Fair Credit Reporting Act

By Pamela Q. Devata , Robert T. Szyba, and Stacey L. Blecher

Seyfarth Synopsis: On May 4, 2017, New York’s highest court, the Court of Appeals, held that the New York State Human Rights Law (NYSHRL) prohibits employers from discriminating on the basis of criminal conviction history. Entities that are not direct employers may also be liable, however only for aiding and abetting a violation of the NYSHRL.

In Griffin v. Sirva, Inc., the U.S. Court of Appeals for the Second Circuit (Second Circuit) posed three questions to the New York Court of Appeals (Court of Appeals), New York’s highest court, regarding the appropriate interpretation of New York state law, the NYSHRL. Specifically, the Court of Appeals was asked to determine whether (1) Section 296(15) of the NYSHRL, which prohibits discrimination against individuals with prior criminal convictions, is limited to a party’s “employer”; (2) if so, is an “employer” only a “direct employer,” or can the coverage extend to other related entities; and (3) does Section 296(6), which provides for aiding and abetting liability, apply to Section 296(15) to impose liability on out-of-state entities that may have a connection to an in-state employer?

As background, the direct employer in the case was Astro Moving and Storage Co., who was a contractor for Allied Van Lines. Plaintiffs had convictions for sex crimes with minors, which disqualified them from working for Allied, and Astro terminated their employment because they could not perform services for Allied.  Plaintiffs sued Astro, Allied, and Sirva, Inc. (Allied’s parent).  Among other claims, Plaintiffs alleged discrimination due to their criminal conviction histories, as prohibited by Section 296(15) of the NYSHRL.  As is most relevant here, they sued Allied (which was not their direct employer).  Thus, since the interpretation of the NYSHRL had not been resolved on this point, the Second Circuit certified its questions to the Court of Appeals.

In its response, the Court of Appeals held definitively that Section 296(15) of the NYSHRL is limited to direct employers. Although the statutory text states that “any person” is prohibited from discriminating, the Court nevertheless found that this language was contextually designed to target direct employers.

With respect to the second question, the Court of Appeals clarified who the NYSHRL considers an “employer.” To make the determination, the Court of Appeals turned to the common law test for determining the employer-employee relationship, as enunciated by New York’s Appellate Division, Fourth Department, in State Div. of Human Rights v. GTE Corp., 109 A.D.2d 1082 (4th Dept. 1985).  The test consists of four factors: “(1) the selection and engagement of the servant; (2) the payment of salary or wages; (3) the power of dismissal; and (4) the power of control of the servant’s conduct.”  The primary focus on this test, the Court of Appeals quoted the Fourth Department, is the “right of control, that is, the right of one person, the master, to order and control another, the servant, in the performance of work by the latter.”  This pronouncement is noteworthy in that it clarifies the definition of “employer” for NYSHRL claims.

Last, the Court of Appeals turned to the breadth of liability for aiding and abetting, under Section 296(6). The Court noted that one does not need to be a direct employer, or have any employment connection to the plaintiff. The Court pointed out, for example, that in National Org. for Women v. State Div. of Human Rights, 34 N.Y.2d 416 (1974), a newspaper company had no employment relationship with the plaintiff, but was nevertheless found to have aided and abetted discrimination by running two sets of help wanted ads: a separate list of jobs for men, and a separate list of jobs for women, despite the fact that the newspaper did not employ anyone from these ads. The Court also noted that the NYSHRL has an extraterritoriality provision that captures out-of-state actors when their acts have an impact within the state. Thus, an out-of-state entity can be liable for acts that constitute discrimination, or aiding and abetting, that have an impact in New York.  This interpretation is not a change in the lower court’s opinions, but an affirmation that  third party entities should understand that if they have control over hiring decisions, they could be at risk.

Outlook and Potential Ramifications

The Court of Appeals has made certain clarifications that have a potential impact on any employer, as well as any entity who works with another entity that is an employer, where questions surrounding criminal background checks come up that have an impact on employees in New York. Beyond direct employers, who are directly covered by Section 296(15), non-employers, even those outside New York, may nevertheless find themselves ensnared in a claim under the NYSHRL for aiding and abetting. Thus, the ramifications of this decision extend beyond the universe of direct employers, and beyond New York’s state lines. Employers within New York would be well-served to revisit their compliance requirements with Section 296(15). Further, any companies who does business with a New York employer, regardless of whether the company is located in or outside of New York, would likewise be well-served to review their business practices for any “impact in New York” that might run afoul of the NYSHRL.

Those with questions about these issues or topics are encouraged to reach out to the authors, your Seyfarth attorney, or any member of the Background Screening Compliance & Litigation Team.

 

By Esther Slater McDonald

Seyfarth Synopsis: The New York Court of Appeals’ ruling on questions regarding the use of criminal convictions in hiring will impact employers and may impact the background screening industry, the temporary staffing industry, and other businesses requiring its affiliates or contractors to adhere to certain criminal history guidelines.

In Griffin v. Sirva, Inc., 835 F.3d 283 (2016), the United States Court of Appeals for the Second Circuit certified several questions to the New York Court of Appeals, seeking clarification on provisions of the New York States Human Rights Law relating to consideration of criminal convictions in hiring.

The Background Facts

Trathony Griffin and Michael Godwin worked for Astro Moving and Storage Company, a company providing local warehouse and transportation services in New York. Astro had an agency contract with Allied Van Lines to provide household moving services on behalf of Allied.  Pursuant to the contract, all Astro employees working on Allied jobs were required to pass criminal background checks.  Allied engaged a third party to conduct the background checks and to apply Allied’s adjudication guidelines.  Under Allied’s guidelines, a felony conviction for any sexual offense disqualified an individual from working on Allied jobs.  That disqualification applied only to Allied jobs; it did not prohibit an individual from working for Astro on non-Allied jobs.

Griffin and Godwin were employed by Astro. At some point, Astro required them to undergo background checks so that they could continue to work on Allied jobs.  The background checks revealed that both men had been convicted of felony sexual offenses and were designated as “Sexually Violent Offenders.”  According to Griffin and Godwin, Astro terminated them after receiving their background reports.

Sometime later, Griffin and Godwin sued Allied and Sirva, Inc., a holding company related to Allied, alleging that they had violated the New York State Human Rights Law by denying them employment because of their criminal convictions or, alternatively, by requiring Astro to deny them employment because of the convictions.

The New York State Human Rights Law

Section 296 of the New York State Human Rights Law.  Section 296(15) generally makes it unlawful for “any person, agency, bureau, corporation, or association … to deny … employment to any individual” because of a criminal conviction unless there is a direct relationship between the criminal offense and the employment at issue or the employment would involve an unreasonable risk to property or to the safety or welfare of individuals or the general public.  Section 296(6) also makes it unlawful for “any person to aid, abet, incite, compel or coerce” a violation of Section 296(15).

The Litigation

The district court entered judgment for Allied and Sirva.  The district court held that only employers can be liable for denying employment and that, to be liable for aiding and abetting a denial of employment, a business must be a joint employer of the individual denied employment.   The court determined that Allied and Sirva were not “employers” or “joint employers” of Griffin or Godwin.

On appeal, the Second Circuit cast doubt on the district court’s ruling and concluded that the New York State Human Rights Law may apply to Allied and Sirva even though they did not employ Griffin and Godwin. The Second Circuit stated that Section 296(15) applied to “any person, … corporation, or association,” and thus the Section may apply to companies other than employers.  Even if Section 296(15) is limited to “employers,” the Second Circuit concluded that the term “employer” could be read to encompass entities like Allied and Sirva.  Last, the Second Circuit stated that the standard for aiding and abetting liability was unclear and indicated that New York may have intended for the provision to have a broad reach that encompasses non-employers, including contracting parties, regardless of their intent.

Because New York courts have not determined who may be liable under Section 296(15) or addressed the scope of Section 296(6) liability for businesses, the Second Circuit certified the following issues to the New York Court of Appeals for it to decide:

(1) Does Section 296(15) of the New York State Human Rights Law, prohibiting discrimination in employment on the basis of a criminal conviction, limit liability to an aggrieved party’s “employer”?

(2) If Section 295(15) is limited to an aggrieved party’s “employer,” what is the scope of the term “employer” for these purposes, i.e. does it include an employer who is not the aggrieved party’s “direct employer,” but who, through an agency relationship or other means, exercises a significant level of control over the discrimination policies and practices of the aggrieved party’s “direct employer”?

(3) Does Section 296(6) of the New York State Human Rights Law, providing for aiding and abetting liability, apply to § 296(15) such that an out-of-state principal corporation that requires its New York State agent to discriminate in employment on the basis of a criminal conviction may be held liable for the employer’s violation of § 296(15)?

The New York Court of Appeals accepted the certification, and oral argument in the case is expected to occur later this year.

The Takeaway

Employers, staffing agencies, background screeners, and others should be watching Griffin v. Sirva, Inc. How the New York Court of Appeals will rule on the certified questions is uncertain.  The court could interpret Section 296 narrowly to apply only to employers, or the court could interpret the section broadly in a manner that expands liability to non-employers.  Regardless of the outcome, any ruling is likely to provide guidance to employers and others, which will enable businesses to better manage risk.

For more information on this or any related topic please contact the author, your Seyfarth attorney, or any member of the Background Screening Compliance & Litigation Team.

By Pamela Q. Devata and Craig B. Simonsen

Seyfarth Synopsis: The FTC has adjusted its per violation penalties, in some cases by substantial amounts.

In a federal rulemaking published last week, the Federal Trade Commission (FTC) has finalized amendments to Commission Rule 1.98 to adjust the maximum civil penalty dollar amounts for violations of sixteen provisions of law. 81 Fed. Reg. 42476 (June 30, 2016).

The U.S. Congress had mandated the formula for calculating the increases under the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, which included a catch-up provision for inflation. See related Implementation of the Federal Civil Penalties Inflation Adjustment Act, OMB Memorandum M-16-06 (February 24, 2016).

Based on the FTC’s interim final rule recalculation, violations of final Commission orders issued under section 5(b) of the FTC Act, and violations of certain trade regulation rules and other laws enforced by the FTC with civil penalty provisions, will increase significantly from $16,000 to $40,000.

In addition, specifically under the Fair Credit Reporting Act Section 621(a)(2) (duty to correct and update information) for knowing violations of the Act, the per violation penalty will increase from $3,500 to $3,756.

The adjusted violation amounts will take effect on August 1, 2016.

It is interesting that the FTC suggests that the best way to avoid any penalties is to “comply with the law”.  That sounds simple, when writing it in a blog, but real life may be more complicated. Employers and credit reporting agencies conducting background checks should be sure to evaluate their policies and processes in light of these new penalty provisions, and should also train their Human Resources professionals on these laws — to help “comply with the law”.

For more information on employer responsibilities under the FCRA or on the use of criminal background screening in employment, please contact the authors, your Seyfarth attorney, or any member of the Seyfarth Background Screening Compliance & Litigation Team.

By Pamela Q. Devata and Craig B. Simonsen

The Federal Trade Commission (FTC) has just released a report on Big Data: A Tool for Inclusion or Exclusion? Understanding the Issues (Report), January 6, 2016.

The FTC Chairwoman Edith Ramirez indicates in the FTC news release on the Report, that “big data’s role is growing in nearly every area of business, affecting millions of consumers in concrete ways….  The potential benefits to consumers are significant, but businesses must ensure that their big data use does not lead to harmful exclusion or discrimination.”

The Report examines “possible risks” that could result from biases or inaccuracies about certain groups, including:

  • Individuals mistakenly denied opportunities based on the actions of others;
  • Exposing sensitive information;
  • Creating or reinforcing existing disparities
  • Assisting in the targeting of vulnerable consumers for fraud;
  • Creating higher prices for goods and services in lower-income communities; and
  • Weakening the effectiveness of consumer choice.

The Report reviews various laws that may apply to the use of big data, concerning possible issues of discrimination or exclusion, including the Fair Credit Reporting Act, Federal Trade Commission Act, and other equal opportunity laws. Perhaps helpfully, from the Agency’s perspective, the Report also provides a “range of questions for businesses to consider” when they examine whether their big data programs comply with these laws.

The Report also suggests four key “policy questions” that the Agency claims are drawn from research, into the ways big data can both present and prevent harms. The policy questions posed by the FTC “are designed to help companies determine how best to maximize the benefit of their use of big data while limiting possible harms….” Companies are intended to consider, and perhaps answer the questions of accuracy and built-in bias that may exist, and whether the company’s use of big data raises “ethical or fairness concerns.”

The Commission voted (4-0) to issue the Report. The Report was issued along with Commissioner Maureen Ohlhausen’s separate statement.

For employers, especially now with this heightened scrutiny and attention from the FTC, it may be a good time for you to consider seriously the “range of questions” as to whether your company’s big data programs comply with these laws.

Those with questions about these issues or topics are encouraged to reach out to the authors, your Seyfarth attorney, or any member of the Global Privacy & Security Team.

 

 

 

 

In the second periodic installment of the Employment Law Lookout Blog Team’s analysis of employment law (and related) case being heard by the United States Supreme Court this term, read on for our take on Spokeo Inv. v. Robins.

Plaintiffs Without Injuries?  SCOTUS To Hear Arguments Whether
Plaintiffs Need to Show Concrete Harm To Establish
Injury-in-Fact for Article III Standing

By Pamela Q. Devata and Robert T. Szyba

On April 27, 2015, the U.S. Supreme Court granted cert in Spokeo, Inc. v. Robins, a case brought under the Fair Credit Reporting Act (“FCRA”) where the Ninth Circuit held that the “violation of a statutory right is usually a sufficient injury in fact to confer standing” and that “a plaintiff can suffer a violation of the statutory right without suffering actual damages.”

The plaintiff, Thomas Robins, filed a putative class action against Spokeo, Inc., which is an online people search platform that organizes information about people into comprehensive profiles. Robins sued the company for allegedly violating the FCRA by presenting inaccurate information about him on the Internet—he accused the company of over-reporting his earnings and education level, and reporting that he was married with children, even though he was not married and had no children.  He argued this information might have a negative impact on his employment prospects, but did not allege any actual harm.  With no actual damages, Robins sued to recover only statutory damages.  In the Ninth Circuit’s view, that was enough for to confer standing under Article III.

The question that the Supreme Court took up: Does a plaintiff who suffers no concrete harm, but who instead alleges only a statutory violation, have standing under Article III to bring a claim on behalf of himself or a class of individuals?

Leading Up To Spokeo.  This case follows in the footsteps of the Supreme Court’s 2013 decision in Clapper v. Amnesty Int’l USA, where a group of attorneys and human rights, labor, legal, and media organizations sued seeking a permanent injunction to stop surveillance permitted by the FISA Amendments Act of 2008.  In the 5-4 decision, Justice Alito wrote that under Article III, threatened injury must be at least “certainly impending.”  Possible future injuries were not enough.  But Clapper left the question of actual harm open… until now.

The Circuits.  The Circuits are split.  For example, the Ninth Circuit, in Spokeo, found actual harm was not needed if a plaintiff could point to a violation of a statutory right.  This comported with the Sixth Circuit’s view (Beaudry v. TeleCheck Services, Inc.), and the Fifth and Seventh have also shown their support (Mabary v. Home Town Bank and Remijas v. Neiman Marcus Group, LLC, respectively).  The Second, Third, and Fourth Circuits have generally disagreed: Kendall v. Employees Retirement Plan of Avon Prods. (2d Cir.); Doe v. National Board of Medical Examiners (3d Cir.); David v. Alphin (4th Cir.).

Why This Case Matters.  The Supreme Court’s decision may have a significant impact on congressional power as well as the future of consumer, workplace, and other class actions.  The question formally presented is rooted in separation of powers issues between Congress and the federal judiciary, in that it may limit Congress’ ability to create a statutory right of action without a requirement of actual harm in order to recover.  However, the Court may opt to narrow the question to:  Can plaintiffs sue for the violation of a statute when they can show no actual injury or harm that they have suffered?

The Court’s answer in the negative could discourage the current wave of consumer, workplace, and other class actions seeking millions in statutory damages. On the other hand, a decision allowing individual and class claims to go forward alleging only statutory damages without injury in fact would likely have the opposite outcome, resulting in claims based on alleged violations of statutory requirements, brought by individuals who suffered no adverse consequence of the identified possible violation.

Stay Tuned… Oral argument is set for Monday, November 2, 2015 — a follow up blog post will follow here when we have a decision.

If you would like more information regarding this article, please contact the author or your Seyfarth attorney.