Employment Decisions Archives

Trend of suing employers for technical FCRA violations continues

The threat of a multi-million potential class action lawsuit alleging technical violations of the Fair Credit Reporting Act (FCRA) continues to haunt employers, even where the plaintiffs have alleged or proven no harm.

Pursuant to the statute, employers are required to “provide prior written notice before they can procure a consumer report about any employee or applicant for employment.” Just as important, 15 U.S.C. Section 1681b(b)(2)(A)(i) adds that the notice must be given “in a document that consists solely of the disclosure.”

Seeking to take advantage of the statutory damages available under the FCRA – from $100 up to $1,000 for a willful violation – plaintiffs have challenged employers’ use of a disclosure form that combined the written notice to procure a consumer report with other information or documents, such as an application form.

The trend to sue for FCRA technical violations was started by Singleton v. Domino’s Pizza, LLC in the U.S. District Court of Maryland (case no. 8:11-cv-01823-DKC) where the court ruled that inclusion of a liability release in the employer’s disclosure/authorization form violates the FCRA. Domino’s ended up reaching a settlement with the plaintiffs in 2013 for $2.5 million.

Also taking a strict reading of the statutory language, the Western District Court of Pennsylvania ruled in 2013 in Reardon v. Closetmaid Corporation (case no. 2:0S-cv-01730) that an employer could be liable for the combination of a disclosure/authorization with a liability waiver, and granted summary judgment in favor of the roughly 1,800 job applicants.

In a more recent example, a class of applicants sued Publix Super Markets in the U.S. District Court for the Middle District of Tennessee (case no. 3:14-cv-00720) also based on a violation of the sole disclosure requirement and release of liability. With Domino’s and Closetmaid’s payouts looming over its head and a class of 90,000, Publix agreed to settle the claims for $6.8 million earlier last year.

Although these companies opted not to fight the suits on their merits, a defendant in a case filed in the U.S. District Court for the Eastern District of California (case no. 1:14-742-WBS-BAM) did and won dismissal in October 2014. Syed v. M-I LLC involved identical claims but the judge reached a contrary decision, finding that the FCRA text was not as clear-cut as the plaintiff claimed. Immediately following the subsection mandating the sole disclosure of the employer’s intent to procure a consumer report is a provision that states that the consumer’s authorization is to “be made on the document referred to in clause (i)” – “that is, the same document as the disclosure,” the court noted, and “…thus, the statute itself suggests that the term ‘solely’ is more flexible than at first it may appear…”

The Syed decision is the second one that may give hope to employers facing similar suits. (There are at least six class actions pending.) But the obvious answer for companies looking to avoid the problem entirely is simple: use a standalone disclosure/authorization form that is separate from any other information or documents.

January 29th, 2015|Employment Decisions, Lawsuit|

Medical marijuana laws put employers in a tough spot

The growing number of jurisdictions permitting medical marijuana is putting employers in a tough position. One the one hand, marijuana remains illegal under federal law and a workforce under the influence isn’t much of a workforce at all. On the other hand, 23 states and the District of Columbia now permit the use of marijuana for regulated medical purposes and some state laws include anti-discrimination provisions prohibiting employers from taking action against employees based on their status as a registered medical marijuana user.

A first-of-its-kind lawsuit demonstrates the conundrum. In December, the American Civil Liberties Union filed suit in a Rhode Island state court on behalf of an individual who allegedly was denied an internship after she disclosed that she lawfully carried a medical marijuana card for severe migraines.

According to the complaint, the company told the applicant that she had been rejected because of her status as a cardholder, and despite promises not to bring medical marijuana on the premises or come to work under the influence, the applicant was denied the position.

The lawsuit charges that the company violated Rhode Island’s medical marijuana law which prohibits schools, employers, and landlords from refusing “to enroll, employ, or lease to, or otherwise penalize, a person solely for his or her status as a cardholder.” The complaint – which also includes allegations of disability discrimination under state law – seeks compensatory and punitive damages.

Employers in states permitting medical marijuana would be well-advised to review their relevant law when considering marijuana use or marijuana-related criminal records in employment decisions. While Rhode Island is not alone in including an anti-discrimination requirement in its law, joined by Arizona, Connecticut, Delaware, Illinois, Maine, Minnesota, Nevada, and New York, other states – including California, Massachusetts, and New York – are clear that employers have no obligation to accommodate an employee’s medical marijuana use or permit them to work under the influence.

Read the complaint.

January 29th, 2015|Employment Decisions|

Class action charges LinkedIn with violations of FCRA

According to a new putative class action filed in California federal court, social networking site LinkedIn runs afoul of the Fair Credit Reporting Act (FCRA).

The plaintiffs claim that LinkedIn’s reference search functionality allows prospective employers, among others, to obtain reports on job applicants with profiles on the site. LinkedIn’s dissemination of “Reference Reports” – that are created based on a user’s profile and connections to form a list of former supervisors and co-workers as possible references – are available for users who pay a monthly or annual subscription fee.

“LinkedIn has created a marketplace in consumer employment information, where it sells employment information, that may or may not be accurate, and that is has obtained in part from unwitting members, and without complying with the FCRA,” according to the complaint, which noted the site has more than 300 million members and one million jobs listed.

The Reference Reports bring LinkedIn within the purview of the FCRA, and yet the company fails to comply with a host of statutory requirements, according to the complaint.

Specifically, the complaint alleges that the site violates Section 1581(b) by furnishing consumer reports for employment purposes without obtaining the certifications required by the statute or a summary of the consumer’s rights and also does not maintain any of the procedures required by Section 1681e(a) to limit the furnishing of consumer reports to the limited purposes of the statute. In addition, Section 1681e(b) mandates that all consumer reporting agencies follow reasonable procedures to assure the maximum possible accuracy of consumer report information, Section 1681e(d) requires that a user notice be provided to individuals when a report is provided about them, and Section 1681b states that reports can only be provided after an inquiry to ensure the report is used for a “permissible purpose.” None of these statutory requirements were met by LinkedIn, the suit alleges.

“[A]ny potential employer can anonymously dig into the employment history of any LinkedIn member, and make hiring and firing decisions based upon the information they gather, without the knowledge of the member, and without any safeguards in place as to the accuracy of the information that the potential employer has obtained,” Sweet and the other plaintiffs claim. “Such secrecy in dealing in consumer information directly contradicts the express purposes of the FCRA.”

The main plaintiff alleges that she located a job opening on the site and submitted her resume through LinkedIn. She received a notification from the site that the general manager of the employer had viewed her profile and she was offered the job after an interview. The general manager declined the plaintiff’s offer to provide a list of references but later called back to rescind the offer, telling her that he had checked some of her references and changed his mind.

The plaintiffs seek to certify a nationwide class of LinkedIn users who had a Reference Report run on them as well as a subclass of users who applied for employment via the site and had a Report generated by a potential employer. As for remedies, the putative class requests actual, statutory, and punitive damages, as well as attorney’s fees and costs.

To read the complaint in Sweet v. LinkedIn Corporation, click here.

December 3rd, 2014|Employment Decisions, Lawsuit|

Background screening of independent contractors

The issue of worker misclassification is a hot topic for employers, with state and federal authorities as well as class action suits challenging whether a worker is an employee or an independent contractor. But what about the differences in background screening for independent contractors? Are they subject to the same disclosure and authorization requirements, adverse action notices, and dispute rights that apply to employees?

The answer: it depends.

While the Fair Credit Reporting Act (FCRA) doesn’t directly address independent contractors, the Federal Trade Commission (FTC) has issued two advisory opinions stating that they should be afforded the same rights as employees. The FTC also reiterated this view in its staff report published in July 2011, stating that the FCRA’s broad definition of the term “employment purposes” extends beyond traditional employment relationships. (FTC Staff Report at 32.)

The Allison Letter (a response to an inquiry from a Georgia worker named Herman L. Allison) addressed the issue in the context of a trucking company that hired drivers who owned and operated their own equipment. Characterizing the situation as a “business relationship” and not an “employment relationship,” Allison asked whether the protections of the FCRA still applied.

Taking a broad interpretation of the term “employment,” the FTC said that treating independent contractors differently than employees would hamper the goals of the FCRA. Even a homeowner who conducts a background check on a handyman or other worker hired as an independent contractor should follow the FCRA requirements, the agency wrote.

In a second letter, the FTC considered a query from Harris K. Solomon, an attorney in Florida. A client wished to conduct background checks on individuals selling its insurance products and handling title exams. Again, the agency said the checks would trigger the requirements of the FCRA.

The FTC’s advisory letters – both issued in 1998 – as well as the staff report, are advisory and non-binding on other parties. But they provide insight into how federal authorities would address the rights and protections owed to an independent contractor as the subject of a background check.

However, on the other end of the spectrum, a Wisconsin federal court judge in 2012 held that the disclosure obligations of the FCRA do not apply to independent contractor relationships. The case involved a sales rep who sued EMS Energy Marketing Service after he was terminated. The plaintiff claimed that the company failed to provide him with either the written notice of his rights or a copy of the report as required by the statute. But the court granted summary judgment for the employer, ruling that Lamson was hired as an independent contractor, not an employee, and therefore, the FCRA did not apply. The language of the statute refers only to employees and if a worker is not an employee “it necessarily follows that he or she is not covered by the FCRA,” the court wrote in Lamson v. EMS Energy Marketing Service. The court also distinguished the FTC letters as advisory opinions, adding that the “letters, in and of themselves, are of limited, if any, persuasive power.”

To read the Allison Letter, click here.

To read the Solomon Letter, click here.

December 3rd, 2014|Employment Decisions|

New York City’s new bill would restrict using credit reports for employment decisions

Last month, the New York City Council’s Committee on Civil Rights held a hearing on a bill that would amend the city’s administrative code, prohibiting employers from using consumer credit reports for personnel decisions. Although the hearing ended without a disposition, it is expected that this bill will pass in some form in the near future. The Committee is holding a separate hearing in December on a bill that would prohibit employment discrimination based on an applicant’s or employee’s criminal history.

October 15th, 2014|Employment Decisions, Legislation|

Congress proposes bill that protects regulated employers’ background checks

While the Equal Employment Opportunity Commission (the “EEOC”) is continuing its challenge of employers’ use of criminal history and credit report information in personnel decisions, and new “ban-the-box” laws are rapidly gaining momentum, on September 9, 2014, Congress proposed legislation that protects certain regulated employers from EEOC, state agency and private actions when they strive to comply with the screening laws that are particular to their industries. The Certainty in Enforcement Act of 2014 would amend Section 703 of the Civil Rights Act of 1964 (42 U.S.C. 2000e-2), and cover employers that include those engaged in “health care, childcare, in-home services, policing, security, education, finance, employee benefits, and fiduciary duties.”

October 15th, 2014|Employment Decisions, Legislation|

FTC halts high school diploma mill

As the request of the Federal Trade Commission (the “FTC”), on September 16, 2014, the U.S. District Court for the Southern District of Florida imposed a temporary restraining order to halt the business operations of Diversified Educational Resources, LLC (DER), and Motivational Management & Development Services, Ltd. (MMDS), and freeze their assets. The FTC’s lawsuit seeks a permanent injunction to stop the defendants’ deceptive practices and to return ill-gotten gains to consumers, which according to a preliminary review of bank records referenced in the lawsuit were more than $11,117,800 since January 2009.

The complaint alleges that the defendants violated the FTC Act by misrepresenting that the diplomas were valid high school equivalency credentials and that the online schools were accredited. The FTC charges that the defendants actually fabricated an accrediting body to give legitimacy to their diploma mill operation. DER and MMDS allegedly sold the diplomas since 2006 using multiple names, including jeffersonhighschoolonline.com, jeffersonhighschool.us, enterprisehighschool.us, and ehshighschool.org, which purport to describe legitimate and accredited secondary school programs such as “Jefferson High School Online” and “Enterprise High School Online.” The websites claim that consumers can become “high school graduate[s]” and obtain “official” high school diplomas by taking an online exam and paying between $200 and $300. In numerous instances, consumers who attempt to use their Jefferson or Enterprise diplomas to enroll in college, enlist in the military, or apply for jobs are rejected because of their invalid high school credentials.

September 19th, 2014|Employment Decisions, Fraud, Lawsuit|

District of Columbia joins ban-the-box movement

On August 22, 2014, District of Columbia’s mayor signed new legislation titled the Fair Criminal Record Screening Amendment Act of 2014 that prohibits most employers in DC from both inquiring about criminal history information during the application process and obtaining a criminal background check until after a conditional offer of employment is made to the applicant. The law, which imposes a host of other restrictions and requirements on using criminal record information for personnel decisions, will take effect following a 30-day period of Congressional review as provided in the District of Columbia Home Rule Act and publication in the District of Columbia Register.

September 19th, 2014|Employment Decisions, Legislation|

New Jersey’s new ban-the-box law goes into effect March 1, 2015

Signed into law last month, The Opportunity to Compete Act will effect March 1, 2015, preventing many private employers in New Jersey from asking job candidates about their criminal history on the initial job application. In “banning the box” for private employers, New Jersey joins the District of Columbia, Hawaii, Illinois, Massachusetts, Minnesota, Rhode Island, and cities of Philadelphia (PA), Newark (NJ), Buffalo (NY), Seattle (WA), San Francisco (CA), Baltimore (MD), and Rochester (NY)) in postponing inquiries about criminal record information until later in the hiring process, and imposing other requirements on the use of such records in employment decisions.

September 19th, 2014|Employment Decisions, Legislation|

Cities of Rochester, NY and Baltimore, MD join fast growing list of ban-the-box jurisdictions

Effective November 18, 2014, the City of Rochester, New York ordinance no. 2014-0155 will prohibit employers from requiring applicants to disclose any criminal conviction information during the application process. The employer may inquire about a criminal conviction only after the initial interview. And if the employer does not conduct an interview, it must inform the applicant whether a criminal background check will be performed, before employment is to begin. Additionally, it must wait until after a conditional job offer has been extended before conducting the criminal check or otherwise inquiring into the applicant’s criminal history. The ordinance applies to any position where the primary place of work is located within Rochester, and to any city employees (except fire or police) or vendors regardless of location. Excluded from the ordinance are criminal record inquiries that are authorized by another applicable law.

Baltimore’s Fair Criminal-Record Screening Practices ordinance, which becomes effective August 13, 2014, similarly bans private employers from inquiring about or conducting criminal checks on applicants until a conditional offer has been extended. The ordinance applies to any employer with 10 or more employees within the city of Baltimore, but excludes entities serving minors or vulnerable adults. Unlike some other ban-the-box laws, the Baltimore ordinance does not require that employers provide additional notices to applicants other than those required under the Fair Credit Reporting Act.

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.

July 9th, 2014|Employment Decisions, Legislation|

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