and apply. Both employers and employees are advised to consider the implications of these changes in the event the rule is adopted and implemented as proposed.

The Fair Chance Act

New York City's newly passed Fair Chance Act (the “Act”), which will go into effect on October 27, 2015, prohibits employers from inquiring about a job applicant’s criminal history, including arrest and conviction records, during interviews before a conditional offer of employment is made. In addition, the Act prohibits employers from conducting pre-offer searches of public records and certain consumer reports that contain criminal conviction information. Once a job applicant is given a conditional offer of employment, the employer can do a background check and ask for information about convictions that may be relevant to the job. For more information about the Act, please visit our article here.

Start-up ventures and selling or expanding the business

We invite you to read our last article in the three-part series of articles on start-up ventures and entrepreneurs now posted here. The last article focuses on decisions an entrepreneur who has successfully grown a company and is looking to retire, cash-out, or start a new venture may make. The entrepreneur who is looking to sell should consideration whether the sale should be structured as a stock sale or an asset sale. There are tax and control ramifications that the seller must consider, depending on what they decide to do. The entrepreneur may also decide to buy back the shares that are were issued during the capital raising stage and consolidate control before selling to a third party or simply holding on to the company for a future sale after the buy-back occurs. We invite you to read the full series of articles: Attracting Investment for the Amateur Entrepreneur Part IAttracting Investment for the Amateur Entrepreneur Part II: Additional Capital, and Attracting Investment for the Amateur Entrepreneur Part III: Selling the Business or Buying Back Stock

The New York City Fair Chance Act Requires Employers to More Carefully Evaluate Applicants With Criminal Records

Yogi Patel - Monday, June 29, 2015

The newly passed Fair Chance Act (the “Act”) will prohibit employers from inquiring about a job applicant’s criminal history, including arrest and conviction records, during interviews before a conditional offer of employment is made. In addition, the Act, which Mayor Diblasio is expected to sign shortly, will ban employers from conducting pre-offer searches of public records and certain consumer reports that contain criminal conviction information. Once a job applicant is given a conditional offer of employment, the employer can do a background check and ask for information about convictions that may be relevant to the job. 

The reasoning behind proponents of the Fair Chance Act is simple: job applicants should not be automatically screened out of the hiring process based solely on past mistakes before they’ve had an opportunity to prove their qualifications for the position they seek.  Under the Fair Chance Act, employers will now be required to evaluate these applicants’ fitness for the job, just like any other applicant, instead of screening them out before they’ve even had a chance. The Fair Chance Act passed the New York City Council by a vote of 45-5-1.

New York State law already limits when employers can inquire about or make employment decisions based on past arrests that never led to any conviction. The law also already requires employers with four or more employees to do a careful analysis of any applicant with a criminal record before they rule out the applicant on that basis. Employers unfamiliar with those restrictions should seek legal guidance to develop a consistent procedure and policy for handling applications by individuals with criminal histories. 

Let’s be clear: the Fair Chance Act is not a requirement that employers hire individuals with criminal convictions and does not change existing law; it simply requires them to judge these applicants on their merits before considering their prior convictions. 

The Fair Chance Act takes the criminal record question off the table until a conditional offer of employment is made, leveling the playing field for job seekers with criminal histories and ensuring that all New Yorkers have a “fair chance” at employment, especially if the applicant’s past conviction really has no bearing on the job they are applying for. The Fair Chance Act does not apply to employers with less than four employees. However independent contractors who are not employees are considered persons in the employ of the employer if they are hired to carry out work in furtherance of the employer’s business enterprise, so small businesses that use independent contractors should still take note.

After making a conditional offer of employment, the employer must notify the job applicant that a background inquiry will be performed; this is a new requirement. If the applicant has a prior conviction, the employer must first perform the careful analysis required under previously existing law—evaluating the particular crime the applicant was convicted of and its potential relationship with the position and the job—and then provide a copy of its inquiry and analysis to the applicant. If, after receiving information regarding the applicant’s record, the employer no longer wants to employ the applicant, the employer must explain why and provide a copy of the record it relied on in making that decision. The position must then be held open for three days so the employer and applicant can engage in an interactive discussion, considering the employer’s requirements and the applicant’s evidence of good conduct, if the applicant so chooses. This time also allows the applicant to question any inaccuracies on the record, which is not as uncommon as one might assume.

Failure to adhere to the strict notice procedure will result in an automatic presumption that the employer has engaged in unlawful discrimination based upon the applicant’s criminal history in any future litigation. The presumption can only be overcome by “clear and convincing” evidence presented by the employer. Of course, this means that like all employment decisions, employers must keep very good records of their decision-making process and have a solid and consistent policy and procedure in place that is closely followed.

Other laws currently in place still require background checks and prevent people with certain serious convictions from working in daycares and as home health aides, among other positions. The Fair Chance Act does not affect these jobs or change the background check requirements. These employers are allowed to tell applicants that the jobs are subject to a background check. Employers that are required by law to conduct background checks and exclude people with specific convictions may still do so. Employers may still conduct criminal background checks and deny employment to workers with conviction histories that are directly related to the job or pose an unreasonable risk.

The attorneys at Lloyd Patel LLP are available to help employers develop or modify their employment manuals and policies to comply with the law and to consult with employees who believe they have been the victim of unlawful discrimination. Contact us at info@lloydpatel.com or (212) 729-4266.


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