Originally Posted September 28, 2009
Nowadays, background checks of prospective employees are the rule, not the exception. In a survey of human resource professionals by the Society of Human Resources Management, 82% of the respondents stated that their organizations investigated the background of job applicants. Problematically, while the number of employers utilizing checks is on the rise, so are the examples of employers doing them all wrong. Employers can undermine the very purpose of the check by hiring unreliable third-party providers or relying upon outdated and incomplete information. In addition, if you are not careful you may violate any number of laws covering adequate notice, how to properly use the information in making a hiring decision as well laws in other not-so-obvious areas.
The purpose of this blog entry is not to the definitive guide on background checks, but to simply provide employers with some useful guidance on what to keep in mind when implementing this essential screening tool.
Types of Background Checks
There are countless ways that employers can obtain useful and relevant information about job applicants, but these are the most common:
-- criminal records check
-- credit history check
-- reference checks
-- employment verification
-- identity and address verification
-- licensing and accreditation verification.
In addition, depending on the job and circumstances, some employers conduct drug screening and psychological “pen-and-paper” tests, as well as verify DMV records. Moreover, as social networking becomes such an integral and pervasive part of our lives, employers have resorted to “googling” candidates and looking at their postings on Facebook, LinkedIn and Twitter to get a better handle on their personalities and out-of-work activities (more on this later).
The Purpose of Background Checks
Employers have a number of legitimate reasons for conducting background checks:
--Ensure that applicant is really qualified for the job (It is widely accepted that more than 50% of job applicants lie on their resumes)
--Protect employees and others from being the victims of violent criminal activity (according to the Department of Justice, 1 out of every 32 adults has a criminal record)
--Mitigate the risk of employee fraud and theft of the company’s trade secrets and other proprietary materials (U.S. Chamber of Commerce estimates that employee theft costs American companies between $20-$40 billion/year)
--Compliance with Federal and state laws that often mandate checks for certain jobs, such as those dealing with children and the elderly (such as Pennsylvania’s Child Protective Services Act and Older Adult Protective Services Act)
--Weeding out the rotten apples (e.g., candidates with work habits and attitudes that can destroy a team’s morale and productivity).
One other rationale for background checks deserves further treatment. For many employers, background checks are used to protect themselves from negligent hiring lawsuits. See Florida Stat. Ann. §768.096 (presumption against negligent hiring if employer conducts criminal background check); Blair v. Defender Services, 386 F.3d 623, 629 (4th Cir. 2004) (negligent hiring claim survives summary judgment because jury could conclude that employer was negligent for failing to run a criminal background check of an employee). According to the Vancouver Business Journal (Nov. 17, 2008), employers lose 70% of the negligent hiring cases filed against them, with verdicts sometimes reaching as high as $1million.
In general, an employer may be held liable under the theory of negligent hiring for a tort committed by its employee where the employer knew, or should have known by the exercise of “reasonable efforts,” that the employee’s conduct might subject third parties to an unreasonable risk of harm. See University Mechanical and Engineering Contractors, Inc., No. D038967, 2008 WL 1084844, at *6 (Cal. Ct. App. March 12, 2003) (“To establish a negligent hiring claim, plaintiff must show that the employer knew or should have known the employee created a particular risk or hazard.”).
As is typical in law, there is no standard definition of what constitutes the exercise of “reasonable care” or “reasonable efforts,” but conducting a background check is considered a good way to get there. It seems pretty clear that the risk ofliability decreases for employers that have conducted complete and thorough background checks. See Cherry v. Utica Dialysis Center, No.37532/01, 2003 WL 23109711, at *1 (N.Y. Sup. Ct. Kings County 2003) (Since [employer] did not know or have reason to know that [employee] had any propensity for violence based on either his pre-hiring background check and recommendations and/or his on-the-job conduct, it cannot be held liable for his negligent hiring.”). Not surprisingly, risk of liability will go up if you don’t do them. See Brimage v. City of Boston, No. 97-1912, 2001 L 69488, at *7 (Mass. Dist. Ct. Jan. 24, 2001) (jury could determine that employer was liable for negligent hiring when criminal background check into suspiciously long gap in applicant’s resume would have led employer to learn that the job candidate had previously been convicted of rape.). In addition, be aware that state law may impose an affirmative duty upon employers to investigate an applicant’s background. Doe A. v. Green, 298 F. Supp. 2d 1025,1040 (D. Nev. 2004) (under Nevada law, in a negligent hiring case, “a general duty is imposed on the employer ‘to conduct a reasonable background check on a potential employee to ensure that the employee is fit for the position.’”).
The Focus: Credit History and Criminal Background Checks
As mentioned above, there are a number of checks that employers can, and do, undertake. However, I’m going to focus on the two that are the most common, yet get employers in the most trouble—inquiries into an applicant’s credit and criminal background checks.
1. Credit History Checks
Many employers consider credit checks to be an essential tool to gauge the character of a job applicant. A person’s credit history can be a reflection of how responsible that person can be; if you can’t solve your own basic problems, it is likely that you won’t be able to do anything positive for the company, either. In addition, companies feel strongly (and justifiably so) that an applicant who is in serious, personal financial difficulty might be prone to misappropriate company funds put under their control. However, given the concern for individual privacy and the fact that these records can be inaccurate and sometimes used for improper purposes, credit history checks are subject to heavy regulation.
The controlling law in this area is the Fair Credit Reform Act (FCRA). 15 U.S.C. §1681. This statute, enforcement of which is the responsibility of the Federal Trade Commission (FTC), governs employers’ use of consumer reports prepared by third-party consumer reporting agencies (Key point: The FCRA does not apply to the employer if the employer does the check on its own, which is rare). See id. at §1681a(f) (defining consumer reporting agency); see also Dalton v. Capital Associated Indus., 257 F.3d 409 (4th Cir. 2001) (third-party consumer reporting agency doing work for employer can be held liable for inadequate procedures in reporting criminal history of prospective employee). Under the FCRA, employers are allowed to obtain consumer reports for “employment purposes,” which includes assessment of a job applicant and evaluations of current employees for promotions, retention and reassignment. Id. at 1681b. Take note, however, that the term “employment” has been interpreted broadly by the courts to encompass contractors and temporary employees. See Hoke v. Retail Credit Corp., 521 F.2d 1079 (4th Cir. 1975), cert. denied, 423 U.S. 1087 (1976). Also keep in mind that the FCRA does not treat small businesses and large companies differently; all employers must comply in the same fashion. This means that when in doubt, you should probably assume that the FCRA is applicable.
OK, but what is “consumer report”? There are two kinds of consumer reports under the FCRA. General “consumer reports” are any form of communication of information by a consumer reporting agency that bears upon a person’s “creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living” that is used or collected to establish a person’s eligibility for, among other things, employment. 15 U.S.C.§1681a(d). Clearly then, credit reports fall into this category.
Although they will not be addressed in detail here, the second type of consumer reportis the “investigative consumer report.” These reports do not include information relating to creditworthiness and, unlike general consumer reports, information is “obtained through personal interviews with neighbors, friends or associates” of the person being assessed. Id. at §1681a(e). These types of reports also have additional compliance requirements that the general consumer reports do not.
The FCRA has outlined a number of requirements for employers to follow when requesting a general consumer report (like a credit history check) on a job applicant. Id. at §1681e. First, even before the request for a report is made, the employer must provide the applicant with notice that it intends to procure a report on the applicant. This notice should be in a stand-alone, written document. Id.
Second, the employer must obtain the prospective employee’s consent to the employer’s report request. Again, the consent form should be a separate document, but if it included as part of the disclosure form, it must be clear and conspicuous.
Third, before contracting with the third-party consumer reporting agency to obtain ther eport, the employer must certify to the agency that: (i) the employer’s name is correct; (ii) the report is being used for employment purposes only; (iii) disclosure to job applicant has been made; (iv) that if medical information is requested, separate disclosure to the prospective employee has been made; (v)the information request will not violate equal opportunity laws; and (vi) the employer will comply will all adverse action requirements.
Assuming that you’ve hired a third-party to do the check, FCRA also imposes a number of restrictions on the checker. For example, if the position being applied for has an annual salary of $75,000 or more, the checker cannot report civil judgments and tax liens after seven (7) years, and a bankruptcy cannot be reported after ten (10) years. According to the FTC, any mistakes, such as reporting information beyond the time limit, is the problem of the consumer reporting agency, not the employer who has the option of using the information, anyway.
Now, let’s get to the point where you’ve requested the credit report, and gotten it back from the consumer reporting agency. On paper he’s a great candidate, his interview was stellar, but you look at his credit score of 450, non-payment of numerous credit cards, two defaulted mortgages and say, “We can’t hire him for this financial management position.” Essentially, you’reready, at least preliminarily, to take an “adverse action.” What do you need to do under the FCRA?
Before formally rejecting the candidate based on his credit report, you must: (i) provide the applicant with a copy of the report; (ii) communicate to the applicant, in writing, his or her rights under the FCRA; (iii) inform the applicant of the adverse action to be taken based on the credit report (i.e., rejection); and (iv) give the applicant an opportunity to correct any mistakes or make comments on the report. The FCRA does not specify the minimum time that must elapse between notice of an adverse action to be taken and actually doing it, the FTC has stated that five days is a reasonable period of time. See Brinckerhoff, FCRA Staff Opinion, FTC Advisory Opinion (June 27, 1997).
Let’s just take a step back for a moment. Let’s say that the information in the credit report is not as bad as the example above, and in fact is only a minor factor in your decision to reject the applicant. Do you still have to follow the FCRA’s requirements? The answer is yes. If the report has any bearing on your decision to take an adverse action, you need to follow these rules.
Finally, you’re ready to pull the trigger and reject the candidate. Your work is still not done. You must now provide the job applicant with oral, electronic or written notice of the adverse action. The notice must contain the following: (i) the contact information for the consumer reporting agency; (ii) a statement that the consumer reporting agency did not make the decision to take the adverse action, and that the agency is unaware of the reasons why the action was taken; (iii) a statement of the applicant’s right to dispute the accuracy or completeness of the report; and (iv) a statement that the applicant has sixty (60) days within which to obtain a free copy of the report from the consumer reporting agency. Id. at §1681m.
Whew. It’s not easy to get your arms around the FCRA. But you still have to be aware of other Federal and state laws that might be implicated when you run credit checks of job applicants.
From the Federal side, you have to watch out for the Federal Bankruptcy Act. 11 U.S.C. §525. The Bankruptcy Act prohibits public employers from discriminating against and denying employment to those who have filed for bankruptcy. However, the statute is silent with respect to the obligations of private employers. Some courts have relied on this silence in holding that private employers are permitted to reject a candidate on the basis of a bankruptcy filing. See, e.g., Pastore v. Medford Savings Bank, 186 B.R. 553 (Bankr. D. Mass. 1995); Fiorani v. Caci, 192 B.R. 401 (Bankr. E.D. Va. 1996). Others, hanging their hat on the Bankruptcy Act’s language barring private employers from “discriminat[ing] with respect to employment against” people who have sought bankruptcy protection, have concluded that private employers cannot base their hiring decisions on a bankruptcy filing. See, e.g., Leary v. Warnaco, Inc., 251 B.R. 656 (Bankr. S.D.N.Y. 2000). You must carefully confirm what interpretation is controlling in your jurisdiction.
State laws are also part of the mix. Some states. like California, have adopted the same standards as the FCRA. See Bank of America, N.A. v. City of Daly City, California, 279 F. Supp. 2d 1118 (N.D. Cal. 2003). Arizona and some other states have imposed additional requirements on top of the FCRA. See Credit Data of Arizona, Inc. v. State of Arizona, 602 F.2d 195 (9th Cir. 1979). If you do business in multiple states, and if feasible, you should make it easier on yourself and adopt the standards of the most rigorous state you work in. Having dozens of different policies and notices will simply be a nightmare to track and control.
Lastly, I need to talk about liability. Hopefully you’re never in this position, but if you violate the FCRA because of your improper credit check procedures and improper use of the information gathered, it can get real ugly real fast. If you are found to have willfully violated the statute, the company is on the hook for actual damages, punitive damages, attorneys’ fees and costs. See 15 U.S.C. 1681n; Northrop v. Hoffman of Simsbury, Inc., 134 F.3d 41 (2d Cir. 1997); Yohay v. City of Alexandria Employees Credit Union, 827 F.2d 967 (4th Cir. 1987) (standards for demonstrating “willfulness” under the FCRA). Negligent conduct creates liability for all of the above except punitives. See 15 U.S.C. 1681o; Podell v. Citigroup Diners Club Inc., 914 F. Supp. 1025 (S.D.N.Y. 1996). Employers who obtain a credit report for impermissible purposes are subject to civil liability that includes actual and punitive damages, attorneys’ fees and costs, and may be criminally prosecuted as well. See 15 U.S.C. §§1681n(a)(1), 1681q; Comeaux v. Brown & Williamson Tobacco Co., 915 F.2d 1264, 1273 n.11 (9th Cir. 1990); Daley v. Haddonfield Lumber Inc., 943 F.Supp. 464 (D.N.J. 1996). The FTC and state attorney generals also have the authority to bring actions to enforce the FCRA and relevant consumer protection laws. See 15 U.S.C. §1681s(a). Finally, remember that it is not a defense to a failure to give proper notices and obtain the required consents that you would have taken the same adverse action without a consumer report—you are still on the hook. Try to keep the checks job-related and provide proper and sufficient notices, and that will go a long way towards avoiding these minefields.
2. Criminal Background Checks
Criminal background checks are essential, not only for the peace of mind of the employer and its employees, but also for the financial health of your company. Criminal background checks, though, are tough on a number of different levels. First, states vary widely in their requirements and limits. Some states require a criminal check for certain types of industries and professions. See Ala. Code §16-22A-5 (requiring criminal check for all people dealing with children, elderly and disabled); Ga. Code Ann. §7-1-1004 (mandating criminal background checks by banking and financial institutions on specified personnel). Others may automatically disqualify a person from holding a position if they were arrested or convicted of certain crimes. See N.J. Stat. Ann. §6:1-100 (prohibiting airports from hiring applicants convicted of certain crimes, including kidnapping, aggravated sexual assault and robbery); 63 Okla. Stat. Ann. §1-1950.1 (prohibiting employers in nursing-related facilities from hiring applicants convicted of certain violent, financial or indecency crimes). A few states require that the employer first obtain the applicant’s written consent before conducting a criminal background check. See 20 Vt. Stat. Ann. §2056c.
Second, you must always keep in mind that your state may distinguish between records of arrests and convictions. For example, Vermont permits inquiries into criminal convictions, but not arrests. See id. California bars inquiries into certain criminal convictions. See Cal. Lab. Code §432.8 (prohibiting employers from asking about particular marijuana convictions that are more than two years old). New York has tried to balance the needs of employers and the rights of applicants by allowing inquiries into pending arrests and convictions and any other results that were not “in favor” of the applicant. See N.Y. Exec. Law 296(16); Green v.Wells Fargo Alarm Service, 192 A.D.2d 463 (1st Dep’t 1993) (employee’s termination due to arrest for driving while intoxicated did not violate Executive Law).
Third, criminal background checks are considered general “consumer reports.” Thus, the requirements of the FCRA, including notice and consent, must be complied with when conducting these types of checks. Like in the case of credit checks, some limits have been placed on the reporting of past crimes—an arrest cannot be part of a criminal background report if it occurred more than seven (7) years before; there is no limit, however, on the reporting of criminal convictions.
Fourth, be cognizant that there are laws and rules that control not only how you procure criminal information, but also how you use it. Put another way, make sure that your criminal records check policy is consistent with Federal and state discrimination laws. Rejected job applicants have brought successful claims under Title VII of the Civil Rights Act of 1964 against employers alleging that their criminal background checks discriminated against minorities. See, e.g., Youngblood v. Danzell, 925 F.2d (6th Cir. 1991); Green v. Missouri Pacific Railroad Co., 523 F.2d 1290 (8th Cir. 1975). These cases are usually brought as “disparate impact” claims—that a facially neutral employment policy is still discriminatory because it has a racially discriminatory effect—because intentional discrimination is very difficult to demonstrate in these situations. See Pollard v. Wawa, 366 F. Sup.. 2d 247 (E.D. Pa. 2005) (intentional discrimination claim challenging criminal conviction screening policy dismissed); Gregory v. Litton Systems, Inc., 316 F. Supp. 401 (C.D. Cal. 1970) (disparate impact of employer’s use of arrest records). On a state level, Wisconsin has gone as far as including arrests and convictions with the traditional factors of race, sex, religion, etc. as prohibited hiring criteria. See Wis. Stat. Ann. §111.321. New York Human Rights Law §296(15) proscribes discrimination by private employers who reject job applicants based on any criminal conviction, but Correction Law §752 creates an exception when “there is a direct relationship between one or more of the previous criminal offenses and the specific license or employment sought. . . or the issuance or granting of the employment would involve an unreasonable risk to property or to the safety or welfare of specificindividuals.” New Jersey expresslypromotes the concept of rehabilitation through employment, but bars discrimination based on criminal records for public, not private, employers. N.J. Stat. Ann. §2A:168A-1.
The above discussion thus begs the question: How do I, as an employer, minimize the risk that I will be socked with a discrimination suit based on my criminal background check policy? The Equal Employment Opportunity Commission (EEOC) has provided some useful direction on this very issue, but it should also be made clear that these guidelines have been criticized by some who believe that they mischaracterize discrimination laws and side with employees over employers. Equal Employment Opportunity Commission, Policy Guidance on the Consideration of Arrest Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §§2000e et. seq. (1990); Equal Employment Opportunity Commission, Policy Guidance on the Issue of Conviction Records Under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §§2000e et. seq. (1982).
In any event, first and foremost, the employer should show that its criminal check has a business-related justification. See Field v. Orkin, No. 00-5913, 2001 U.S. Dist. LEXIS 24068, at *8 (E.D. Pa. 2001) (It is “the general policy of Title VII to require employers to make hiring and retention decisions on the basis of job-related factors”); 18 Pa. C.S. § 9125 (employer can use felony and misdemeanor convictions “only to the extent to which they relate to the applicant’s suitability for employment for the position for which he has applied.”). Automatic rejection of a candidate based on any arrest or conviction is not a good idea. A better approach is to consider which crimes would make the candidate unsuitable for that position. See Lanning v. SEPTA, 181 F.3d 478 (3d Cir. 2001) (employers should have a criminal conviction policy that “measures the minimum qualifications necessary for successful performance of the job in question”). Use your commonsense—not hiring a person once convicted for a financial crime as a bank account manager is justified; rejecting a manual laborer with the same conviction and with no access to money and valuables might be a tougher call.
Here are some other considerations. When reviewing the arrest or conviction, consider how long ago the event occurred—obviously, a single misdemeanor drug conviction that occurred many years ago in high school may not be viewed as “job-related” by a court, but the same conviction that occurred two months ago by a now mature applicant would be a different story. Also, it is always a safer bet to make hiring decisions based on convictions and exclude review of arrests. But if you really insist on including arrests in your overall assessment of the candidate, it would be wise to give the applicant a chance to explain the circumstances surrounding that arrest. Finally, it is recommended that you make your criminal background check policy a written one, that expressly lays out what you do, and what crimes will be taken into consideration when accepting applications for specific positions. This approach will go a long way towards rebutting any claims that your check is subjective, unreasonable and discriminatory.
Two Other Background Checks: Drugs and Social Media Checks
Unfortunately, I can’t address a number of background checks that I have been asked about over the past few months. Pre-employment medical tests, lie detector tests and others that you may want some guidance about will have to wait for another blog (or just ask me). I did think, however, that two checks should not be passed over right now—drug use/testing, because of its prevalence and legal complexity, and Google/social media activity checks, because of my firm’s new media and publishing client base.
1. Pre-employment Drug Use Inquiries and Testing
Many employers, understandably, want to know if a prospective employee has used, or even worse, is currently using controlled substances. From an employer perspective, it would nice to be able to ask the prospective employee about his or her history of illegal drug use, and if they admit to anything, ding them. If you don’t trust them, it would be great to be able to investigate their possible past and current use and if you find anything, ding them. Finally, if you really wanted a final confirmation, it would be wonderful if you could simply have them submit to a drug test and if the results were positive, ding them. It’s not that simple, however.
As a threshold matter, you need to contend with the Americans with Disabilities Act (ADA). The ADA considers past addition to illegal drugs a disability. 42 U.S.C. §12114. However, it does not deem current drug use or prior casual use worthy of protection. Id. at 12114(a). What this means for employers is that under the ADA: (i) you can ask a candidate about his or her prior and current drug use; (ii) you can inquire about an applicant’s arrest and conviction records relating to illegal drugs including use, possession and sale crimes; (iii) other than the initial inquiry, you cannot further investigate an applicant’s prior use of drugs; (iv) it is impermissible to base your hiring decision on the applicant’s past drug addiction if the prospective employee is no longer using illegal drugs and able to perform the job he or she is applying for.
These guidelines sometimes can put the employer in a box. The applicant has admitted to a past history of drug abuse, denies that he has used controlled substances in the past couple of years, but you have still have some concerns about whether he is really clean. The option is to test the applicant for their current use of illegal drugs before extending an offer. But before jumping in and directing applicants to submit their urine samples, you need to carefully craft a drug testing policy and procedure that complies with Federal and state laws.
For private employers, there are no express legal prohibitions against pre-employment drug testing under Federal law. See The Drug-Free Workplace Act of 1988, 41 U.S.C. §§701 et seq.; 42 U.S.C. §12114(d)(1)-(2) (while ADA prohibits medical examinations before a conditional job offer, a drug test is not a “medical examination.”). Interestingly, Federal regulations actually mandate drug testing for certain jobs involved with public safety, which includes airline pilots, truck drivers and railroad workers. Moreover, Title VII expressly allows employers to reject job applicants who fail a drug test, even if there is a disparate impact caused by these rejections. See 42 U.S.C. §2000e-2(k)(3).
But, as is often the case, just because a practice is permitted doesn’t mean that there is no risk of liability. When you require drug testing before extending an offer of employment, the risk is sometimes high. For example, FCRA may apply, triggering a number of its requirements (and associated liabilities). See Hodge v. Texaco, Inc., 975 F.2d 1093, 1095-1096 (5th Cir. 1992) (“broad range of conduct” regulated by the FCRA may encompass “workplace drug test reports”; plaintiff argues that the FCRA violated because employer and tester failed to implement reasonable procedures to ensure accuracy of “consumer report”). The ADA may also be implicated. A drug test may provide employers with access to medical information that is subject to confidentiality under Federal law. See Sanchez v. Georgia Gulf Corp., 853 So.2d 697 (La. Ct. App. 2003) (data about applicant’s prescription drugs and health conditions). A rejected job applicant could claim that the employer’s drug test was improper because it was not job-related and lacked a business necessity. This potential problem is highlighted in a September 11, 2009 lawsuit involving employees of a Tennessee auto parts supplier. In that suit, summarized this week in the National Law Journal (http://tinyurl.com/n5bdpz) and apparently an issue of first impression, the EEOC has sued the supplier under the ADA for allegedly screening out employees with disabilities, failing to keep the testing results confidential and taking unlawful adverse actions against employees who tested positive for legally prescribed medications. The employer claims that it has a safety justification for the testing; the EEOC obviously takes the position that testing for legal drugs goes way too far. Although it deals with current employees, the issues raised are applicable to jobapplicants and highlight the potential problems that employers face if they are not careful in their drug testing approach.
OK, we can’t forget about state laws either. Most states permit drug testing of job applicants, but have required employers to take a number of steps to safeguard privacy, confidentiality and maximize accuracy of results. See, e.g., Conn. Gen. Stat. Ann. §31-51v; Fla. Stat. Ann. §112.0455. Like the Federal rules, states may also impose mandatory drug testing for specific occupations, particularly those that involve public safety. See, e.g.,16 Del. Code Ann. §1142 (nursing home job applicants). As we all know, the state laws can strengthen but can’t dilute Federal requirements, so you need to be aware of any additional reporting and implementation burdens that may be imposed on you by your state.
In the end, if you really, really feel the need to implement a pre-employment drug test, here are a few things that your policy should focus on:
--have a written policy that provides proper notice to everyone what you will do, and how the information will be used
--the test should be related to the job in question and have a business justification
--ensure privacy and confidentiality
--be objective: don’t single out individuals; test people who are similarly situated with respect to the job they are applying for
--finda way to ensure reliability of the results, and mandate a second test to confirm positive results
--provide applicant with copy of test.
This is far from an all-inclusive list, but should at least get you focusing on how to serve your business needs without short-changing the rights of prospective employees.
2. Google/Social Networking Checks
You have heard a lot about employers looking up job candidates on Facebook, LinkedIn and Twitter, and doing a search on a person’s name by using Google. The hype is probably true—an October 2007 Vault.com survey of 350 employers by found that 44% of employers review the profiles of job applicants on social networking sites.
--The Positives. Looking at a job applicant’s use of social networking can provide an employer with a picture of the “real” person that might not come across through a dry resume or perfunctory interview. As pointed out in a number of recent blogs, employers searching the person on the Internet are looking for some key “red flags” that, more often than not, will indicate that the person is probably not a good fit with their organization. Some of these include: (i) employees who trash their former employers, supervisors and co-workers; (ii) excessive social media and internetactivity when they are supposed to be working; (iii) inappropriate photographs; (iv) information about their educational and employment background that conflicts with their resume; (v) talking about their current use of illegal drugs; (vi) offensive comments exposing racist views, etc. I would add to this a lack of writing and communication skills, although some would argue that bad spelling, grammar and lack of clarity is a “good” thing and simply reflects the informality of social networks.
--The Negatives. That’s what’s good about Googling and social network checks. As you can probably guess by this point, the next question you should be asking is: What are the downsides? As Vickie Wallen and Brian Flock correctly note in a great EmploymentLaw360.com article (http://tinyurl.com/nyhhv6), before social networking, employers curtailed the practice of requiring job applicants to submit photos, or disclose their age or marital status, for fear of being subjected to a discrimination suit. Now, because photos and demographic data not visible on the face of job application can readily accessed by employers surfing the Internet, the potential for liability has been revived.
Relatedly, an employer who looks at postings on social network sites and googles people becomes privy to information such as an individual’s medical history, sexual orientation and political affiliation and activities that are protected under Federal and State law. A rejected applicant who finds out about these online checks could challenge the adverse action on the grounds that it was motivated by a illegal discriminatory intent.
Similarly, you can expose yourself to a discrimination suit if you do not conduct these checks in a consistent fashion. It is possible that if you do social network background checks on some, but not others, prospective employees who are rejected and have protected characteristics may have adecent disparate treatment case against you.
The FCRA can rear its head once again.It appears that while the FCRA does not bar social network background checks, it certainly requires that employers disclose to the applicant that the information obtained was a basis for the rejection. In addition, some state laws go further than FCRA in restricting the scope of employer background checks. For instance, the Washington Fair Credit Reporting Act has been interpreted by some as prohibiting an employer from rejecting a candidate for a position based on information uncovered in a social networking check unless the information was related to the job in question.
You need to be aware of states, such as New York, that have restricted employers’ ability to rely on lawful “off-duty” activities as a basis for hiring and other employment decisions. An employer may be able to defend its actions by claiming that the prospective employee’s behavior conflicted with its public image and business mission, but that won’t stop the rejected candidate from contending that basing its decision on his orher Tweets or blog was a blatant violation of these “private time is my time” statutes.
As we all know, information that you find on the Internet and on social networks can be inaccurate and sometimes defamatory. If you make an adverse decision based on wrong information, be prepared for the consequences.
As for advice, it appears that most employment lawyers counsel their clients that the information obtained through these checks is simply not worth the legal risk. Several attorneys echoed these concerns in a recent Workforce.com article (http://tinyurl.com/5b4mbb). Neal Mollen of Paul Hastings believes that “it’s unlikely employers are going to learn a good deal of job-related information from a Facebook page they won’t learn in the context of a well-run interview.” Seyfarth Shaw’s Gerald Maatman believes that you should weigh the pros and cons, but if there is a discrimination suit and an employer acknowledges that they looked at the applicant’s social networking, “it makes the case more problematic to defend.”
Social Network/Internet Background checks will become a hot topic for courts in the near future. If you want to avoid being the test case for this issue, be very careful by, among other things, providing full, complete and proper disclosures to applicants about what you will be doing or stay on the sidelines altogether. Stay tuned.
Some Final Thoughts
Probably the best way to sum up this discussion is to create a preliminary things that you should start doing in order to conduct legally permissible background checks. Although not exhaustive, it will at least get you in the frame of mind of not shying away from doing these important screens, but doing them in a way that can keep you out of trouble.
1. Have wrriten backgroundcheck guidelines that are clear, based on objective criteria, and applied to all persons similarly situated.
2. Keep your checks narrow. In other words, have the check focus on job-related criteria, and only do them if you have a valid business justification for doing so.
3. Provide adequate notice of the nature of the check to the applicant, and permit the applicant to comment on or challenge the results.
4. Screen the screeners. You will likely be hiring a third-party consumer reporting agency to conduct the background check for you. Ask around for reputable outfits and get references. Quality varies widely. Ask the hard questions about the thoroughness of their checks (e.g., no national database for arrests and convictions, they need a system to check all relevant jurisdictions to ensure completeness and accuracy), whether they rely on the most-up-to-date information and their familiarity with applicable laws like the FCRA.
5. Have processes in place to ensure the confidentiality of the information obtained.
6. Put your business savvy and common sense to good use. If you were on the other side of the table as the employee, what reasonable steps would you want to employer to take to make sure they got an accurate picture of who you are?
Originally Published March 1, 2010
Back in the good ole’ days (about a year ago), employers could confidently brag that they had virtual unfettered discretion to review their employees’ workplace emails. In fact, recent surveys indicate that more and employers are feeling entitled, or emboldened, or both, to review these communications accessed over the company’s computer networks. For example, a June 2009 ProofPoint Inc.survey of 220 large US companies found that 38% of the firms read and analyzed the outgoing email of employees, up from 29% a year earlier. But if some recent court decisions areany indication, a legal backlash against these practices is taking shape, and employers must be prepared for a new world where the balance of power is shifting away from employers’ business needs and towards a greater recognition of an employee’s privacy rights.
Private sector employees have no Federal statutory right to privacy in emails sent from theirwork computers. As applied to private businesses, the Stored Communications Act (“SCA”) (18 USC §§2701-2712) provides that any person who intentionally accesses stored electroniccommunications (e.g., emails) without or in excess of authorization are subject to civil and criminal penalties. Federal courts have consistently ruled that employers have full authority to access emails stored on company-owned servers and their own computer and email systems and in situations when employees consent to employer access to email. With no effective cause of action against an employer under the SCA for monitoring email, employees have instead relied on state statutes and tort law for legal remedies.
II. The Cases
The case causing the most consternation for employers is Stengart v. Loving Care Agency, Inc., 973 A.2d 390 (N.J. Super. Ct. App. Div. June 26, 2009). There, Plaintiff served as the Executive Director of Nursing at the Defendant facility. Before resigning her position, Plaintiff sent her attorney a number of emails from her employer-provided laptop relating to a sexual harassment suit she intended to file against Defendant. These emails were communicated, not through her corporate email account, but via her personal, password-protected Yahoo account.
Plaintiff eventually filed her lawsuit. Subsequently, Defendant employed a forensic expert to create a mirror image of Plaintiff’s laptop, and in doing so recovered and reviewed the email communications between Plaintiff and her attorney. Defendant did not inform Plaintiff that it was in possession of these emails until they were turned over by Defendant’s counsel in the course of discovery months later.
Plaintiff demanded return of the emails and when Defendant refused, Plaintiff moved for emergency relief, which included return of the allegedly privileged emails and disqualification of Defendant’s counsel for violating New Jersey Bar ethical rules. The trial court denied Plaintiff’s motion, holding that the emails were not protected by attorney-client privilege because Defendant’s electronic communications policy put Plaintiff on notice that any emails sent or received on her laptop was company property, constituting a waiver of the privilege.
On appeal, the Appellate Division reversed. The Appellate Division determined that the lower court’s decision was premature, because genuine issues of fact still existed as to whether Defendant had actually implemented an email policy, if Plaintiff and other employees had been made aware of any such policy, if the policy covered personal emails sent via a personal email account as opposed to a pure “business” emails and whether Defendant’s claimed policy applied to executives such as Ms. Stengart. Although the court could have (and arguably should have) stopped right there and remanded the matter to the trial court for resolution of these evidentiary questions, it did not.
Instead, the court decided to address the following question: assuming that all of the factual issues were decided in Defendant’s favor, would Defendant then have been entitled to review, retain and use these emails in litigation? The court’s answer: absolutely not.
In a novel approach, the court held that to determine the enforceability of a company policy claiming to “transform private emails or other communications between an employee and employee’s attorney into company property,” it was obligated to balance “the company’s right to create and obtain enforcement of reasonable rules for conduct in the workplace against the public policies underlying the attorney-client privilege.”
Noting that an employer’s policies must advance a “legitimate” business interest, the court again articulated a unique position with respect to the practice of monitoring and reviewing an employee’s personal emails: “[T]he company’s interest . . . is not in the content of these communications; the company’s legitimate interestis in the fact that the employee is engaging in business other than the company’s business.” Applying this logic, the court held that Defendant’s policy that it owned all employee communications sent through its computers and thus had the authority to access, confiscate and review the content of purely private employee emails at any time did not further any legitimate business interest.
Having rejected Defendant’s position that “because the employer buys the employee’s energies and talents during the workday, anything that the employee does during those hours becomes company property,” the court then turned to the other side of the balance, what it characterized as “the employee’s considerable interest inmaintaining the confidentiality of her communications with her attorney.” For the court, the result was clear: “In weighing the attorney-client privilege, which attaches to the emails exchanged by plaintiff and her attorney, against the company’s claimed interest in ownership of or access to those communications based on its electronic communications, we conclude that the latter must give way.” The court ordered return of the privileged emails to Plaintiff, deletion of the emails from Defendant’s hard drives, and a hearing to determine if disqualification of Defendant’s counsel was warranted.
In one fell swoop, the court had significantly narrowed what many considered an employer’s expansive right to control communications sent over its own computer equipment and systems. Under the court’s rationale, in general an employer cannot use a policy stating that it owns all communications stored on its computer systems and that such communications arenot private as a basis to trump an employee’s reasonable expectation of privacy in personal emails. Only where the company wishes to confirm a legitimate belief that “the employee is engaging in business other than the company’s business,” such as to determine whether an employee was violating employment rules (e.g.,sending harassing emails) or was providing proprietary information to a competitor, would such an intrusion into the private sphere be justified. To many, the court’s conclusion that personal, privileged emails should not be accessed by employers, while somewhat of a surprise, is debatable; but at the same time, of real concern was thecourt’s broad language arguably creating a de facto presumption that an employee’s personal emails in the workplace are “hands-off” for employers.
The second significant case reflecting the sudden shift in the balance of power is Convertino v. U.S. Dept. of Justice, Civ. No. 04-0236, 2009 WL 4716034 (D.D.C. Dec. 10, 2009) (Lamberth, J.). Former Assistant U.S. Attorney Richard Convertino was terminated after his convictions in a Detroit terrorism trial were overturned in 2004 for prosecutorial misconduct. Convertino subsequently filed suit against DOJ and against Eastern District of Michigan First Assistant U.S. Attorney Jonathan Tukel. In the complaint, Convertino alleged that he was retaliated against for exposing alleged incompetence in the Bush Administration’s War on Terror in testimony before Congress and that, in violation of the Privacy Act, DOJ improperly leaked confidential information about an investigation into his possible prosecutorial misconduct to the Detroit Free Press. The retaliation claim against Tukel was dismissed, but discovery moved forward on Convertino’s Privacy Act claim.
Convertino then moved to compel DOJ’s production of 36 emails sent by Tukel to his attorneys, Cadwalader, Wickersham & Taft. According to Convertino, the emails could possibly show who had leaked the information in question. Tukel had previously met with Convertino to discuss his handling of various cases, and had played a role in drafting allegations passed on to DOJ’s Office of Professional Responsibility. During this process, Tukel had sent the emails to Cadwalader without a cc from his DOJ email address and eventually deleted them. However, what Tukel didn’t know was that DOJ had been regularly accessing and saving all of his emails sent from his workplace account. Tukel was granted leave to intervene in the discovery dispute for the purpose of asserting attorney-client privilege. Convertino argued that Tukel had waived the privilege because the emails were sent using his DOJ email account.
The District Court ruled in Tukel’s favor. Judge Lamberth initially noted that there is no waiver of attorney-client privilege under Federal Rules of Evidence 502(b) if the disclosure is inadvertent, and the holder of the privilege takes reasonable steps to prevent disclosure. Tukel had submitted an affidavit that he had no intentions of allowing DOJ to read the emails he was sending to his attorney through his work email account. Also, the Court pointed out that Tukel had taken steps to delete his emails and had timely intervened in the case when he became aware that DOJ still had access to these emails.
Relying on a prior New York case, Judge Lamberth then recognized that for email documents to be covered by the privilege, there must exist a subjective expectation of confidentiality that is objectively reasonable. To determine reasonableness, a case-specific analysis of four factors must be conducted: (1) whether an employer maintains a policy banning personal or other objectionable use of email; (2) whether the employer monitors the use of the employee’s computer or email; (3) whether third parties have a right of access to the computer or email; and (4) whether the corporation notified the employee, or whether the employee was aware, of the use and monitoring policies.
Applying thistest to the facts of the case, Judge Lamberth concluded that Tukel’s expectation of privacy in these emails was reasonable: “The DOJ maintains apolicy that does not ban personal use of the company e-mail. Although the DOJ does have access topersonal e-mails sent through this account, Mr. Tukel was unaware that they would be regularly accessing and saving e-mails sent from his account . . . . Because his expectations were reasonable, Mr. Tukel’s private e-mails will remain protected by the attorney-client privilege.”
The court essentially held that where someone uses their workplace email, intends for the communication to be confidential and takes reasonable steps to try to ensure that they remain confidential, then there is no waiver of the privilege. Again, like in Stengart, a ruling upholding the confidentiality of privileged communications was not exactly a shocker. However, what causes concern for employers is that the court seemed to indicate that employees—government and private sector—potentially have an expectation of privacy in all of their personal emails sent from their workplace email account. All what seems to be required for this protection to kick in is for the employer to permit personal emails in some way, shape or form (practically speaking, virtually all do), and for the employee to say that they had no idea that the employer was regularly accessing and backing up all workplace emails (which, everyone knows, employers do as a matter of course). To some observers, to reward an employee who remains blissfully ignorant of the realities of email technology, and punish employers for being reasonableby allowing personal use of workplace email accounts, just goes too far.
Finally, there is City of Ontario v. Quon, 529 F.3d892 (9th Cir. 2008), rehearing en banc denied, 554 F.3d 769 (9th Cir. 2009), cert. granted, 130 S.Ct. 1011 (Dec. 14, 2009), a case that will be argued before the U.S. Supreme Court in the spring. At issue is whether a California city, by reviewing text messages transmitted and received on a pager issued to a police officer, violated the constitutional rights of the officer and three individuals who had sent him the messages. On its face the case implicates the Fourth Amendment, which is not applicable to private employers, but the Supreme Court’s decision will likely foreshadow their views on employee privacy rights in all workplaces.
In Quon, the Ontario Police Department had a formal policy reserving the right to monitor “network activity including email and Internet use.” The policy permitted “light personal communications” by employees but warned that“they should have no expectation of privacy.” Text messages were not expressly addressed.
SWAT team members were given pagers and told that they were responsible for any charges in excess of 25,000 characters a month. The lieutenant in charge of administering the pagers adopted an informal policy whereby those who paid the excess charges themselves would not have their text messages reviewed.Sergeant Quon exceeded the limit on several occasions, but on each occasion, he repaid the overages.
Eventually, the lieutenant grew tired of reconciling the pager bills and complained to the police chief. The chief ordered the lieutenant to obtain transcripts for the pagers issued to those officers who were repeatedly exceeding the limits. The lieutenant was instructed to “determine if the messages were exclusively work related, thereby requiring an increase in the number of characters officers were permitted, . . . . or if they were using the pagers for personal matters.” The investigation revealed that Quon had sent and received hundreds of purely personal messages. In one month in 2002, only 57 of 450 messages were work related. According to the trial court, may of the messages “were, tosay the least, sexually explicit in nature.” Not good.
Quon and several other officers who had been messaging with Quon sued the city, claiming that their privacy rights under the Fourth Amendment and the California Constitution had been violated. Applying O’Connor v. Ortega, 480 U.S. 709 (1987) which articulated the Supreme Court’s test for analyzing the privacy rights of public employees, the trial court entered judgment for the City of Ontario. It found that while the officers had a reasonable expectation of privacy in the messages because of the lieutenant’s informal policy, the search of Quon’s pager was reasonable given the jury’s determination that the police chief was simply trying to determine whether the character limit was adequate, not expose any misconduct.
The Ninth Circuit reversed. First, the panel agreed with the trial court that the officers had a reasonable expectation of privacy in the messages, concluding that the City’s formal dictates concerning electronic communications had been overridden by the “operational reality” ofthe lieutenant’s informal practice regarding oversight of the pagers. However, it held that the trial court was wrong in characterizing the search as reasonable because there were other, less intrusive methods that the City could have employed to verify whether the character limit was adequate.
A majority of the full Ninth Circuit denied a rehearing en banc, but six judges signed on to a dissent by Judge Sandra Ikuta who stated that the panel’s decision “improperly hobbles government employers from managing their workforces” and adopts a less intrusive means test that “conflicts not only with Supreme Court case law, but also with the decisions of seven of our sister circuits. ”What is problematic from an employer standpoint is not the particular result in this case. Instead, it is again the broad language that seems to expand prior settled law on employee privacy rights, and may be interpreted as creating a rule that a company-wide, formal electronic communications policy can always be rendered null and void by a single manager who decides not to enforce it."
III. What Can Employers Do?
Again, maybe I’m being a bit premature in sounding a death knell for employer discretionary authority to review email. It’s possible that the decisions above get reversed, and the facts of these decisions create some room for being distinguished. But there are some things you should do to make sure that you don’t get caught flatfooted, but at the same time, retain some of the power to engage in a justifiable review of emails. Again, like with most other business undertakings, it is always better to be proactive.
A. Have one, comprehensive electronic communications policy
Your company should have a single, formal, and written electronic communications policy. Every employee, on their first day of employment when they are sitting at their desk reading over the human resources manual, should execute an acknowledgement of receipt and understanding of the policy.
To prevent your formal policy from being waived or compromised by a manager’s inconsistent practices, you should keep a close watch on your supervisors’ activities in this area. In addition, your written policy should expressly identify the individuals authorized to modify the policy.
B. Identify the electronic resources to be covered by the policy
Your policy should clearly set forth that it covers all company-issued equipment comprising the employer’s communications network. The equipment should include desktop computers, laptops, Blackberries, PDAs, pagers, cell phones, printers and fax machines. The policy should also make clear that it encompasses all forms of electronic communications and files such as emails, IMs and text messages that are stored on, transmitted by or transmitted through any of the company’s equipment or its network, even if the employee uses a third-party provider (AOL, Yahoo, Google, etc.) to send out the message.
C. Minimize employees’ expectation of privacy
Your employees must be informed, in writing, that they should not have any expectation of privacy in any business or personal communication made through the company’s electronic resources, including any messages sent or received from a personal attorney or for any purpose adverse to the company’s interests, both during after the termination of the employment relationship.
The employer should advise employees, to eliminate any ambiguity, that electronic communications (both business and personal) create business records that require appropriate storage and archiving procedures pursuant to law and policy. And emphasize that in its discretion, the company will review any of these communication or files stored in its electronic resources.
Besides this written notice that the company may read the employee’s electronic communications at its sole discretion, you should put a notice on the computer login screen that the system is the employer’s property, and that by logging on, the employee is consenting to employer monitoring of his or her email communications and use of the Internet.
Warnings are great, but your actions with respect to privacy are important as well. Do not give your employees any reason to believe that their communications sent from the workplace are private—do not make informal promises not to review personal and business-related emails, don’t let them label certain messages as “private,” and avoid using phrases in your materials like “private email system” and “personal password.”
D. Engage in Follow-up Activities
It will be helpful if you have some periodic follow-up to ensure that employees are complying with proper procedures, to troubleshoot for any holes in your policy and to communicate any important changes in the policy or practice. More specifically, you should provide annual training to employees in the appropriate use of email, IMing, andInternet use, and take attendance with sign-in sheets.
Company-wide notices via email are also useful. On a monthly basis you should remind your employees that the computer equipment they use is company property, is intended for business use and that any transmissions, including personal communications, may be monitored.
E. Limit Non-Business Communications
I would not suggest that employers prohibit employees from engaging in non-business communications or from accessing accounts at personal, third-party service providers using company’s electronic resources. You may have a mutiny on your hands, if you have anybody willing to work for you at all.
Employers should advise employees that incidental personal use of company computer equipment is permitted, so long as it does not, inter alia: (i) interfere with their work responsibilities; (ii) violate applicable laws; (iii) adversely affect the company’s interest; (iv) breach confidentiality or nondisclosure agreements; or (v) contravene the company’s internal policies regarding anti-discrimination and the like. In the end, employees should be instructed that when engaging in personal communications over the company’s electronic system, they must exercise good judgment and common sense, and provide some examples of “appropriate” and “inappropriate” messages for guidance.
F. Monitor for sound, business-related reasons
You really have to establish a delicate balance between a need for information about what your employees are doing, and an employee’s tolerance for a “Big Brother” work environment. The best way to achieve such a balance (and to avoid breaking Federal laws with respect to wiretapping, permissible union communications and whistleblowing as well as state laws such as those in Delaware and Connecticut regarding notice), is to make sure you monitor for a legitimate business reason, you specifically outline for your employees what you will be monitoring and under what circumstances, obtain their written consent to your monitoring policy and set forth the penalties for non-compliance.
As an initial matter, be aware that sometimes employers have an affirmative duty to monitor an employee’s electronic communications. Doev. XYC Corp., 887 A.2d 1156 (N.J. Super. Ct. App. Div. 2005) (employer with notice of possible unlawful activity harmful to others through employee’s use of the employer’s computer network had duty to monitor in order to protect third parties.). Also, under Federal Trade Commission guidelines, an employer may be held liable if it fails to develop and enforce policies that restrict employees from promoting or endorsing the employer’s products through blogs or social networking sites without disclosing the employees’ relationship with the employer.
I don’t recommend that you routinely monitor your employees’ email. However, there are some justifiable grounds for doing so. For example, measuring employee productivity is an OK reason. Monitoring for the purpose of investigating possible leaks of proprietary, confidential or damaging information is definitely OK, even necessary. Employers are also on solid footing if they monitor email to check on the quality of customer service or to minimize liability from employee commentary being disseminated both internally and externally. But monitoring simply because you’re curious or just “because I can” is not going to pass muster.
Although email monitoring should be subject to controls, you should still keep track of incoming and outgoing email addresses so that you can recreate the employee’s online activities in the event that a reasonable email check raises some serious concerns about the employee’s conduct (e.g., sending email attachments to a competitor).
Again, as youcan easily discern from the discussion above, the law is less than settled with respect to defining the boundaries of employers’ rights to monitor employeee mails. So, all the precautions you may take may still not be enough to uphold your policy and actions. Nevertheless, an approach that is comprehensive in coverage, vigilant in providing employees with notice, and narrow in scope with respect to actual monitoring, will minimize risk and go a long way inproviding a strong justification if your electronic communications policy is ever challenged.
Originally Published January 26, 2010
Having just gotten off the phone with another Federal employee alleging discrimination in the workplace, it’s remarkable to me how misguided and misinformed Federal employees can be about the basic legal requirements of bringing such an action, the potential risks involved in doing so, and the actual merits of their case. I’m not going to spend time giving a primer on Federal discrimination law (e.g., age, sex, disability, race, national origin, religion, etc.) but as a former senior executive for a Federal agency tasked with defending managers these against these complaints, I think I can impart some useful anecdotal tips for those with legitimate cases, as wellas those who think a complaint is quicker way to get a bonus than actually doing your job.
New Administration: “New” Attitude?
What’s interesting, but not surprising, is that often when a new President comes in, discrimination complaints by Federal employees often dip in the first year. Employees have a hopeful attitude that their seemingly intolerable employment conditions will get better, and employees are willing to give new political management the benefit of the doubt as new employment policies and practices take shape. It also helps when a President makes labor-management relations, and revamping of the Federal hiring process to emphasize fairness and efficiency, a centerpiece of his agenda.
However, I do think that history will repeat itself once again, and discrimination actions by Federal employees will spike in 2010. Why? Yes, the EEOC proposed new rules in December that would expedite and streamline the Federal complaint process. Making it easier to file, with speedier results, leads to more complaints—pretty obvious. However, getting to the heart of the matter, it’s the same old story—Reality Bites. Underrepresented groups such as Hispanics (only 8% of Federal workforce) and women (44% of Federal workforce, 27.7% of senior executives) will quickly conclude that if workplace diversity is actually happening, it’s not happening quick enough. Employees will come to the realization that while there might be a new political crew in charge at their agency, the career managers making their life miserable are still around, and not going anywhere anytime soon. And, no matter how you repackage it, the Federal Government’s human resources approach is broken, rewarding mediocrity, insulating improper favoritism and discriminatory practices, and eliminating any incentive to work hard and improve, which ultimately breeds discontent and litigation.
Point 1: Don’t Bring Frivolous Lawsuits
But just because there maybe more discrimination complaints doesn’t mean that they all should be brought in the first place. Don’t file baseless complaints. I know it seems pretty obvious, and the long-term effects and collateral damage of such action is often the last thing someone is thinking about when emotion and $$$ takes hold, but based on my experiences it is a point that cannot be ignored.
If you file a ridiculous complaint against an agency manager, you irreparably harm the fortunes of all meritorious discrimination actions subsequently filed by agency employees (including yourself). It is difficult to shake the reputation that a particular Agency’s employees file unfounded claims at the drop of a hat. This stigma cannot help but negatively affect the views of key players and decision-makers such as EEO counselors, investigators, as well as EEOC judges when they are confronted with yet another “waste-of-time” employment matter involving that Agency. They are only human; case-by-case determinations become harder and harder to make when the generalizations start to ring true.
Similarly, bad complaints and a lot of them cause Agency management to get defensive, and treat all of the discrimination claims of its employees as total garbage and/or a shakedown for a quick payout. This hunker down posture on the part of management, a mix of growing anger and arrogance (not entirely unjustified), can destroy any chance of a quick and amicable settlement when such a result would be in the best interests of all involved, and can stifle dialogue that can prevent a simple misunderstanding from morphing into a personnel explosion. Employees, do your part and please don’t start the slippery slope.
Point 2: Don’t Miss Deadlines
There are a lot of timing issues you need to familiarize yourself with when thinking about filing a discrimination claim. You are required to contact the agency’s EEO counselor within 45 days of the alleged discriminatory act. There is a 15-day window for you to decide whether to file a formal EEO complaint after receiving a Notice of Final Interview. Upon receipt of the Report of Investigation, you must request an EEOC hearing within 30 days or the agency will issue a final decision based on the record alone. The list goes on and on.
As soon as you think you have the basis for a case, talk to your agency’s EEO office, the EEO counselors and an attorney to confirm these essential deadlines. This is not like being late to dinner with a friend, or even sending in a payment one day late on a credit card bill—there are no “I’ll just pay the fee” arguments or second chances in the land of EEOC. We’re talking about a system that is overburdened and swamped with cases and is thus all too happy to dismiss a case on procedural and technical grounds without undergoing a time-consuming investigation of the facts. In short--you miss a deadline, your case may be over before it even started.
Point 3: Don’t file an EEOC Complaint When You Really Should Be Filing An MSPB Appeal
An employee gets reassigned from his current position to another position without a loss of grade. He disagrees with the decision, and doesn’t believe that the agency has a legitimate management reason (e.g., budget, skills needed elsewhere, etc.) for the action. He also has no good-faith basis for alleging discrimination. Fine. But instead of challenging the adverse personnel action by filing an appeal in MSPB, really the proper venue in these situations, the employee files an EEO case against the agency and the decision-maker.
Why would a person do that? Well, there are a number of reasons, all motivated by strategy. As an initial matter, everyone knows that filing an EEO complaint is more “juicy” than going the MSPB route. If you are trying to scare an agency into a settlement, labeling its managers as people who routinely discriminate against minorities is 100 times more disturbing (though both are pretty bad) than saying that the agency engages in prohibited personnel practices. Second, and related to the above, establishing a prima facie case of discrimination is nothing more than a pro forma exercise. Employees don’t have to do more than go through a rudimentary checklist: “Am I over 40 years old. Age discrimination, check. I am white, my manager is Asian-American. Race discrimination, check. My manager is a woman, so I have a sex discrimination case as well.” What this means is that an EEO complaint will rarely be thrown out without first creating some prolonged, embarrassing pain. Third, it is one of the worst-kept secrets in employment law that MSPB is generally not a favorable forum for employees. By contrast, EEOC’s track record is decidedly more pro-employee, from the agency EEO offices up to the EEOC itself. It is a conscious forum-shopping decision, pure and simple.
Don’t do this unless you really believe in your heart of hearts that you are a victim of discrimination. Most importantly, it is wrong. Also, managers will not react well to these accusations, and will, as discussed earlier, likely react by treating all future complaints, including claims with merit that should be quickly resolved, as a fight to the death. Finally, the agency might call your bluff and when the EEOC pulls back the curtain on your case and finds out there is nothing there, your complaint will get dismissed and you will then be foreclosed from filing in the more appropriate forum, MSPB. Gamble and you might just lose.
Point 4: Don’t Jump Right Into Adversarial Mode and Become Toxic
A lot of Federal employees, when they disagree with an employment decision by their supervisor, stake out an overconfident and inflexible position right out of the starting gate. They start using a flame-thrower and threaten to bring an action before really understanding the motivation behindthe manager’s decision or before trying to use mediation or some other informal means to resolve a simple problem with a low-key, simple solution. Big mistake.
It is a big step to file an EEO complaint against a manager. Although complaints are supposed to be confidential, more often than not the details of the matter eventually become public knowledge. When it does, colleagues, other Agency employees and managers begin to take sides, which can destroy your chances of maintaining positive working relationships. In addition, although it is quite possible that the manager will retaliate against the employee by taking away responsibilities, giving bad ratings, etc., it is more likely that the now gun-shy manager will just clam upand avoid the employee in fear that he or she will be subjected to additional discrimination claims for anything they say and do. Lines of communication with the manager will be extinguished, as will any degree of workplace normalcy and satisfaction for the foreseeable future. But remember—if you feel strongly about what has been done to you and have weighed the pros and cons, do what you need to do and never look back.
Point 5: Don’t File For The Wrong Reasons
File an EEO complaint because you want to right a serious wrong, not because you think you can get a quick payout at the expense of taxpayers or a nice, cushy GS-15 without paying your dues. Of course, you are more likely to get a favorable settlement when you present a good case, but also if you present remedies that the agency can live with, are reasonable, and won’t set a crazy precedent for other employees chomping at the bit waiting to see ifthey cash in as well. I can’t tell you the number of times we asked a complainant what they were looking for to settle their case, and their response: “$300,000 (the statutory limit)”; or “an SES would be nice” (like they grow on trees). Huh? If you want to acquire some real bargaining power, ask for some money, but also consider requesting a higher rating, a QSI, a lateral reassignment to a more high-profile job that you are qualified for, and/or management training opportunities. Credibility, by not overplaying your hand, will get you what you want and deserve in the short-term, and preserve your reputation in the long-term.
I know some people will read this and say that I am trying to discourage Federal employees from filing discrimination claims. However, that is certainly not my intention; I’m not in the business of trying to put myself out of business.
However, what I’m trying tosay is that for some, litigation not your only option, and for others. Bad managers who discriminate are doing their part to paralyze the Federal workplace. But so are bad lawsuits. Both have to stop so we can add some add some sanity, and civility, back into the system.
Originally Published August 23, 2009
When negotiating a separation agreement on behalf of an employer or employee, one of the sticking points often centers around the issueof “non-disparagement.” Employers want departing employees to keep their opinions to themselves to stave off viral adverse publicity that hurts existing business, scares off investors and impedes the recruitment of new talent. Employees respond in kind by demanding a reciprocal provision, to guard against employers bad-mouthing them to prospective employers that can destroy their chances of getting re-employed or get them fired from a new job.
Given the number of questions I get every week about this topic, as well as the high-profile debate over these provisions generated by the Yankees possibly adding these clauses to managers’ and coaches’ contracts after Joe Torre’s tell-all book The Yankee Years and a searing Above the Law posting by a laid-off Paul Hastings associate who refused to sign a severance containing a gag clause, I thought I would spend a few moments trying to answer a few of these inquiries.
Question: What is a non-disparagement clause?
Non-disparagement clauses, typically found in severance/separation agreements and less so in employment agreements, bar employees from saying anything, orally or in writing, that is negative or demeaning about the company, its reputation, products and management. Likewise, these clauses can be used to block employers from denigrating the employee and damaging his or her reputation in the marketplace.
Question: What does a non-disparagement clause look like?
Focusing for now on what the employer often demands, these often-perpetual clauses can be simple: “You [employee] agree that you will not disparage or comment negatively about the Company, its officers and management, and/or current or former employees.”
It can also be more complex and comprehensive: “You agree that you will not, in any communication with any person or entity, including any actual or potential customer, client, investor, vendor, or business partner of Company, or any third-party media outlet, make any derogatory, disparagingor critical negative statements, orally, written or otherwise, against Company or any of Company’s managers, directors, officers and employees. Nothing herein shall prevent you from testifying truthfully in connection with any litigation, arbitration or administrative proceeding when compelled by subpoena, regulation or court order to do so.”
The language in the above two examples is often followed by a liquidated damages clause that relieves the aggrieved party of the burden of demonstrating that it was damaged by the remark—the plaintiff is automatically awarded a cash amount (e.g., $1,000, $2,500) for each proven disparaging statement.
Note that in some situations (example 2 above), employees are successful in negotiating exceptions to the non-disparagement, such as permitting negative testimony in response to a subpoena or court order and creating a “safe harbor” for statements made during job interviews.
Question: Is there any legal significance to the term “disparagement”?
Well, unlike defamation, there really is no established body of law as to what constitutes “disparagement.” However, what is somewhat clear under the law of many states is that for a statement to be actionable as a breach of a non-disparagement clause, the negative statement must be untrue.
Question: Are non-defamation provisions enforceable?
The answer is yes. See GRK Fasteners, Ltd. V. Bennet, No. 03-6363, 2004 U.S. Dist. LEXIS20603, at *14 (D. Or. Oct. 5, 2004) (ordering specific performance of non-disparagement provision in settlement agreement to prevent party to agreement from filing subsequent litigation). However, most lawyers agree that, depending on the circumstances, such a provision will not be enforced if it conflicts with workers’ rights (e.g., right to organize under the National Labor Relations Act) or contravenes public policy (e.g., exposing discrimination or danger to the public).
Some argue that these provisions violate an employee’s First Amendment rights to free speech. We just love to say “They violated my constitutional rights,” don’t we? Non-disparagement clauses do not implicate the First Amendment; instead, they involve simple contract law—a bargained for agreement between two parties.
Question: Why are employers so reluctant to enter into a mutual non-disparagement arrangement?
If you have represented employees you know the feeling. You are going back and forth and then you suggest that the employer be bound by the same non-disparagement obligation as the employee. Suddenly, you are on the receiving end of their usual knee-jerk response: “No way!”
From the perspective of the employer, a non-disparagement clause is one fraught with peril. For them, it is virtually impossible to comply with. The “Company” is a broadly defined term that can encompass hundreds if not thousands of people, and the clause could be interpreted as its promise that every current and future officer, director, manager and employee will refrain from saying anything bad about the employee. You can see why at first blush, this provision is considered an unacceptably risky option by employers. See Love v. University of Cincinnati Hospital, 694 N.E.2d 1005, 1006 (Ohio 1997) (employer breached separation agreement bygiving negative reference about plaintiff to prospective employer).
Question: What do you do if the employer refuses to accept a broad non-disparagement clause?
Employees can counter in two ways. First, you can agree to have the non-disparagement clause apply to a narrower group of the company’s employees (e.g., all senior officers and managers) or to specific named individuals. Employers, if you agree to this, remember to keep documentation that you actually informed these individuals of their obligation not to disparage the employee in question.
Second, you can try to focus on getting the employer to agree on providing a positive reference when prospective employers do their checks. The positive reference can take a number of forms, such as having an agreed-upon reference letter that is drafted by both sides, and/or a script for any oral references to be given.
But employers are wary about potential legal liability when dishing out positive references. See Randi W. v. Muroc Joint Unified School District, 929 P.2d 582 (Cal. 1997) (employer who gives unjustified positive reference subject to claim of negligent misrepresentation when one who relied on the reference later learned it was inaccurate); Fluid Technology, Inc. v. CVJ Axles, Inc., 964 P.2d 614 (Colo. Ct.App. 1998) (same). And, of course, it goes without saying that negativereferences always pose potential troubles for an employer. See Aspero v. Shearson American Express, Inc., 768 F.2d 106 (6th Cir. 1995) (employer who provided negative information and opinions about a former employee subject to defamation lawsuit from former employee); Thompson v. Orange Lake Country Club, 224 F. Supp. 2d 1368, 1382 (M.D. Fl. 2002) (same).
Although not the best result from the employee’s perspective, the best they may be able to get out of the employer is, when faced with an inquiry, a neutral reference confirming the employee’s dates of employment, title and salary and a statement that this is standard policy for the company and for all former employees.
All of this begs the question: what if the employee refuses to accept such a clause? If you really want to get this severance agreement consummated, you can drop your demand and you will still have a number of common law remedies for enforcement, including tortuous interference with contractual relations.
Question: The employee breaches the non-disparagement clause by criticizing the company’s competence and ethics on blogs, Facebook and Twitter. What can the employer do?
The key issue in these situations is not the legal remedy—yes, you can obviously go to court and sue the employee for breach. Really, what controls is practicality—is it worth it from a business perspective it to pursue litigation? For many companies, the answer is no.
First, the liquidated damages in the hypothetical might amount to no more than $5,000-$10,000. A law firm associate drafting a complaint will blow through that in a single day.
Second, enforcing the provision carries with it public relations downsides. Perception always matters. It will look as if the big bad corporation is trying to squash the speech of the weaker party, and being seen as an entity that trolls chatrooms and websites looking for violations is simply not the business image you want to project.
Third, litigation becomes self-defeating; the suit brings attention and scrutiny to the very claims the non-disparagement clause was intended to suppress.
Question: How does an employer add some more teeth to a non-disparagement agreement to deter breach by the employee?
One common strategy used by employers is to provide that the severance payment will be made in the form of salary continuation or periodic installments over time. This gives employers needed leverage for enforcement—if the employee breaches, you hold back on paying the rest of their severance. On the other hand, if you are the employee, you want a lump sum payment of your severance to make a clean breakand get out from under the thumb of the employer as soon as possible.
In the end, I don’t want to convey the impression that non-disparagement clauses are a waste of time and not worth the effort. Those who claim that these provisions are simply a way for lawyers to throw a bunch of useless stuff into an agreement for CYA are being overly cynical. They serve as a needed psychological deterrent in a tension-filled environment, and induce parties, as some have called it, to “play nice in the sandbox.”
Although it’s not always possible, having both parties part company, move on but continue to act in a dignified and civilized fashion should be the end goal for everyone.