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Legal Report January 2011


EMPLOYMENT. A federal appeals court has ruled that a company’s unwritten policy denying employment to applicants with theft-related convictions is sufficient to thwart a racial discrimination lawsuit. A woman who claimed she was not hired because of her race may not pursue her lawsuit because her theft convictions would have disqualified her.

Roberta Hollins heard about a possible job opening at Con-Way Freight in Poplar Bluff, Missouri. A friend arranged a meeting between Hollins and the branch manager, Kenneth Gaffney. Gaffney told Hollins that he was attempting to create a part-time customer service position. He interviewed Hollins for that job, and she completed an application, disclosing two misdemeanor shoplifting convictions. Gaffney told Hollins that he would inform her when the position became official.

Gaffney was impressed with Hollins and approached Kevin Beer, regional manager for Con-Way, about creating the customer service job. When Beer learned that Hollins was black, he warned Gaffney not to hire her, saying that doing so would be “opening up a can of worms.” Gaffney was granted permission to continue inter viewing additional applicants for the potential job.

Gaffney also called Hollins in for a second interview and said that she might be subjected to racially derogatory comments in the workplace. After completing his round of interviews, Gaffney still listed Hollins as his first choice, with another applicant, who was white, as an alternative. Both women later testified that Gaffney had offered them the job.

Gaffney then violated company policy by asking both women to submit to a drug test. Under Con-Way policy, a manager may not send a candidate for a drug test or make an offer of employment until a background check is completed. This policy was based, in part, on the fact that a candidate could not be hired if a theft-related conviction appeared on the background check.

Before Gaffney could extend a job offer to either candidate, he was fired. When Hollins called to inquire about the drug test results, Beer informed her that there was no position available. When Hollins said that she had already been hired, Beer told her that he would look into the matter and get back to her. He did not.

Gary Sellers was hired to replace Gaffney. After Sellers had been on the job some time, he was contacted by Anthony Godwin. Godwin claimed that he had been promised a job as a part-time customer service representative. Sellers obtained approval to fill the position and hired Godwin. Hollins filed a racial discrimination claim with the Equal Employment Opportunity Commission (EEOC), which filed a lawsuit against Con-Way.

The U.S. District Court for the Eastern District of Missouri found for Con-Way, ruling that Hollins’ convictions disqualified her for the position so she could not pursue a discrimination claim.

The EEOC appealed the decision, arguing that were it not for Beer’s discrimination, Gaffney would have been able to proceed more quickly in hiring Hollins. The U.S. Court of Appeals for the Eighth Circuit disagreed, noting that this fact would not have changed the theft convictions. In the written opinion of the case, the court wrote that “even if Mr. Gaffney had attempted to hire Ms. Hollins, ConWay’s policy of automatically disqualifying applicants with theft-related convictions would have resulted in Ms. Hollins’ application being rejected.”

The EEOC also maintained that the existence of Con-Way’s policy on theft-related convictions was in doubt because the policy was not written down. The appeals court ruled that, despite the lack of a written policy, a reasonable person could conclude that such a policy was in place. The court noted that Con-Way provided evidence that it had disqualified 28 applicants in 18 months because of theft-related convictions uncovered on background checks, and no employees working at the Poplar Bluff center had such convictions on their records. (EEOC v. Con-Way Freight, Inc., U.S. Court of Appeals for the Eighth Circuit, No. 09-2926, 2010)

PRIVACY. The Lower Merion (Pennsylvania) School District has agreed to pay $610,000 to settle a lawsuit brought by students who claimed that district employees spied on the students using two-way Web cams that were incorporated into school-issued laptops.

Students in Lower Merion High School were issued the laptops as part of a new learning initiative designed to allow students to have constant access to school resources and work on projects at school and at home. The materials accompanying the laptop did not reveal that the school could remotely activate the embedded Webcam and obtain images of anyone or anything in range of the Webcam at any time.

One student, Blake Robbins, became aware of the school’s ability when he was contacted by the assistant principal. The official accused Blake of engaging in “improper behavior” in his home. As evidence of the wrongdoing, the school produced a photograph from the Webcam embedded in Blake’s school-issued laptop.

Blake’s father, Michael Robbins, then verified that the school could remotely activate the Webcam and view and capture any images within the view of the Webcam, even if the student was not using the computer at the time. Robbins then filed a lawsuit against the school claiming that it invaded Blake’s privacy.

The suit also charged that the school violated the Electronic Communications Privacy Act, the Computer Fraud Abuse Act, and the Fourth Amendment to the U.S. Constitution.

The school, which captured at least 56,000 images through the Webcams, claimed that it used them to locate laptops that had been stolen. However, for about 40 students, the Webcams kept taking photos, some as frequently as every 15 minutes. The school has suspended the tracking program.


BACKGROUND SCREENING. The Equal Employment Opportunity Commission (EEOC) held a hearing to explore the use of credit checks in preemployment screening programs. The EEOC is investigating the issue to determine whether credit checks are creating an obstacle to employment in a poor economy, especially for minority applicants. At the hearing, witnesses discussed the usefulness of credit checks in hiring decisions and whether the practice is widespread among employers. Other issues included whether existing law provides sufficient safeguards for employees.

Michael Aamodt, principal consultant with DCI Consulting Group, Inc., in Washington, D.C., testified that little scientific research exists on the topic of credit checks and poor performance. “This lack of research is especially important to note because there have only been five studies that investigated actual credit history rather than self-reported levels of financial stress.” Aamodt testified. “When these studies are combined using meta-analysis… financial problems seem to be correlated most highly with absenteeism and least highly with performance ratings.”

Sarah Crawford, with the Lawyers’ Committee for Civil Rights Under Law in Washington, D.C., also argued that credit checks do not provide the context necessary for employers to make informed decisions. “While credit reports may show whether bills have been paid on time, they do not reflect the circumstances surrounding debts or reasons for any late payments,” noted Crawford. “A credit report would not explain that a man’s credit was destroyed because he was the victim of identity theft.”

However, some witnesses argued that companies don’t conduct credit checks as often as the public suspects, meaning that the problem may be one of perception rather than reality. For example, Michael Eastman, executive director of labor law policy for the U.S. Chamber of Commerce testified that his informal survey of businesses yielded a surprisingly small number of firms that conducted credit checks. “In fact, some of the largest employers in the United States told me that, while they reserve the right to look at credit history, they currently do not look at credit history for any of their employees,” noted Eastman.

Eastman went on to say that employers who did include credit check information in their background screening process did not do so for all applicants. He gave the example of a company in the insurance services industry which employs approximately 5,000 employees in the United States and includes credit history as a component of the background check for only about 100 of them because they have direct access to the company’s funds or to client funds.

According to Eastman, this company suffered from embezzlement four times in the past when employees stole client money, so examining credit history is an important tool in making hiring decisions for those positions. However, Eastman also noted that the company anticipates reducing the number of positions for which it examines credit history because technology is making it more difficult for employees with access to client funds to embezzle.

In addressing the issue of how an applicant came to be in debt, Eastman testified that companies do consider context. “It is my experience that employers are much less likely to be concerned with debt that arose as a result of a medical issue, a period of unemployment, or a divorce,” he said. “On the other end of the spectrum, some types of debt might raise red flags more quickly, such as gambling debt.”

Some companies are required to conduct background checks that include credit reports. Christine V. Walters, owner of FiveL Company in Westminster, Maryland, who testified on behalf of the Society for Human Resource Management noted that state and local statutes often require companies to conduct credit checks on employees in certain positions. Licensed healthcare professionals, day care providers, teachers and athletic coaches, and police officers and firefighters are just a few of the positions requiring a credit check, according to Walters.

Industry standards also factor into screening decisions, Walters noted. She cited the Payment Card Industry’s Data Security Standards, otherwise known as PCI Compliance as an example. Under the standard, companies that process consumer credit card data must conduct credit checks on employees who handle that data or have access to computer networks where the information is stored.

Maneesha Mithal, associate director for the division of privacy and identity protection for the Federal Trade Commission testified that the federal Fair Credit Reporting Act already places requirements on employers who use credit history in making hiring decisions. And existing EEOC guidelines caution employers to examine hiring practices to avoid a disparate impact on minority applicants.

The EEOC plans to hold more hearings on the issue. In her testimony, Crawford urged the EEOC to issue guidance. While some issues have been addressed in other documents, such as the EEOC’s Guide to Pre-Employment Inquiries, there has been no comprehensive guidance on the use of credit history in preemployment screening.



SCHOOL SAFETY. A new law (previously H.B. 4647) requires that the Chicago school system establish a violence-prevention hotline. The hotline will be developed in conjunction with the Chicago Police Department, and each call that comes in to the hotline will be answered by police department staff. Police will be required to record and investigate each call.


GUARD TRAINING. A new law (formerly S.B. 2165) in Hawaii sets out training, testing, and continuing education requirements for security guards and those “acting in a guard capacity.” Before starting work as a security guard, individuals must complete eight hours of classroom instruction, pass a written exam, and undergo four hours of on-the-job training. All guards must also undergo a federal criminal background check.

This column should not be construed as legal or legislative advice.