Employer Incentives for Providing Second Chances

President Biden recently issued a proclamation declaring April 2023 as Second Chance Month. In it, he called upon all government officials, educators, volunteers, and the people of the United States overall to observe the month with appropriate programs, ceremonies, and activities.

According to the Proclamation, our justice system should “be based on the simple premise that once someone completes their sentence, they should have the chance to earn a living, build a life, and participate in our democracy as fellow citizens.” It goes further in stating, “At the same time, we have to invest in preventing crime and breaking the cycle of recidivism.”

It is this latter part that much of American society, and particularly employers, continue to be challenged by, essentially negating the idea that any of this is a “simple premise.” Preventing crime and breaking the cycle of recidivism come up often with regard to the delicate balancing act in which employers must engage in their hiring practices. On the one hand, they must comply with any Second Chance Acts in their applicable jurisdiction(s). On the other hand, they must take appropriate measures to protect their employees, customers, and property or potentially subject themselves to negligent hiring claims.

In an attempt to alleviate some of the burdens placed on employers through the increased legal and regulatory restrictions, the government has taken steps to incentivize them to hire those with criminal records. At the same time, these measures satisfy the government’s goal to increase access to employment for those with criminal records. There are several of these employer incentives for fair chance hiring that encourage businesses to consider hiring individuals with criminal records (or those who have been subjected to other barriers to employment); namely, tax credits and bonding programs.

Tax Credits

Several federal and state tax credits are available to employers who hire individuals with criminal records. For example, the Work Opportunity Tax Credit (WOTC) provides a federal tax credit to employers who hire those who have consistently faced barriers to employment, including the formerly incarcerated. To be eligible for the WOTC program, employers (of any size) must hire individuals from one of the targeted groups and submit the necessary paperwork (Form 8850) to the state workforce agency within 28 days of the employee’s start date. An employer cannot claim the WOTC for employees who are rehired.

The amount of the tax credit varies depending on the targeted group and the number of hours worked by the employee, calculated as a percentage of the employee’s first-year wages, up to a maximum amount. Generally, the WOTC is equal to up to 40% of up to $6,000 of wages paid to an individual in their first year of employment, while a 25% rate applies to wages for individuals who perform fewer than 400 but at least 120 hours of service for an employer.

The WOTC program provides a valuable financial incentive for employers to hire formerly incarcerated individuals who may have difficulty finding employment otherwise. By providing employers with tax credits for hiring these individuals, the WOTC program can financially incentivize employers, while helping to reduce barriers to employment and promote greater economic opportunity.

Bonding Programs

Bonding programs provide employers with fidelity bonds that protect against losses due to employee theft or acts of dishonesty on or away from the worksite. The Federal Bonding Program was created in 1966 by the Department of Labor to provide fidelity bonds as a type of insurance to employers. The program applies to any employer wanting to hire individuals who may be considered “at risk” and hard-to-place due to their backgrounds, such as those with criminal records, for the first six months of their employment. Each bond has a $5,000 limit, with no deductible for the employer. The bonds come at no cost to either party and can be applied to full, part-time, and temporary employees.

The Federal Bonding Program provides a valuable tool for employers to manage risk and protect their business against potential losses due to employee dishonesty or theft. By providing bonding for individuals who may be considered higher risk, the program can provide an additional layer of protection and peace of mind for employers who are willing to take a chance on individuals who may have difficulty finding employment elsewhere. Further, it helps reduce barriers to employment and provide individuals with a second chance at meaningful work.

Other Benefits

In addition to these government issued incentives, there may be other benefits for employers hiring those with criminal pasts, including reduced hiring costs and the ability to demonstrate a commitment to social responsibility, as a part of its Environmental, Social, and Governance (ESG) initiatives. By hiring and retaining individuals who may have difficulty finding employment elsewhere, businesses may greatly expand the pool of available candidates, reduce turnover, and build a loyal and dedicated workforce. Further, embracing fair chance hiring helps build a more inclusive and diverse workforce, improve a business’s public image and reputation, and build goodwill and positive brand recognition.

The Importance of Background Screening

Employers, regardless of whether they are taking advantage of these incentive programs, should establish clear hiring criteria and job requirements that are directly related to the position, and apply those criteria consistently to all applicants, regardless of their criminal histories. One way this can be effectuated is through the proper training of hiring managers and clearly established best practices in recognition of any applicable legal restrictions and requirements. Having and following an employee screening policy for all employees ensures that consistent guidelines are being followed for every applicant.

As employers consider these incentives to hire individuals with criminal histories, it’s equally as important that they continue to protect themselves through the implementation of thoughtful and thorough hiring policies and procedures. For example, while employers may be limited in the types of criminal records they can consider in making hiring decisions under Second Chance Act policies, they should still conduct a thorough background check to identify any potential risks to their business or employees.

It’s also important to weigh the significance of past criminal convictions against the current qualifications and character of the candidate, taking into account the 2012 EEOC Enforcement Guidance on Arrest and Conviction Records in Hiring and considering any relevant factors such as the age of the conviction and evidence of rehabilitation. Ultimately, it’s important to remember that these incentives and benefits are not a substitute for proper screening and hiring practices, and employers should still conduct appropriate background checks and due diligence on all potential employees.

At Hire Image, we work with employers to understand Second Chance Acts as they relate to their hiring practices. Please contact us if you have any questions about the laws and rules governing background checks and drug screening.