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Supreme Court ruling extends SOX whistleblower protection to private contractors

On March 4, 2014, the Supreme Court in a split decision ruled that employees of private companies servicing public companies are covered by the whistleblower protections of Sarbanes Oxley Act of 2002 (“SOX”)

[U.S., No. 12-3, 3-4-14]. In this case, two employees of a private company contracted by a publicly-traded mutual fund alleged that they were terminated in retaliation for raising fraud issues about the fund. With this decision, the Supreme Court has expanded the universe of companies regulated by the SOX whistleblower provision from about 5,000 public companies to potentially millions of private ones, including the smallest of businesses. Employers of every size and type have to be prepared for potential SOX whistleblower retaliation claims if they are a contractor or subcontractor of a publicly traded company.

FTC and EEOC jointly publish guides on employment-purpose background checks

The Federal Trade Commission (FTC) and the Equal Employment Opportunity Commission (EEOC) have co-published two brief guides on employment background checks that explain the rights and responsibilities of the people on both sides of the desk. See Background Checks: What Employers Need to Know and Background Checks: What Job Applicants and Employees Should Know. For employers, the guidelines cover only the basics that must be considered for procuring and using employment-purpose background checks and do not attempt to explain in detail the many compliance requirements of the Fair Credit Reporting Act, and analogous state and municipal consumer reporting laws, regulations, codes and statutes.

San Francisco enacts ordinance for using criminal records in employment decisions

Effective August 13, 2014, under San Francisco’s Fair Chance Ordinance, companies with 20 or more employees are prohibited from inquiring about an applicant’s criminal history on the employment application or during the first live interview. Along with banning the box, the ordinance imposes several additional restrictions and mandates certain considerations for individualized assessment. San Francisco employers must also ensure that their notice and consent forms for criminal background inquiries later in the process comply with the guidelines that will be published by San Francisco’s Office of Labor Standards Enforcement (OLSE) as well as with the already existing background check disclosure/authorization requirements under California’s ICRAA and the FCRA.

San Francisco is the ninth jurisdiction with legislation that affects private employers. The remaining eight are the states of Hawaii, Massachusetts, Minnesota, Rhode Island, and the cities of Buffalo, NY, Newark, NJ, Philadelphia, PA, and Seattle, WA. Multi-state employers should consider whether their particular circumstances warrant adopting individualized employment applications for jurisdictions with ban-the-box laws, or whether to use a nationwide standard form. Employers who opt for a standard electronic application for all locations need to include a clear and unambiguous disclaimer for applicants in each applicable ban-the-box jurisdiction. It is uncertain whether such disclaimers are sufficient for paper applications of multi-state employers in at least one ban-the-box jurisdiction (Minnesota) or if the box must be removed altogether.

For more information on ban-the-box legislation, see the recently published briefing paper by the National Employment Law Project titled Statewide Ban the Box – Reducing Unfair Barriers to Employment of People with Criminal Records.

Note: Effective August 13, 2014, with our California employment-purpose disclosure/ authorization form, we will be including a supplemental disclosure/authorization notice as prescribed by the OLSE, to use by San Francisco employers. 

FINRA has some common sense advice for avoiding investment scams

  1. Guarantees: Be suspect of anyone who guarantees that an investment will perform a certain way. All investments carry some degree of risk.
  2. Unregistered products: Many investment scams involve unlicensed individuals selling unregistered securities, ranging from stocks, bonds, notes, hedge funds, oil or gas deals, or fictitious instruments, such as prime bank investments.
  3. Overly consistent returns: Any investment that consistently goes up month after month, or that provides remarkably steady returns regardless of market conditions, should raise suspicions, especially during turbulent times. Even the most stable investments can experience hiccups once in a while.
  4. Complex strategies: Avoid anyone who credits a highly complex investing technique for unusual success. Legitimate professionals should be able to explain clearly what they are doing. It is critical that you fully understand any investment that you are considering, including what it is, what the risks are and how the investment makes money.
  5. Missing documentation: If someone tries to sell you a security with no documentation, such as a no prospectus in the case of a stock or mutual fund, and no offering circular in the case of a bond, he/she may be selling unregistered securities. The same is true of stocks without stock symbols.
  6. Account discrepancies: Unauthorized trades, missing funds or other problems with your account statements could be the result of a genuine error or they could indicate churning or fraud. Keep an eye on account statements to ensure that activity is consistent with your instructions, and know who holds your assets. For instance, is the investment adviser also the custodian? Or is there an independent third-party custodian? It can be easier for fraud to occur if an adviser is also the custodian of the assets and keeper of the accounts.

Identity theft remains on top of FTC’s national complaints list

Identity theft continues to top the FTC’s national ranking of consumer complaints, with American consumers reported as losing over $1.6 billion to overall fraud in 2013, according to its annual report released last month. The FTC received more than two million complaints overall, of which 290,056 or 14%, involved identity theft. Thirty percent of these were tax or wage-related, which continues to be the largest category within identity theft complaints. Debt collection followed identity theft with 204,644 or 10% of total complaints, and banking and lending was number three with 152,707 or 7%.

Florida was noted as the state with the highest per capita rate of reported identity theft and fraud complaints, followed by Georgia and California for identity theft complaints, and Nevada and Georgia for fraud and other complaints.

Accuracy issues top credit reporting complaints

The Consumer Financial Protection Bureau (CFPB) last month released its report regarding approximately 31,000 complaints filed between October 22, 2012 and February 1, 2014, by consumers frustrated with credit reporting companies. The majority of the complaints pertained to accuracy and completeness of credit reports.

Another lawsuit reminds employers about FCRA disclosure/authorization requirements

A recently filed class action NDC Ca. No. (4:14-cv-00592-DMR, 2-7-14) is a reminder to employers that under the Fair Credit Reporting Act (the “FCRA”) their disclosure and authorization form to the applicant/employee for obtaining a background check must be in a standalone document, and cannot contain confusing or extraneous information. The lawsuit alleges that the defendant employer used an invalid form to obtain consent to conduct background checks, that it relied on an authorization that was included alongside several other consent paragraphs in an online employment application, and that the consent form contained a release of liability related to obtaining the background check. Two published court decisions already ruled that including a liability waiver constitutes a technical violation under the FCRA. (WD Pa. 2013, No. 2:08-cv-01730-MRH, and Dist. Md., 2012, No. 8:11-cv-01823-DKC.)

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