Washington D.C. Employment Law Update : Washington D.C. Employment Lawyer & Attorney : Littler Mendelson Law Firm : Virginia, Tyson's Corner

In the letter to the DOJ the senators write: “[g]iven Facebook terms of service and the civil case law, we strongly urge the Department to investigate and issue a legal opinion as to whether requesting and using prospective employees’ social network passwords violates current federal law.” Specifically, the senators ask the DOJ investigate whether requesting this information:

violates the Stored Communication Act or the Computer Fraud and Abuse Act. The SCA prohibits intentional access to electronic information without authorization or intentionally exceeding that authorization, 18 U.S.C. § 2701, and the CFAA prohibits intentional access to a computer without authorization to obtain information, 18 U.S.C. § 1030(a)(2)(C). Requiring applicants to provide login credentials to secure social media websites and then using those credentials to access private information stored on those sites may be unduly coercive and therefore constitute unauthorized access under both SCA and the CFAA.

The letter also notes that two federal courts have determined that supervisors may be subject to civil liability under the SCA by accessing otherwise private employee information with requested login credentials.

The senators sent a separate letter to the EEOC asking the agency to investigate whether requesting applicant login information violates employment discrimination statutes. According to the senators, job applicants and employees often post online personal information such as religious views, national origin, family history, gender, marital status, and age. “If employers asked for some of this information directly, it would violate federal anti-discrimination law. We are concerned that collecting this sensitive information under the guise of a background check may simply be a pretext for discrimination.”

The lawmakers say they intend to introduce legislation to curb this practice.

For more information on this trend, see Littler’s ASAP: Not Yet Banned, But Requiring Social Media Information Is a Bad Idea by Chris Leh.

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Michael Eastman, the executive director of labor law policy at the United States Chamber of Commerce (CoC) explained that under certain circumstances, the use of an employment credit check is a “necessity.” Eastman stated that employers use such background checks “to help protect themselves from claims of negligent hiring and to protect themselves from other potential liability,” such as theft and fraud. Employers may use credit checks for employees with direct access to company or client funds, and to examine the credit history of those with access to sensitive information. Members of human resources, for example, often have access to Social Security Numbers, banking information, personal data, and client/customer credit card and account information. Other employees, Eastman pointed out, may have access to trade secrets and other confidential company information. Eastman also emphasized that employers do not typically rely on a credit report standing alone in making an employment decision. Moreover, he stated that employers conduct such background checks only during the last stage of the hiring process, contrary to the belief that such checks are used to weed out potential hires from the outset. Regarding questions about whether credit history is job related, Eastman noted that the federal government has answered this question in the affirmative, at least with respect to policies for its own employees.

Echoing this position was Christine Walters, a sole proprietor and member of the Society for Human Resource Management (SHRM), who claimed that there is a “compelling public interest in enabling our nation’s employers . . . to assess the skills, abilities, and work habits of potential hires.” Walters reiterated that employers have a fiduciary responsibility to protect its assets and those of its clients, customers and members, and that “if an employee engages in severe misconduct, organizations may face legal actions from customers, shareholders or other employees in the form of negligent hiring, negligent retention, vicarious liability lawsuits or other legal claims.” Walters cited a report on occupational fraud and abuse conducted by the Association of Certified Fraud Examiners, which found that “living beyond financial means” (43 percent of cases) and “experiencing financial difficulties” (36 percent) were the two most common warning signs displayed by perpetrators of workplace fraud. Walters noted that an earlier report by this association concluded: “Given that financial difficulties are often associated with fraudulent behavior, it would seem advisable for organizations to devote more efforts to conducting credit background checks on new applicants.”

Walters agreed with her fellow panelists who stated that there are many misconceptions about the employment use of credit checks. In her written testimony, Walters outlined the results of a study conducted by SHRM, which included the following findings:

• Credit checks on all job candidates are the exception—not the rule. Only 13 percent of organizations conduct credit checks on all job candidates. While another 47 percent of employers consider credit history, they do so only for candidates for select jobs.
• Many organizations do not conduct credit checks at all. Four out of 10 organizations revealed that they do not conduct credit checks at all.
• Employers generally conduct credit checks only for certain positions. Those positions include ones with financial or fiduciary responsibilities (91 percent of employers that conduct credit checks), senior executive positions (46 percent), and ones with access to highly confidential employee information (34 percent). In other words, organizations conduct credit checks when this information is most job-relevant to the particular position.
• Credit history is not among the most important factors in making a hiring decision. Credit checks ranked the lowest among a list of criteria employers typically use in making hiring decisions.
• Employers overwhelmingly use credit checks at the end of the hiring process, not to screen out applicants up front. At least 87 percent of organizations initiate credit checks only after a contingent offer (57 percent) or after the job interview (30 percent). This finding substantiates other data showing that organizations place relatively more importance on other job-relevant factors in making hiring decisions.
• Medical treatment debt is not considered during hiring process. Of the relatively few employers that check applicants’ credit reports, practically no employers consider past medical-related debt (1 percent) and very few consider home foreclosures (11 percent) when making an employment decision.
• Employers regularly go beyond current law requirements and allow candidates to explain their credit history. According to the survey, 87 percent of organizations allow job candidates, in certain circumstances, the opportunity to explain results of their credit report.

These results indicate, according to Walters, that employers are not taking a uniform approach to conducting credit checks for hiring purposes, and are instead using this tool on a case-by-case basis.

The panelist also noted that given the employee protections afforded by the FCRA and Title VII of the Civil Rights Act, the EEOC’s current guidance on credit checks is sufficient. As Maneesha Mithal, Associate Director of the Federal Trade Commission’s Division of Privacy and Identity Protection, explained, the FCRA offers a number of protections against credit reporting abuse. Mithal noted that “[i]n the employment context, permissible purposes of a consumer report are limited to ‘employment, promotion, reassignment, or retention.’ Thus, employers may only obtain a consumer report about employees or applicants, and may not simply use their status as employers to get consumer reports about competitors, opposing parties in litigation, or anyone else.” She emphasized that the FCRA imposes on employers certain obligations, including the duty to provide notices to consumers and obtain their consent when using consumer reports for employment purposes.

A complete list of the panelists, their testimony, and a transcript of the meeting can be found here. 

The EEOC’s meeting is part of a recent trend focusing attention on the use of employment credit screening. In September, the House Financial Services Committee held a hearing on the Equal Employment for All Act (H.R. 3149), legislation introduced this session that would, with certain limited exceptions, prohibit the use of credit checks on prospective and current employees for employment purposes. The limitations imposed by this bill would not apply to job applicants subject to a national security clearance, those applying for public-sector positions that require a credit check, or candidates for supervisory or managerial positions at financial institutions.

Earlier this month, the U.S. Supreme Court heard oral arguments in NASA v. Nelson, a case that addresses the National Aeronautics and Space Administration’s (NASA) right to conduct background investigations for employees working on federal contracts. As a panelist pointed out during the EEOC meeting, given the government’s position in NASA v. Nelson and H.R. 3149’s exceptions, there is a general acknowledgement that credit checks are relevant for positions in which a professional is required to manage financial or sensitive information. A number of panelists at the EEOC’s meeting argued that these same considerations and concerns exist in the private and non-profit sectors, therefore warranting the use of background checks.

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Entities covered by the measure include all businesses or organizations, whether public, private, for-profit, nonprofit, or voluntary that provide care, care placement, supervision, treatment, education, training, instruction, or recreation to children, including a business or organization that licenses, certifies, or coordinates individuals or organizations to provide care, care placement, supervision, treatment, education, training, instruction, or recreation to children. The terms of the legislation would require the Attorney General to establish a program to streamline the process of obtaining nationwide criminal background checks and facilitate access to such screens by participating entities. The Attorney General, who administers the program, would not be permitted to charge more than $25 plus FBI processing fee per background check.

The Senate has introduced a companion bill (S. 1598) that has been referred to the Senate Judiciary Committee.

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