Nolo's Employment Law Blog

If you review applicant or employee credit reports, you're undoubtedly already familiar with the Fair Credit Reporting Act (FCRA). Among other things, this federal law requires employers to get the consent of the employee or applicant before pulling credit and other consumer reports, to give notice if the information in the report might lead you to take adverse action (such as denying the applicant a job or denying the employee a promotion), and to give notice -- again -- if you do ultimately take the adverse action.

As long as you follow the rules above, the FCRA allows you to use credit reports for employment purposes, including to decide whether to hire, promote, or even fire. That's the federal law, however; some states see things differently. The economic downturn of the last few years -- and the resulting damage to credit reports and scores -- have led many politicians to reconsider whether it's really appropriate for employers to use credit reports in making job decisions. At least three states (Hawaii, Oregon, and Washington) have passed laws prohibiting employers from considering credit reports in most circumstances. According to the National Conference of State Legislatures, about 20 states are currently considering similar legislation. (See their detailed chart here.)  

The Supreme Court has agreed to hear a case challenging the federal government's background check process. (The case is called National Aeronautics and Space Administration v. Nelson; you can find links to the petition and other documents here, on SCOTUSblog.)

The underlying challenge was raised by a group of scientists, engineers, and administrative support employees who worked at the Jet Propulsion Laboratory (JPL), a research lab run by NASA and the California Institute of Technology. The employees were officially employed by CalTech. Following a policy change in 2007, all JPL employees whom the government categorized as "low risk" (they didn't have access to classified material) had to submit to the background check procedures routinely applied to federal civil service employees in order to maintain their access to the JPL. The employees filed a lawsuit and sought a preliminary injunction to stop the new policy from going into effect until the court had a chance to decide whether it was constitutional. 

The background check -- called the Nationwide Agency Check with Inquiries (NACI) -- requires employees to provide information on their residential, education, employment, and military histories; give references; and disclose any use of illegal drugs in the past year, along with any treatment or counseling received. Employees must also sign a release form allowing the government to collect information from landlords, employers, and references on a wide variety of topics, including "financial integrity," "mental or emotional stability," and "general behavior or conduct."

The Ninth Circuit Court of Appeals ruled in favor of the government on several issues. However, the Court found that the employees were entitled to a preliminary injunction because they had raised serious questions as to whether their constitutional right to informational privacy was violated by the question asking about drug treatment or counseling and by the release form (and subsequent inquiries it authorized). NASA petitioned the Supreme Court to hear the case, and the Court agreed to do so earlier this month.

This case challenges background checks applicable to government employees and contractors. The U.S. Constitution protects only against action by the government (in this case, NASA's decision that JPL employees had to pass a background check), not actions by private companies and employers. So, while the outcome of the case could be hugely significant to federal sector employees, who have been subject to these same background check requirements for decades, it won't be directly applicable to those who work in the private sector. However, state courts often follow the Supreme Court's lead and guidelines in deciding cases alleging violations of privacy, even though the right to privacy applicable in those cases generally comes from a state constitution, statute, or case law, not the U.S. Constitution.

Private sector employees could be more directly affected by some of the background check developments reported on this week by SHRM, here (you may need to be a SHRM member to view the article). SHRM reports that the EEOC is considering issuing new enforcement guidance explaining when employers may consider an applicant's credit history and arrest and conviction record in the hiring process. The EEOC has long stated that using credit reports and criminal records to disqualify applicants could have a disparate impact based on race; if so, the employer would have to show that the practice is job-related and consistent with business necessity. SHRM offers some tips that will help employers avoid legal trouble when performing background checks, including that employers should be selective in deciding which positions require a background check and should allow applicants to explain negative information that turns up.   

Did you know that at least four states have passed laws that prohibit mandatory or coerced microchipping, including installing a microchip or radio frequency identification (RFID) tag as a condition of employment? A number of states have legislation addressing the improper use of RFID tags or the information from them (for example, to surreptitiously gather private information). But California, North Dakota, Ohlahoma, and Wisconsin have gone further to ban employers from implanting microchips in their employees as a condition of employment. You can find a list of state RFID laws, with links, here, at the website of the National Conference of State Legislatures.)

California's statute (Cal. Civil Code section 52.7), for example, prohibits requiring, coercing, or compelling anyone to undergo "the subcutaneous implanting of an identification device," including conditioning any private or public benefit on consent to implantation, "including employment, promotion, or other employment benefit, or by any means that causes a reasonable person of ordinary susceptibilities to acquiesce to implantation when he or she otherwise would not." The law imposes penalties of $10,000 per violation, with an additional $1,000 penalty for each day the violation continues; it also creates a right of action, with punitive damages, attorney fees, and litigation costs (including the cost of hiring expert witnesses).

And speaking of high-tech information gathering, one of the fixes currently under consideration for the E-Verify system, the government's online system for authenticating an employee's authorization to work in the United States, involves biometric data. Senator Schumer, Chairman of the Senate Judiciary Committee's Subcommittee on Immigration, Refugees, and Border Security, recently said that E-Verify should include a biometric component -- based on fingerprints, retinal scans, or DNA, for example -- to make sure that the employee is who he or she claims to be. Employment lawyers have raised a number of concerns about the proposal, from privacy violations to concerns about the cost, according to a recent article in the National Law Journal.

Certainly, any employer that requires employees to provide biometric information will have to guard the privacy of that information very carefully. If biometric information is leaked or stolen, the term "identity theft" could take on a whole new meaning -- to include not only identification numbers or bank account information but also the ridges on our fingertips and the unique structure of our faces (or our genes). You can apply for a new Social Security number, but not a new eyeball. And this issue is already on the legislative radar: For example, Illinois recently enacted a law requiring companies that gather biometric data to do so only with written consent, to use reasonable care to store and protect that information (and to refrain from selling it), and to establish a timetable for retaining and destroying the information 

Last week, the Department of Homeland Security announced that it had issued new guidance to Immigration and Customs Enforcement ("ICE"). The new marching orders: Focus on employers, not employees. The press release on the new rules says that, effective immediately, worksite enforcement resources will be focused on the criminal prosecution of employers who knowingly hire unauthorized workers, "to target the root cause of illegal immigration."

The press release points out that previous efforts resulted in many more arrests of workers than employers. Of the more than 6,000 arrests ICE made in 2008 as part of its worksite enforcement program, 135 were employers, managers, and human resources personnel. The rest were the workers themselves.

Just as ICE is refocusing its efforts on employers, the Supreme Court took away one of its tools for prosecuting workers. The workers arrested by ICE often face criminal charges relating to their use of false identity information. Prosecutors could also tack on the charge of aggravated identity theft, which carries a two-year sentence extension, if the worker knowingly used someone's else's identification. According to the New York Times, prosecutors used the threat of that additional punishment to convince workers to plead guilty to lesser charges, such as document fraud.

Earlier this week, the Supreme Court held that the crime of aggravated identity theft requires the alleged thief to know that the identification information he or she is using actually belongs to someone else. In other words, a worker can no longer be charged with aggravated identity theft simply for making up a Social Security number; the worker must know that the number belongs to another person.

It's spring break, when thousands of college students follow the time-honored tradition of heading to warmer climates to party. But these days, when the job market for soon-to-be college graduates looks pretty bleak, spring break revelers might want to remember this: Prospective employers have Internet access. If a search for your name turns up, say, a photo of you at a party with the caption "Drunken Pirate," your job prospects might go from grim to nonexistent.

Recent news reports show that applicants and employees alike don't seem to realize that their Internet posts are public -- as in, employers can find them, read them, and perhaps figure out who posted them. That's what "theconnor" learned recently when, after being offered a job at Cisco, he tweeted the news, along with this commentary: "Now I have to weigh the utility of a fatty paycheck against the daily commute to San Jose and hating the work." Soon, someone from Cisco responded, "Who is the hiring manager. I'm sure they would love to know that you will hate the work. We here at Cisco are versed in the web." Then, the website "Cisco Fatty" was created to memorialize the whole incident. (Check out the whole story here.

Then there's the teacher who got fired for his MySpace page, which he said he created to communicate with students outside of school and build a better relationship with them. Apparently, the road to a better relationship was paved with nude photos, cursing, and inappropriate conversations. The teacher lost his wrongful termination lawsuit.

With gas prices hovering around $4 per gallon, a survey by placement firm Challenger, Gray & Christmas reveals that 57% of polled employers are offering alternatives to help employees cope, according to CNN. Strategies include a compressed work week -- four 10-hour days (23%) -- employee carpools (20%), subsidizing the cost of public transportation (18%), and allowing employees to telecommute at least one day a week (14%).

Personally, I'm surprised telecommuting is so far down the list. All the other options are good ones, but telecommuting has some distinct advantages for employers as well as employees. (Full disclosure: I'm writing this from home, as a telecommuting employee.) Here are just a few of the benefits:

• Recruiting and retaining the best employees. According to the survey, 34% of employers have had a qualified candidate turn down a job because of a long commute, while 40% of jobs could be done telecommuting. Allowing employees to telecommute is an attractive job benefit that will help you attract the best candidates, even if far away. Another study shows telecommuting employees are more satisfied with their jobs, and less likely to leave.


• Decreased costs. Telecommuting may decrease your costs -- for example, if it allows employees to share work space and office equipment.


• Increased efficiency. Employees working at home are free of the distractions of a ringing phone, interruptions by co-workers, and the like. Particularly if working on focused projects, this allows employees to work more efficiently.


• Positive environmental impact. One 2005 study found Americans drive an average of 16 miles each way to work. In addition to reducing commuting times and costs, allowing telecommuting has a positive environmental impact as fewer workers drive to the office.

As we previously posted here, there's a lawsuit underway in San Francisco, challenging the Department of Homeland Security's new regulations telling employers how to handle "no-match" letters. A coalition of labor, immigrants' rights, and business groups filed the lawsuit, asking the court to stop the new regulations from going into effect. And that's exactly what the court did on October 10, 2007, for at least the next few months.

The court issued a preliminary injunction: a court order that prevents the rules from going into effect while the lawsuit is pending. The court's decision found that serious questions had been raised as to whether the government followed required procedures, such as analyzing the effect the new regulations would have on small businesses. Because of these questions, and because allowing the regulations to go into effect would cause significant harm to both employers and employees, the judge put them on hold.

What happens next? The lawsuit continues, and the Social Security Administration finds a place to store the 141,000 no-match letters it planned to mail out. And here's an interesting twist: Judge Charles Breyer issued this decision. If that name sounds familiar, it's because his brother -- Justice Stephen Breyer -- sits on the U.S. Supreme Court, which could well decide this issue once and for all.

Lisa Guerin

UPDATE: In December 2007, there were a couple of new developments in this case. First, the Department of Homeland Security filed an appeal, asking the Ninth Circuit Court of Appeals to lift the temporary injunction and allow the new rules to go into effect. And second, Judge Breyer (the district court judge) agreed to put off his decision on whether to issue a permanent injunction until March of 2008, to give the government a chance to address the concerns that led Judge Breyer to issue the preliminary injunction.

And, if you want to find out more about the most important federal employment laws on the books, be sure to pick up a copy of my & Attorney Amy DelPo's book, The Essential Guide to Federal Employment Laws.

To what length will your company go to recruit top talent? Some companies, it seems, are willing to enter a whole new world--a virtual one, that is. A recent article reveals that some organizations are using Second Life, an online "3-D virtual world," to recruit and interview applicants. Interviewers and interviewees choose avatars ("your persona in the virtual world") and arrange meetings that require them to master virtual world skills like climbing stairs, shaking hands, and even getting dressed.

Maybe I'm old-fashioned, but I'm not ready for a virtual world to take the place of the real one. If your company is thinking about jumping on the Second Life bandwagon, consider a few important factors.

First, not everyone will want or be able to use Second Life--for example, applicants with visual or other physical disabilities, or even older applicants who may be less likely to join Second Life (the average age of a Second Life "resident" is 30). For legal and practical purposes, you'll want to make sure applicants have access to other recruiting and interviewing methods.

Second, consider how long it takes to learn to use Second Life. A successful applicant said it took him about a day and a half to learn the basics (like not walking into virtual walls)--and of course, you and every other interviewer will have to learn those skills too. Unless it's something you expect to do often, it may not be practical.

Third, are the skills the candidate needs to navigate in Second Life relevant to the position? If you're hiring for a high-tech position, perhaps. Otherwise, you may not find the best candidates this way--it's hard to see a lot of accounting professionals or equipment operators using Second Life, for example. And it's never wise to make employment decisions based on skills unrelated to the job--like keeping your avatar virtually seated.

Finally, don't undervalue a face-to-face meeting. Yes, communicating through avatars may put a candidate at ease and limits (but doesn't eliminate) your ability to distinguish between applicants based on legally-protected classes like race or age. But often, you'll want to see how a candidate reacts to stressful situations--like a job interview. For many positions, you'll want to make sure the applicant presents well and has good people skills, both almost impossible to judge online. Also, the virtual interviewee doesn't get the benefit of seeing the work environment or getting a feel for the company culture. The best practice, if you interview in the virtual world, is to follow up with an in-person meeting--between actual, carbon-based life forms--to make sure the candidate meets your needs.

To learn more about the basics of hiring an employee, Attorney Fred S. Steingold's The Employer's Legal Handbook is a good place to start.

Alayna Schroeder

Employers have long been confused about what, exactly, they are supposed to do when they receive a "no-match" letter: a letter from the Social Security Administration stating that the Social Security number reported for an employee (usually on IRS Form W-2) does not match the government's records. Although a no-match letter might mean that the employee's work authorization documents - which the employee must present as part of the I-9 process -- are inaccurate or even falsified, it could be issued for other reasons too, such as typos or errors in the government database. What's more, employers are told that they must accept documents that "reasonably appear to be genuine"; asking for more or different documentation could be illegal discrimination on the basis of national origin or citizenship status.

The Department of Homeland Security (DHS) issued new regulations to explain what employers should do if they receive a no-match letter. Although employers aren't legally required to follow these rules, those who do can take advantage of a safe harbor provision, which protects them from legal liability if an employee turns out not to have proper work authorization. These rules were scheduled to go into effect on September 14, 2007, but they didn't. A federal judge in San Francisco issued a temporary restraining order prohibiting DHS from enforcing the rules and even from sending out packets to employers explaining what will be required. The judge found that the plaintiffs who filed the lawsuit challenging the rules - including the AFL-CIO and the ACLU - had raised serious questions as to whether the new rules are legal or exceed the authority of the DHS and the Social Security Administration.

On October 1, the court will hear arguments as to whether it should issue a preliminary injunction, extending the prohibition on enforcing the rule. The plaintiffs have filed their papers, as has the DHS; now it's up to the judge to decide what will happen next.

And if you want to find out more about the most important federal employment laws on the books, be sure to pick up a copy of my & Attorney Amy DelPo's book, The Essential Guide to Federal Employment Laws.

Lisa Guerin