EEOC Must pay Nearly $1M in Fees for Background Check Case

The EEOC has recently been pursuing cases against companies for allegedly discriminating in its use of background checks.  In the recent case of EEOC v. Freeman, 2015 BL 288334, D. Md., No. 8:09-cv-02573, 9/4/15, the EEOC pushed its position too far.  The Court in Freeman summarized the facts of the case as follows:

Freeman, as a regular part of its hiring process, conducted criminal background checks on all applicants who were offered a position, and conducted credit background checks on applicants who were offered financially sensitive positions. EEOC v. Freeman, 961 F. Supp. 2d 783 , 787 (D. Md. 2013). Importantly, applicants were not turned away for any negative information. Rather, Freeman limited in scope the type of negative information that would disqualify an applicant. For example, as to the criminal background check, Freeman generally did not consider arrests, but only convictions that had occurred within the past seven years. Id. at 788 . Furthermore, Freeman did not consider all convictions, but only those for certain crimes. Id . Similarly, with regard to credit checks, only certain negative items would exclude an applicant from being hired. Id. at 789 .

Freeman rejected a job applicant for a position based on information on her credit report and the applicant then filed a charge of discrimination with the EEOC.  The EEOC took the position that Freeman’s use of background checks had a disparate impact on Arica-American, Hispanic, and male applicants. In support of this claim, the EEOC relied on statistical evidence from an “expert.”  The court found that the expert’s statistical analysis was “inexplicably shoddy,” and dismissed the case for lack of any evidence of disparate treatment.  Freemen then moved for attorneys fees against the EEOC.  The Court found that the EEOC statistics were “divorced from any reference to” the allegations against Freeman and therefore required the EEOC to pay Freeman’s attorneys fees for defending the case.  Freeman was awarded nearly a million dollars in fees.

The EEOC has had issues with its statistical analysis before.  In EEOC v. Kaplan Higher Education Corp., 748 F.3d 749, (6th Cir. 2014), the Sixth Circuit upheld the exclusion of EEOC expert statistics as well.

But, the EEOC has also had success in pursuing litigation based on background checks.  The EEOC recently settled a case against BMW for $1.6 million and is continuing to litigate against Dollar General.  Employers should contact their employment counsel to review their credit and criminal background check policies.

FTC Issues Cyber Security Guidance: Good Advice for Employers and Business

The Federal Trade Commission has issued a guide for businesses that sets forth cyber security practices based on lessons learned from FTC cases.  Regardless of industry, the FTC guide can be used to help assess the cyber-security posture of an entity.  Employers should be aware that not all cyber security risks occur from distant hackers trying to break into a network.  In fact, many cyber issues begin with an "inside job" and can lead to huge liability.  The FTC's guide is a free resource that applies regardless of company size or sector.

Roanoke Journalist Murders are the Latest Violent Tragedies Caused by Co-Workers or Former Employees--What can Employers do?

A little known fact about yrs truly: I grew up in Roanoke, Virginia.  As a kid, I recall vividly how absolutely nothing ever seemed to happen in Roanoke.  Today, that has changed.  A TV news station's former employee murdered two journalists on live television while they were filming an on-site interview at Smith Mountain Lake near Roanoke. The murderer was apparently a former employee who was terminated earlier this year.  Given my history living in the area and the fact that one of the victims was a fellow JMU grad, this attack hits close to home for me.  Tragically, however, this horrific event is just the latest case of workplace violence that has been plaguing employers for decades. 

According to the most recent DOL statistics, in 2010, there were 506 workplace homicides including 405 due to shootings.

The Bureau of Labor Statistics’ Census of Fatal Occupational Injuries (CFOI) reported 14,770 workplace homicides between 1992 and 2012.  In addition to today’s tragedy, another famous example of this type of violence occurred in 2014 in Oklahoma.  In that case a food plant employee drove from his termination meeting with HR to another building at the plant and beheaded one employee and stabbed another.

In addition to workplace homicides, there are ever increasing numbers of registered sex offenders who are in the workplace or seeking employment.  I recently have had several clients who were dealing with employees convicted of indecent exposure or other criminal sexual acts outside of the workplace. 

While employers must grapple with these issues and strive to make their workplace as safe as possible for employees, clients, vendors, and customers, they are often forced with difficult choices.  For instance, the EEOC’s recent guidelines on criminal background checks create potential liability for employers whose background check policies create a “disparate impact” on minority groups.  According to EEOC statistics, these groups tend to have a disproportionate rate of criminal convictions and thus by refusing to hire them an employer may be discrimination.  According to the EEOC, an employer must consider:

·     The nature and gravity of the offense or conduct;

·     The time that has passed since the offense or conduct and/or completion of the sentence; and

·     The nature of the job held or sought

The EEOC Guidance further underscores the importance of an "individualized assessment" prior to an adverse action based on a criminal record.  Of course, some state laws require criminal background checks for industries such as nursing homes and daycare.  But other industries continue to struggle with the desire to provide a safe workplace and the EEOC guidelines on criminal background checks.

To add to the confusion, there can also be liability if an employer does not terminate an employee who is known to have certain criminal propensities.  Many states, including Michigan, recognize the torts of negligent hiring, supervision, and retention of an unsafe employee.  See Bradley v Stevens, 329 Mich 556, 46 NW2d 382 (1951) (employer who knew or should have known of employee’s violent propensities and criminal record before employee’s commission of intentional tort on customer liable for damages to customer).  To hold the employer liable for negligent hiring, supervision, or retention of an employee, the plaintiff must establish that (1) the company owed a duty to the victim, (2) the company breached that duty, and (3) the breach of duty was the proximate cause of plaintiff’s injuries. The amount of public contact the employee has, the nature of that contact, and the employer’s knowledge of the employee’s dangerous propensities are factors considered by courts.  For the claims to succeed, the plaintiff typically must establish the threat of physical injury or actual physical injury. In Vennittilli v Primerica, Inc, 943 F Supp 793 (ED Mich 1996), for instance, the court limited the application of the negligent hiring doctrine to circumstances in which an employee committed a foreseeable act of physical violence.

If an employer is found to have a duty of care to protect third parties coming in contact with its employees, it will be found to have breached this duty if it knew or should have known of the employee’s violent acts or bad character but nevertheless hired or retained that employee or failed to reasonably investigate the employee’s background. Tyus v Booth, 64 Mich App 88, 235 NW2d 69 (1975).

For employers who do conduct criminal background checks, there can also be potential liability if the employer denies employment based on a background check where the proper Fair Credit Reporting Act disclosures were not provided. Under the FCRA, if a person is not hired or retained in a job based on a “consumer report,” from a consumer reporting agency (including criminal records), the employer must provide notices to the employee that include: (1) providing preliminary adverse action notice to consumer, along with copy of consumer report and A Summary of Your Rights under the Fair Credit Reporting Act, (2) allowing consumer a designated period of time to contact CRA if consumer wishes to dispute any information in consumer report, (3) providing CRA contact information, 4) providing a final adverse action notice to consumer if a final adverse employment decision is made.  15 USC 1681a, 1681b.

For employers the legal balancing act will continue.  As a practical matter, there may be nothing an employer can do to prevent an off-site shooting like the one that occurred near Roanoke or a rampage by a knife wielding employee.  But employers should continue to try to weed out potentially violent individuals or those who have criminal sexual propensities.  The choice may come down to which lawsuit the employer would rather defend: a wrongful death or negligent retention case coming after a murder; or, an employment discrimination claim case based on the failure to hire or retain a potentially violent individual.   

Remarks from EEOC Commissioner Constance S. Barker at ACI Conference in NYC

I have just listened to a keynote address from Commissioner Constance Barker of the EEOC.  Here are a few takeaways from Ms. Barker's remarks:

• The EEOC will issue final rules "very soon" on the ADA and wellness plans as well as GINA.

• While the EEOC takes the position that its criminal background checks apply to employers irrespective of state law (even those requiring background checks for certain industries), as a practical matter the EEOC will not file suits against companies following background check laws such as nursing homes or day care centers.  The thought process behind the EEOC position regarding state law is a fear that some industries would lobby state legislatures for carve outs to end-run the background check requirement.

• The EEOC continues to crack down on severance and release agreements that it considers overly broad.  Title VII waivers should now be clearly set out and possibly put in bold print.

• The EEOC has not taken a formal position on releases that allow an employee or former employee to file administrative charges but require the employee to not obtain any monetary recovery as a result.

• The EEOC hiring freeze has been lifted and the EEOC recently hired 350 new employees--mostly intake and investigators to tackle the 75,000 agency's charge backlog.

• 27 percent of the EEOC's current litigation docket relates to "systemic" claims; i.e. cases where companies are accused of widespread practices that are discriminatory.

• The EEOC now utilizes 18 "lead systemic investigators" at its regional locations to oversee systemic investigations and will seek to aggressively pursue systemic cases.

• The bill currently pending before the Senate to fund the EEOC would require the EEOC to follow regulatory notice and comment rules where two commissioners request it.  This would mean that the EEOC would effectively be unable to simply issue "guidance" as it has done recently since the two Republican Commissioners could request a comment period just as when the EEOC issues regulations.  

EEOC Formally Includes Sexual-Orientation Discrimination as Part of “Sex Discrimination” Under Title VII; Michigan Treasury Issues Guidance on Same-Sex Spousal Benefits

The Equal Employment Opportunity Commission has issued a formal decision in a federal sector case finding that discrimination based on sexual orientation is a form of illegal “sex discrimination” under Title VII of the Civil Rights Act of 1964.  The case, Complainant v. Foxx, E.E.O.C., No. 0120133080, issued July 16, 2015, found that “[s]exual orientation discrimination is sex discrimination because it necessarily entails treating an employee less favorably because of the employee's sex.”  Title VII applies to employers with 15 or more employees. 

While the EEOC decision does not carry the force of law, it indicates how the agency will address claims of sexual orientation discrimination, and it can have persuasive effect when courts consider private sector lawsuits involving alleged sexual orientation discrimination.  So far, however, the Sixth Circuit Court of Appeals, the federal court of appeals that hears cases from Michigan federal courts, has consistently ruled that “sexual orientation is not a prohibited basis for discriminatory acts under Title VII.”  It remains an open question as to whether the Sixth Circuit, or any other court, will reverse itself based on the EEOC position.

The Sixth Circuit has held that Title VII does protect transsexual persons from discrimination for failing to act in accordance and/or identify with their perceived sex or gender.  The new EEOC ruling, however, goes a step beyond acting in accordance with a gender stereotype and expressly finds that sexual orientation discrimination is sex discrimination under Title VII. 

It is also important to recognize that based on the new EEOC ruling and in the wake of the United States Supreme Court’s decision legalizing same-sex marriage, this area of the law is in flux.  Courts and administrative agencies are quickly adopting new rules that will force new compliance mandates on employers.  For instance, on July 16, 2015, the Michigan Treasury issued guidance clarifying taxation of benefits for same-sex spouses.  Employers in Michigan should stop applying state income tax withholding to the portion of employee wages that is used to pay premiums for a same-sex spouse.  Further, an employee with a same-sex spouse may wish to file a new W-4 changing the number of deductions, marital status, and possibly adding a spouse’s dependents.  Employers are encouraged to contact counsel with any questions in this quickly-changing area of law.

Lynn McGuire contributed to this post.

Supreme Court Same Sex Marriage Decision and DOL Overtime Expansion -– What Employers Need to Know Today

Digest of Recent NLRB Decisions on Employment in the Digital Age

The NLRB has been active in its continued attempts to establish rules for both unionized and non-unionized employers regarding "concerted activity" in the digital age.  This includes guidance and attacks on social medial policies and rulings relating to company emails.  Below is a digest of some of the most recent NLRB cases on this issue.

Purple Communications, Inc., 361 NLRB No. 43 (2014), the NLRB has ruled that “employee use of email for statutorily protected communications on nonworking time must presumptively be permitted” by employers that provide employees with access to email at work.  While the majority in Purple Communications characterized the decision as “carefully limited,” in reality, it appears to be a major game changer.  This decision applies to all employers, not only those that have union-represented employees or that are in the midst of union organizing campaigns.  The NLRB reasoned that:

By focusing too much on employers' property rights and too little on the importance of email as a means of workplace communication, the Board (in its earlier ruling) failed to adequately protect employees' rights...and abdicated its responsibility ‘to adapt the Act to the changing patterns of industrial life.’

NRLB GC Guidance Memorandum, GC 15-04, March 18, 2015, Concerning Employer Rules.

This GC memo relates to numerous Employee Handbook rules.  Highlights of the GC position as it relates to electronic and social media polices are as follows:

Unlawful confidentiality rules: Any blanket bans on employee information outside of work, bans on publishing confidential information without limiting language, or any other ban that is broad enough that it might include employee wages, benefits, or terms and conditions of employment.  The GC does give examples of “lawful confidentiality rules” that are specific enough to not encompass terms and conditions of employment, such as “Misuse or unauthorized disclosure of confidential information not otherwise available to persons or firms outside employer is cause for disciplinary action, including termination.”

Rules regarding conduct toward supervisors: The GC provides examples of language that is inappropriate under Section 7 regarding employee rights to criticize or protest employer labor policies or treatment of employees.  The GC did state that policies requiring employees to be respectful to customers, without mentioning management, would not violation Section 7.  Likewise, rules requiring employees to cooperate with each other and management in the performance of their work would not implicate Section 7 rights.  These policies also could extend to social media behavior.

Rules regulating conduct toward fellow employees:  The NLRB will ban internet or social media policies that it feels prevent employees from debating with each other about unions, management, and the terms and conditions of employment.  For instance, the GC found a policy unlawful that stated “[d]on’t pick fights” online. 

The GC did find that anti-harassment policies were lawful.  For instance, a policy was acceptable that prevented “harassment of employees, patients or facility visitors.”  Likewise, an employer can ban “use of racial slurs, derogatory comments, or insults.”

Policies regarding interaction with third parties: Any policy that could be construed as banning an employee’s right to communicate with news media, government agencies, or other third parties about wages, benefits, or other terms and conditions of employment will be found unlawful by the NLRB.  Policies will be lawful if they clarify that the employee cannot speak on behalf of the company but that the employees can speak to outsiders on behalf of themselves.

Unlawful rules regarding logos and trademarks:  The NLRB claims employees have fair use to use company intellectual property in support of concerted activity.  For instance, the NLRB has found unlawful a policy preventing use of “any Company logos, trademarks, graphics, or advertising materials” in social media.

Wendy’s Social Media Policy: The GC memo contains a discussion of its settlement with Wendy’s International LLC.  The company social medial policy required anyone commenting about Wendy’s on social media to obtain advance approval from his or her supervisor.  This was found to be overly broad and could prevent employee’s from discussing protected activities.

Wendy’s also banned posting photographs taken at company property.  The NLRB found this could violate the NLRA because pictures of, for instance, employee’s picketing would be lawful. 

Another Wendy’s policy prevented the creation of a blog or online group “related to your job” without approval from the company.  Because employees have the right to discuss the terms and conditions of employment online, this policy was unlawful.

The Wendy’s anti-disparagement policy was also found unlawful.  The offending provisions stated: [d]o not harass, threaten, libel, malign, defame, or disparage fellow professionals, employees, clients, competitors, or anyone else.  Do not make personal insults, use obscenities or engage in any conduct that would be unacceptable in a professional environment.”

Pier Sixty, LLC  362 NLRB 59 (2015), a March 31, 2015 (post GC Memorandum) decision where the NLRB found that language of the most offensive degree was not “so egregious as to exceed the Act’s protection.” Id. at *3.  Two days before a union election, a frustrated employee on break posted of his supervisor on Facebook:

Bob is such a NASTY MOTHER F***** don’t know how to talk to people???  F*** his mother and his entire f****** family?? What a LOSER??  Vote YES for the UNION???!!

The NLRB applied, what the dissenting panel member described as the “Atlantic Steel test on steroids” of (i) the place of the discussion, (ii) the discussion’s subject matter, (iii) the nature of the employee’s outburst, and (iv) whether the employer provoked the outburst, the Board also cobbled together “totality of the circumstances” factors from previous Board cases in considering (i) employer’s antiunion hostility, (ii) whether employee was impulsive or deliberate, (iii) whether the employer considered language similar to that used by employee to be offensive, (iv) whether the employer maintained a specific rule prohibiting the language at issue, and (v) whether the discipline imposed upon employee was typical of that imposed for similar violations or disproportionate to his offense.  

The employee was reinstated from his termination as the NLRB found his post was protected concerted activity.

Boch Imports, Inc., 362 NLRB No. 83 (April 30, 2015).  The NLRB found the company’s social media policy overly broad. The handbook rule required employees to: (1) identify themselves whenever they posted comments about the employer, the employer’s business, or a policy issue, and (2) prohibited employees from using the employer’s logo “in any manner.” In finding this policy unlawful, the NLRB reasoned that the self-identification requirement could cover comments about the terms and conditions of employment, and the requirement to self-identify would reasonably interfere with employees' protected activities on social media. The NLRB took issue with the restriction on using the employer’s logo “in any manner.” This, the Board reasoned, could cover protected employee communications, such as an employee engaging in union activity while wearing a uniform bearing the company logo.

In Macy’s Inc., 01-CA-123640 (May 12, 2015), an administrative law judge found that Macy’s maintained an unlawful employee handbook that contained overbroad confidential information policies. Macy’s policies prohibited employees from divulging “the personal information of the Company’s employees and customers,” “information about employees ... which if known outside the Company could harm the Company or its . . . employees,” “confidential information,” “information such as names, home and office contact information,” “any information that is not generally available to the public that relates to the Company or the Company’s . . . employees,” and “personally-identifiable information (Personal Data) ... [which] includes names, home and office contact information.” The ALJ found that these provisions unlawfully restrict employees from discussing the terms and conditions of their employment.

Macy’s handbook included a “savings clause” stating that nothing in the handbook was intended to limit employees from engaging in their rights protected by the Act, including protected concerted activities. The ALJ, howver, found that this “savings clause” was insufficient and written in a “generic” manner, whereas the prohibitions on employee conduct were very specific.

Rocky Mountain Eye Center, P.C., 19-CA-134567 (May 6, 2015).  An administrative law judge found that the company violated the NLRA by terminating an employee based on an unlawful confidentiality provision. That policy stated that “information about physicians, other employees, and the internal affairs of [the employer] are considered confidential . . . Breach of either patient or facility confidentiality is considered gross misconduct and may lead to immediate dismissal.” An employee accessed a database that included contact information for both the employer’s patients and employees and provided the employee contact information to a union organizer. The ALJ held that the confidentiality policy unlawfully restricted protected activity and was applied to restrict the employee’s right to share information about other employees with the union. The judge went on to further conclude that the employer violated the Act by terminating the employee for engaging in protected concerted activity.

In Landry’s Inc. (Bubba Gump Shrimp Co.), 362 NLRB No. 69 (April 16, 2015), the NLRB found that a social medial policy was permissible. The employee claimed termination based on making protected negative statements in social media about the employer. The employer’s social media policy stated:

While your free time is generally not subject to any restriction by the Company, the Company urges all employees not to post information regarding the Company, their jobs, or other employees which could lead to morale issues in the workplace or detrimentally affect the Company’s business. This can be accomplished by always thinking before you post, being civil to others and their opinions, and not posting personal information about others unless you have received their permission.

The judge noted that the “cautionary language” in the first sentence could act to inhibit employees from exercising their Section 7 rights. But the judge went on to conclude that when read in conjunction with the second sentence, the policy was sufficiently narrowly tailored to the “manner and tone” with which employees discuss the terms and conditions of their jobs, and “not the content.” The judge concluded that the employer did not violate the Act.