Bank of America seeking federal court review of latest ARB decision in 20-plus-year dispute with OFCCP
Earlier this week, Bank of America (BOA) filed a complaint seeking federal court review of the DOL Administrative Review Board’s (ARB) latest ruling in a case that started with the initiation of an OFCCP compliance review over two decades ago. In its most recent ruling, an ARB panel unanimously affirmed an ALJ’s conclusions that the bank intentionally discriminated against African Americans in 1993 as well as the ALJ’s award of remedies on those claims. However, a majority of the ARB panel found that the OFCCP failed to prove that BOA was liable for the damages awarded for alleged discrimination in 2002-2005, and therefore, reversed the ALJ’s liability and remedy orders pertaining to 2002-2005 period (OFCCP v Bank of America, ARB Case No 13-099 (ALJ Case No 1997-OFC-016), April 21, 2016).
The bank’s complaint, filed in the federal district court for the District of Columbia on May 23, 2016 (dkt no 1:16-cv-968), alleges that the ARB’s conclusion that BOA intentionally discriminated against African American applicants in 1993 was erroneous because it:
- is based upon a fundamental misunderstanding of the nature of a pattern or practice of intentional discrimination case, of the proof required in such a case, and of the use and meaning of statistics in such a case;
- is contrary to the OFCCP’s established procedures, practices and regulations; and
- fails to consider or account for all of the evidence, is contrary to the evidence, and is unsupported by substantial evidence.
BOA also challenges the ARB’s remedy award and its conclusion that the bank voluntarily consented to the compliance review, claiming that the agency violated the Fourth Amendment when it selected the bank for the compliance review. The ARB decision at issue is discussed below.
Procedural history. The case began in November 1993 when the OFCCP initiated a compliance review of the bank’s (at that time known as NationsBank) Charlotte, North Carolina facility. In April 2004, the bank responded without objection by providing the documents requested by the OFCCP and permitting the agency to conduct an onsite investigation. After the OFCCP advised the bank of its findings of discrimination, first in October 1994 and then with a revised notice in June 1995, the bank brought a federal court challenge to the agency’s authority to conduct the review, arguing that the OFCCP’s action violated the bank’s Fourth Amendment rights. When the court challenge failed (NationsBank Corp v Herman, 4thCir, No 98-1127, April 6, 1999 (75 EPD ¶45,814); cert. denied, sub nom. Bank of America Corp v Herman, USSCt, No 99-394, December 6, 1999) and Labor Department attorneys filed an administrative complaint, the bank pursued the case in the administrative forum.
The ARB ruled in 2003 (ARB Case No 00-079) that if the bank had consented to the review, there was no Fourth Amendment violation. In 2004, ALJ Linda Chapman held on remand that the bank had, in fact, consented. The bank unsuccessfully sought an interlocutory appeal of that order (ARB Case No 04-169). On January 21, 2010, the ALJ issued a Recommended Decision and Order finding the bank violated Executive Order (EO) 11246 by discriminating against African-American job applicants for entry level positions at the Charlotte facility in 1993 and from 2002 to 2005.
Specifically, ALJ Chapman held that the bank intentionally discriminated against African-American clerical, clerical/administrative and bank teller applicants at its Charlotte facility because the OFCCP sufficiently demonstrated that there were substantial disparities in selection rates for the particular jobs at issue. She also held that the bank’s failure to retain records as required by law without justification did not lessen the statistical disparities found by the OFCCP’s expert. The ALJ retained jurisdiction over the case in order to determine what remedies should be provided by the bank.
On April 29, 2010, the ARB denied BOA’s request for an interlocutory review and remanded the case to the ALJ for further proceedings and “to issue a recommended decision resolving this case in its entirety” (ARB Case No 10-048).
On September 17, 2013, ALJ Chapman issued a ruling awarding over $2 million in damages. Because she found in her 2010 ruling that the bank discriminated against African-American job applicants for entry level positions, she resolved ambiguities in favor of the OFCCP in determining the damages award. Moreover, she adopted the methodologies offered by the OFCCP’s expert over those offered by BOA’s expert, in part due the bank’s failure to maintain and produce relevant records. The ALJ also ordered the bank to extend job offers, with appropriate seniority, to ten people in the affected classes, and to report on the progress of these job offers to the OFCCP. Once again, BOA appealed to the ARB.
Fourth Amendment. Prior to addressing the merits, the ARB briefly addressed BOA’s objections to the OFCCP’s selection of the Charlotte facility. The ARB concluded that the ALJ’s 2004 summary judgment ruling on that issue, combined with BOA’s failure to present additional evidence at the subsequent merits hearing—aside from what the bank had already presented in support of its argument that the OFCCP’s scheduling letter was coercive, which was rejected by the ARB in its 2003 ruling—settled this issue. Consequently, the ARB found that its 2003 ruling was dispositive on the Fourth Amendment issue.
Burden of proof. The ARB began its analysis of the merits by clarifying the burdens and standards of proof required to establish a pattern or practice of intentional discrimination in violation of Executive Order (EO) 11246. To frame the discussion, the ARB pointed out that, as confirmed during oral argument, the OFCCP unequivocally chose to pursue only claims of intentional disparate treatment, meaning that the agency was not pursuing a disparate impact claim or a claim that the bank violated its affirmative action obligations under the laws enforced by the OFCCP. The parties did not dispute that, in order to prevail on its intentional disparate treatment claims under the pattern or practice theory, the OFCCP was required to prove that unlawful discrimination was the bank’s regular procedure or policy.
Noting that, at this stage of the litigation, it was not was not required to engage in the burden of production analysis, the ARB explained that in reviewing the ALJ’s ruling on the merits, its focus was on the ultimate question of whether the OFCCP proved that BOA engaged in a pattern or practice of intentionally rejecting African-American applicants and that race was a factor. Explicitly rejecting the OFCCP’s argument that the bank failed, as a matter of law, to present proper rebuttal evidence on the question of intentional discrimination, the ARB admonished that “the burden of proof always remains with the OFCCP.” Rebuttal evidence includes any evidence that attacks the validity of the agency’s proof, supports an alternative causation theory, or does both, the ARB explained. Here, BOA presented evidence before the ALJ to show that the statistical disparities at issue were not as significant as the OFCCP’s expert claimed and that reasons other than discrimination caused the hiring disparities between white and African-American applicants.
Statistical evidence. In a pattern or practice claim of intentional race discrimination, the OFCCP must show that there was a sufficient disparity and prove that race was a motivating factor. Recognizing that “some disagreement continues in the courts about the role of statistical evidence in employment discrimination cases,” the ARB then discussed a few principles that “seem fairly established.” First, statistical evidence may be used to rule out chance as a likely reason for a significant racial disparity, and courts have consistently found significance in disparities exceeding the two standard deviation mark. Still, ruling out chance does not automatically mean race discrimination was a motivating factor, but it makes such a reason a viable factor that could be inferred, the ARB explained.
“The more severe the statistical disparity, the less additional evidence is needed to prove that the reason was discrimination,” the ARB wrote. “Indeed, very extreme cases of statistical disparity may permit the trier of fact to conclude intentional race discrimination occurred without needing additional evidence.”
Rulings as to 1993 claims affirmed. Affirming the ALJ’s finding that BOA intentionally discriminated against African-American applicants in 1993, the ARB concluded that the evidence supported these findings and established a pattern or practice by the bank of intentional racial discrimination against African-American applicants in 1993 for jobs in two specific job groups: (1) a group consisting of bank tellers for prime time, full-time and part-time positions, and (2) a group consisting of several clerical and administrative positions, including data entry operators, account clerks and remittance processing specialists.
When an applicant was disqualified or rejected for a job position, the bank used disposition codes to record the reason. For the job groups at issue, two of these disposition codes fell substantially more harshly on African-American applicants than white applicants; one disqualified applicants because of credit checks and the other disqualified applicants for incompatible hours. In her ruling on the 1993 claims, the ALJ relied on a variety of evidence, including: (1) multiple statistical analyses showing significant standard deviations occurred at various stages of the hiring process and when employment offers were made, (2) the lack of standards for some decision-making processes, (3) anecdotal evidence of arbitrary treatment, and (4) troubling and unexplained disparate use of the “incompatible hours” disposition code. Moreover, there was unrefuted evidence that the “credit check” and “incompatible hours” disposition codes eliminated a grossly disproportionate number of African-American applicants compared to white applicants. The ARB could not identify any objective standards that BOA applied that could explain the gross disparity in the bank’s use of these codes, adding that “[w]e cannot imagine a rational objective reason for a gross disparity in the use of the [“incompatible hours”] code. Even more troubling to the ARB was evidence in the record suggesting the race of the applicants may have been known for some applicants at the time these two disposition codes were applied.
The ARB also affirmed the ALJ’s damages award, finding it to be a reasonable remedy for the unsuccessful 1993 African-American applicants. In addition, the ARB ordered the bank to pay an amount of additional interest on the back pay award for the period from September 18, 2013, to the date on which BOA has paid the monetary judgement in full.
Rulings as to 2002-2005 claims reversed. As to the discrimination claims for the period 2002-2005, the ARB majority ruled that the OFCCP improperly found BOA liable. Therefore, the ARB reversed the ALJ’s finding of a pattern or practice of intentional discrimination during the 2002-2005 period and reversed the ALJ’s remedy orders pertaining to that period.
To begin with, the ARB determined that it had to analyze the 2002-2005 time period as a follow-up, but separate, claim of pattern or practice race discrimination and not as a continuation of the same 1993 pattern or practice claim because the ten-year gap of data and evidentiary information between these time periods prevented any realistic ability to logically connect the two. Among other reasons, the ARB noted that the OFCCP expert’s statistical analysis for the 1993 period had many different standard deviation analyses and tests, while his 2002-2005 analyses rested on only two or three bottom line conclusions for the entire period. Also, fundamental changes occurred with BOA and its hiring process between 1993 and 2002, the ARB observed. The bank changed from NationsBank to BOA. The recruiting process dramatically changed, including the number of recruiters (from two to 58) and the discontinued use of credit checks and drug tests.
In contrast to the variety of evidence that supported the ALJ’s rulings on the 1993 claims, the ARB noted that for the 2002-2005 claims, the ALJ relied on only the statistical disparity of that four-year period as a whole. The ARB also drew other contrasts between the evidence presented for the 1993 period and that presented for the 2002-2006 period. First, dissimilar from the 1993 period, there was no evidence that BOA used the “credit check” and “incompatible hours” disposition codes or other code to eliminate African-American applicants disproportionately during the 2002-2005 period. Second, contrary to the 1993 standard deviation analysis, the OFCCP’s evidence of discrimination in 2002-2005 boiled down to one standard deviation of 4.0 (or 4.1) for the four-year period, but no standard deviation conclusions year by year. Third, unlike the 1993 analyses, the OFCCP did not argue that there were statistically significant standard deviations for one or more stages of the hiring process. In terms of raw numbers for each year, two of the four years failed to provide powerful statistical evidence of intentional discrimination. Specifically, in 2003, 44 African Americans were offered a job instead of the expected number of 47.9, and in 2005, 32 instead of 34.5.
“These are small shortfalls,” the ARB majority observed. “Without more evidence, one bottom line standard deviation of 4.0 for four years with minor shortfalls in two of those years is not enough in this particular case to prove a pattern or practice of intentional racial discrimination.”
Concurrence. Administrative Appeals Judge Luis A. Corchado wrote the opinion for the ARB majority. Judge E. Cooper Brown concurred, but wrote separately to express his opinion that the bank’s due process rights were violated by the way in which the OFCCP incorporated the job data for 2002-2005 into the enforcement proceeding before the ALJ without having first afforded BOA the procedural protections mandated under EO 11246 and OFCCP regulations. “[A]s the comments accompanying the regulations in effect at all times relevant to this action attest, up until the present case it has apparently been the OFCCP’s practice to limit its assessment of liability for discriminatory practices in a contractor’s employment practices to the two-year period prior to the initiation of a compliance review,” Brown wrote. Therefore, he found the OFCCP’s actions as to the 2002-2005 claims were both arbitrary and capricious, and consequently, rejected the ALJ’s finding of liability for that period on those ground.
Dissent. Judge Joanne Royce concurred as to the Fourth Amendment and 1993 discrimination liability rulings, but disagreed with the panel majority’s finding that BOA may not be held liable for the discrimination alleged during the 2002-2005 time period. The OFCCP offered a statistical analysis in support of the 1993 claims that demonstrated discrimination against many of the same class of applicants and in the same facility, between 2002 and 2005, she noted. Agreeing with the ALJ, Royce concluded that BOA neither successfully attacked the OFCCP’s statistical method nor demonstrated that the statistical disparities could be explained by non-discriminatory factors. Accordingly, she would affirm the ALJ’s finding that the OFCCP established by a preponderance of the evidence “that BOA’s illegal practices against African-American candidates for entry level positions continued over an extended period of time as demonstrated by the statistical disparity of 6.9 standard deviations for entry level positions between African-American and white job applicants during 1993, and a statistical disparity of 4 standard deviations for similar entry level positions during 2002-2005.”
[Note: This case (ALJ Case No 1997-OFC-16) is not to be confused with the other long-term OFCCP litigation against BOA (ALJ Case No 2006-OFC-003), which ended on January 12, 2015, when the D.C. Circuit issued an order granting Bank of America’s “Consent Motion to Dismiss” the bank’s appeal of a July 2014 decision by a federal district court for the District of Columbia that upheld a 2009 DOL ARB decision in favor of the agency. That case involved OFCCP charges of gender and race bias in compensation and the bank’s claim that the agency violated its Fourth Amendment rights.]
Since mid-2009, 23 complaints have been filed with the New York State Division of Human Rights (SDHR) against the Service Employees International Union Local 32BJ (SEIU), in which the union was alleged to have discriminated against an employee member. Each of those complaints was filed against the union in its capacity as an employee’s collective bargaining representative, and involved allegations that the union failed to demand arbitration, failed to handle an arbitration properly, or engaged in some other discriminatory conduct in its role as collective bargaining representative, in violation of the New York Human Rights Law (HRL).
The union consistently made written submissions to SDHR arguing that its duty of fair representation (DFR) arising from the NLRA “preempted the SDHR’s investigation and prosecution of the administrative complaint and deprived it of jurisdiction over such a complaint.” For its part, the SDHR has disagreed, and has continued to investigate and issue final determinations in such cases.
Declaratory relief. Finally, in Figueroa v. Foster, the SEIU sought judicial relief and filed suit alleging that it was entitled to a declaratory judgment finding that its duty of fair representation preempted claims made against it under the HRL when acting in its capacity as collective bargaining representative.
Currently, SEIU represents over 81,000 employees in New York State. Each collective bargaining agreement to which it is a party includes a mechanism for resolving disputes regarding discipline or termination of employees. Union members notify the union when they believe they have been treated unfairly, and it evaluates and investigates requests to file grievances, attempts to resolve grievances, and determines whether to demand arbitration of unresolved grievances.
Duty of fair representation. Unions owe the employees they represent a duty of fair representation (DFR) in enforcing collective bargaining agreements. “[W]hen a union’s conduct toward a member of the collective bargaining unit is arbitrary, discriminatory, or in bad faith,” it breaches this duty. The DFR arises by implication under the NLRA. “Under this doctrine, the exclusive agent’s statutory authority to represent all members of a designated unit includes a statutory obligation to serve the interests of all members without hostility or discrimination toward any, to exercise its discretion with complete good faith and honesty, and to avoid arbitrary conduct.”
The federal duty of fair representation will preempt state law unless a state claim can be “shown to arise wholly outside the ambit” of the DFR, “that is, unless it involved union activity that was peripheral to the concern of the applicable federal statutes and presented only a tangential or remote potential conflict with the federal regulatory scheme.” Federal appellate courts have consistently held that the DFR preempts substantive state law. Although “[t]he Second Circuit has not addressed the issue of whether the NYSHRL or NYCHRL are preempted by the duty of fair representation,” the “vast majority” of cases in the circuit hold that the DFR preempts the HRL in situations where the union was acting in its capacity as the plaintiff’s collective bargaining representative.
Co-exist. Against this backdrop, the court declined SDHR’s invitation to disregard the overwhelming weight of precedent and to conclude instead that the DFR does not preempt state anti-discrimination law. The NLRA does not expressly preempt state law, nor did the parties argue that enforcement of the HRL conflicts with federal law—rather, the DFR has been held to preempt state laws because “[a] union’s rights and duties as the exclusive bargaining agent in carrying out its representational functions” comprise an area in which “Congress has occupied the field and closed it to state regulation.”
Title VII and the DFR co-exist. “It is well established that a union’s duty breach of its duty of fair representation may subject it to liability under Title VII.” Likewise, Title VII and the HRL complement each other. “State laws obviously play a significant role in the enforcement of Title VII.” However, the court rejected SDHR’s proposition that the interplay between Title VII and the HRL prevents preemption by the DFR. Rather, the DFR works in tandem with Title VII and a breach of the DFR is an element of Title VII claims of discrimination against unions acting as collective bargaining representatives. The synergies between Title VII and the DFR, and between Title VII and the HRL, do not prevent the DFR from preempting the HRL.
The fact that the DFR preempts the HRL merely means that when a union discriminates in its role as a collective bargaining representative, the aggrieved party has recourse under Title VII and the DFR. Here, the court found that the duty of fair representation arising from the NLRA preempts the HRL to the extent that the claimed discrimination arises from acts or omissions of a labor organization acting in its role as a collective bargaining representative under the NLRA. Accordingly, the SEIU was entitled to declaratory judgment regarding the preemptive effect of the DFR.
In a case interpreting a statutory provision allowing district courts to award attorneys’ fees to defendants in employment discrimination actions under Title VII, Justice Kennedy, writing for the Supreme Court, held that a defendant need not obtain a favorable judgment on the merits in order to be a “prevailing” party. The Court reversed an Eighth Circuit decision holding that a Title VII defendant can be a prevailing party only by obtaining a “ruling on the merits” and that the district court’s dismissal of the EEOC’s claims against CRST Van Expedited, including those on behalf of 67 women that it found to be barred based on the Commission’s failure to adequately investigate or attempt to conciliate, was not a ruling on the merits. “Common sense undermines the notion that a defendant cannot ‘prevail’ unless the relevant disposition is on the merits,” the Court observed, noting that plaintiffs and defendants come to court with different objectives and that a defendant has fulfilled its primary objective whenever the plaintiff’s challenge is rebuffed, irrespective of the precise reason for the court’s decision (CRST Van Expedited, Inc. v. EEOC, May 19, 2016, Kennedy, A.).
EEOC suit. In 2007, the EEOC filed a sweeping Title VII suit against trucking company CRST, after a female driver alleged that two male trainers sexually harassed her during an over-the-road training trip. During its investigation, the agency discovered that four other women had filed charges against the company. It ultimately informed the company that it found reasonable cause to believe it subjected the employee and a class of prospective employees to sexual harassment. After conciliation efforts failed, the EEOC sued CRST under Section 706 of Title VII, alleging it was responsible for severe or pervasive sexual harassment in its new-driver training program. The agency claimed CRST subjected approximately 270 similarly situated female employees to a hostile work environment.
In a series of rulings, the district court barred the EEOC from pursuing relief for individual claims on behalf of all but 67 of the women, based variously on discovery sanctions; the statute of limitations; judicial estoppel; CRST’s lack of knowledge of the alleged harassment; insufficient evidence of severe or pervasive sexual harassment; failure to report harassment; and because the EEOC failed to investigate, issue a reasonable cause determination, and conciliate the claims of a number of putative class members. It also found that the Commission had not established a pattern or practice of tolerating sexual harassment.
Attorneys’ fees vacated. Dismissing the suit, the district court held that CRST was the prevailing party. Finding that the Commission’s failure to satisfy its pre-suit obligations on behalf of the final 67 women was unreasonable, it subsequently awarded the company over $4 million in attorneys’ fees. On appeal, the Eighth Circuit reversed only the dismissal of claims on behalf of two women and vacated the attorneys’ fee award, finding that CRST was no longer a prevailing defendant because the Commission still asserted live claims against it.
On remand, the Commission settled the claim on behalf of one claimant and withdrew the other. CRST again sought attorneys’ fees, and the district court again awarded it more than $4 million. Holding that a Title VII defendant can be a prevailing party only by obtaining a ruling on the merits, the Eighth Circuit again reversed. It reasoned that because Title VII’s pre-suit requirements are not elements of a Title VII claim, the dismissal of the claims regarding the 67 women on the ground that the Commission failed to investigate or conciliate was not a ruling on the merits and CRST did not prevail on those claims.
Merits decision not required. In reversing and remanding the Eighth Circuit, the High Court found no indication that Congress intended that defendants should be eligible to recover attorney’s fees only when courts dispose of claims on the merits. “The congressional policy regarding the exercise of district court discretion in the ultimate decision whether to award fees does not distinguish between merits-based and nonmerits-based judgments,” the Court stated, noting that as it explained in Christiansburg Garment Co. v. EEOC, one purpose of the fee-shifting provision is “to deter the bringing of lawsuits without foundation.”
Thus, said the Court, it has interpreted the statute to allow prevailing defendants to recover whenever the plaintiff’s claim was frivolous, unreasonable, or groundless. “Congress must have intended that a defendant could recover fees expended in frivolous, unreasonable, or groundless litigation when the case is resolved in the defendant’s favor, whether on the merits or not. Imposing an on-the-merits requirement for a defendant to obtain prevailing party status would undermine that congressional policy by blocking a whole category of defendants for whom Congress wished to make fee awards available,” the Court wrote.
Noting that various courts of appeals have applied the Christiansburg standard when claims were dismissed for nonmerits reasons, the Court here explained that in cases like these, significant attorney time and expenditure may have gone into contesting the claim, and Congress “could not have intended to bar defendants from obtaining attorney’s fees” on the basis that, although the litigation was resolved in their favor, they were nonetheless not prevailing parties.
Preclusive judgment. As to the Commission’s argument that a defendant must obtain a preclusive judgment in order to prevail, the Court declined to decide this issue, noting that the Commission changed its argument between the certiorari and merits stage and may have forfeited the preclusion argument by not raising it earlier.
The court left the ultimate decision on attorneys’ fees for the Eighth Circuit to consider.
Justice Thomas’ concurrence. In a separate opinion, Justice Thomas agreed that the Court correctly vacated the Eighth Circuit’s ruling and joined its opinion in full. He asserted, however, his belief that Christiansburg “is a ‘dubious precedent’ that I will ‘decline to extend’ any further.”
Impact on employers. Commenting on the decision, Employment Law Daily advisory board member David Wachtel (Trister, Ross, Schadler & Gold, PLLC) noted that the CRST decision “should not result in an increase in fee awards for employers, or discourage employees from filing suits, because the Court leaves intact the requirement that a defendant can only obtain fees after showing that the employee’s position was ‘frivolous.’” Only Justice Thomas expressed a desire to overturn that heightened standard for defendants, he observed.
“EEOC seems to have survived to fight another day. In the Court of Appeals, they may argue that CRST did not prove that the case was frivolous, or that CRST does not get fees because it did not obtain a judgment with preclusive effect,” he stated, noting that the Court mentioned that the latter argument might get knocked out because it was not raised until EEOC’s Supreme Court brief.
“It sounds strange that the Court, about 16 years ago, rejected the ‘catalyst theory’ for plaintiffs and now accepts it–or something like it—for defendants. But whether that holding is one-sided or not, I believe it won’t change the number of cases employees file,” Wachtel suggested.
In a Fair Credit Reporting Act (FCRA) case with clear implications for employers who rely on consumer reporting agencies to run background checks (and so must follow the Act’s notice requirements), the Supreme Court held that the Ninth Circuit erred in analyzing whether a plaintiff suing over inaccuracies in his credit report had Article III standing. Specifically, the appeals court analyzed whether the alleged injury (a statutory violation) was particularized but failed to also consider if the injury was “concrete”—both are required. Remanding for further analysis, the High Court noted that “bare” procedural statutory violations will not automatically confer standing, but they may be enough if there is a risk of real harm (Spokeo, Inc. v. Robins, May 16, 2016, Alito, S.).
Spokeo, a consumer reporting agency, operates a “people search engine” which searches various databases to gather and provide personal information about individuals to a variety of users, including employers wanting to evaluate prospective employees. According to the plaintiff, Spokeo violated the FCRA by generating a personal profile for him that contained inaccurate information (for example, it stated that he is married, with children, in his 50s, and has a job, all of which was incorrect). He filed a federal class action alleging the company willfully failed to follow reasonable procedures to assure maximum possible accuracy of consumer reports.
Proceedings below. Dismissing the suit, the district court held that the plaintiff did not allege injury in fact as required to establish standing to sue under Article III. The Ninth Circuit reversed. Based on the plaintiff’s allegation that “Spokeo violated his statutory rights” and the fact that his “personal interests in the handling of his credit information are individualized,” the appeals court found that he adequately alleged injury in fact.
Standing requires “concrete and particularized” injury. Reversing, the Supreme Court found that the Ninth Circuit’s injury-in-fact analysis was incomplete because it focused only on whether the alleged injury was “particularized” and left out the independent requirement that the injury be “concrete.” The High Court explained that a “concrete” injury need not be a “tangible,” but a plaintiff will not automatically satisfy the injury-in-fact requirement whenever a statute grants a right and purports to authorize a suit to vindicate it. Thus, while Congress plays an important role in identifying injuries and creating causes of action, there must still be a concrete injury, even in the context of a statutory violation. Thus a plaintiff cannot show a concrete injury by alleging a bare procedural violation, divorced from any concrete harm.
Risk of injury may be enough. That said, the High Court further explained that a risk of real harm can in some circumstances satisfy the requirement that an injury be concrete. Thus, a plaintiff in that type of case would not need to allege any additional harm beyond the one that Congress identified.
More information needed. As to the FCRA, Congress plainly sought to curb dissemination of false information by adopting procedures to reduce that risk. On the other hand, the plaintiff could not satisfy Article III by alleging “bare” procedural violations, because a violation of one of the Act’s procedural requirements might result in no harm. For example, wrote the Court, “even if a consumer reporting agency fails to provide the required notice to a user of the agency’s consumer information, that information regardless may be entirely accurate. In addition, not all inaccuracies cause harm or present any material risk of harm.” Because the Ninth Circuit failed to fully analyze whether the alleged injury was both particularized and concrete, the case was remanded.
Dissent. Justice Ginsburg, with whom Justice Sotomayor joined, agreed with “much of the Court’s opinion,” but parted ways as to the necessity of remand. Judging by what the Court said about “concreteness” as a reference to “the reality of an injury, harm that is real,” though not necessarily tangible, the plaintiff’s allegations crossed that threshold, found the dissent. He did more than allege a “bare” procedural violation—he complained of misinformation about his education, family situation, and economic status that affected his ability to find a job, including making it appear that he was overqualified for work he was seeking.
Experts react: “Mixed bag” ruling? Employment Law Daily reached out to advisory board member and experienced labor and employment attorney Chris Bourgeacq (The Chris Bourgeacq Law Firm) for his reaction: “The Court’s ruling may prove to be a mixed bag for employers and employees alike. Instead of bright-lining for both parties what is or is not a ‘concrete’ injury sufficient to satisfy Article III standing, the Court leaves us to guess in future cases—except where the only alleged violation is an incorrect zip code! The takeaway does not appear to strongly favor either side for FCRA claims, although we will certainly see some really creative descriptions of ‘intangible’ harm in future cases.”
What about mere “technical” FCRA violations? Asked about the impact of Spokeo on cases against employers that involve only technical violations—such as those involving non-substantive extraneous language in a pre-background check notice, which the FCRA requires must consist solely of a disclosure that a background check may be used in employment decisions—Bourgeacq opined that “[p]arties will continue to debate whether the plaintiff has alleged or can prove any concrete injury, even if only intangible, from a technical violation of the FCRA.” He suggested that examples can be gleaned from class actions involving data breaches, where plaintiffs argue numerous tangible and intangible harms due to a breach, including emotional distress, and time and money spent correcting credit reports.
Attorney Stephen Woods, chair of Ogletree Deakins’ Background Check Practice Group, found a slightly more positive effect for employers: “The Spokeo decision helps employers—by making it harder for plaintiffs’ lawyers simply to point to either extraneous information in a background check disclosure form/screen or an adverse action without the required pre-adverse action letter and attachments, and by doing so, automatically establish a “concrete” harm. The decision, however, leaves the door open on what the Ninth Circuit and other courts will decide qualifies as a concrete harm. A court may find the inclusion of a ‘liability release’ sentence satisfies the requirement if, for example, a plaintiff alleges the sentence distracted her from the required disclosure.”
Woods also cautioned: “Employers also should remember that Spokeo does not diminish state and local mini-FCRA requirements (e.g., the California ICRAA, New York’s Article 23-A, and New York City’s Fair Chance Act); as with the federal FCRA (especially until we see how lower courts will interpret Spokeo), employers should continue to be vigilant in complying with these local, state, and federal requirements.”
Expect more creative plaintiffs, not fewer FCRA cases. Bourgeacq gave this takeaway: “Don’t expect FCRA class actions to subside anytime soon as a result of today’s Spokeo decision. If nothing else, the decision calls for even more creativity in establishing intangible harms from hyper-technical missteps in FCRA compliance. Perhaps the real fix should be correcting the FCRA and eliminating the pitfalls for technicalities? But as a wise jurist once said, ‘One man’s technicality is another’s substantive right.’ And so it seems.”
Meanwhile . . . comply with FCRA requirements. While the effects of Spokeo play out, employers that rely on credit reporting agencies will justifiably remain concerned with the hyper-technical notice requirements of the Act. Briefly, the key FCRA provisions that seem to lead to lawsuits include the following requirements for employers:
- Before obtaining a consumer report with credit or criminal background info: In a stand-alone document, state that the information may be used for employment decisions. Do not put the notice in an application, and avoid extraneous language in the notice. Importantly: present any release form in a separate document to be read separately. If seeking an “investigative report” (based on personal interviews) disclose the individual’s right to a description of the nature and scope of the investigation. In a separate document get written permission to do the background check. Certify to the company supplying the report that you gave notice; got permission; complied with FCRA requirements; and will not violate federal or state laws.
- Before taking an adverse action based on the report: Provide a copy of the consumer report and “A Summary of Your Rights Under the Fair Credit Reporting Act.” Give the individual a chance to challenge or explain negative information.
- After taking the adverse action: tell the individual (orally, in writing, or electronically) that he or she was rejected because of information in the report; provide the name, address, and phone number of the company that sold the report; and state that he or she has a right to dispute the accuracy or completeness of the report, and to get an additional free report from the reporting company within 60 days.
Additional information on the FCRA’s requirements can be found in a joint publication from the EEOC and FTC: “Background Checks: What Employers Need to Know.” The FTC has also provided a summary of FCRA requirements in “Using Consumer Reports: What Employers Need to Know,” as well as information on recordkeeping requirements and proper disposal of background reports in “Disposing of Consumer Report Information? Rule Tells How.” Obviously, employers are well advised to seek the advice of an experienced employment law attorney before relying on consumer reports for background checks.
The U.S. Chamber of Commerce’s Workforce Freedom Initiative (WFI) on May 12 released a report that underscores labor law reforms that states can enact “to foster a favorable business environment.” The report is a virtual playbook for lawmakers who want to enact labor reforms, especially those aimed at curbing union activity, while still avoiding conflicts with federal law. The study, State Labor Law Reform: Tools for Growth, reviews 10 specific reforms that have been adopted by various states in recent years—for example, the right-to-work laws passed in Indiana, Michigan, West Virginia, and Wisconsin. Right-to-work laws generally bar requirements that workers must join unions or pay union fees as a condition of employment.
In the interest of fairness … From the employee perspective, however, “workforce freedom” and “right-to-work” laws may look a little different. “The interest of state governments in right-to-work laws is understandable,” according to the report. “Government data indicates a positive correlation between job growth and right-to-work.” According to an August 2015 briefing paper, The Union Advantage For Women, released by the Institute for Women’s Policy Research, however, “right to work” states are associated with lower wages for all workers (both union and nonunion), especially women.
However, in the context of the public at large, a January 2014 Gallop poll showed that Americans widely support right-to-work laws.
High- and low-profile reforms. Returning to the WFI report, it highlights not only high-profile state labor law reforms, but also lesser-known ones, such as the Nevada legislature’s passage of a mass picketing statute in 2015, a Tennessee statute that allows threats associated with union organizing to be prosecuted under the state’s bribery and extortion law, and state preemption statutes.
The 10 state labor law reforms featured in the report include: right-to-work laws; state franchise law reform; prohibitions on “labor peace” agreements; prohibitions on “project labor” agreements; state preemption of minimum wage and other city ordinances; state preemption of “wage theft” laws; mass picketing legislation; trespassing legislation; classifying “neutrality” and “card check” agreements as “things of value”; and prohibiting “card check” union organizing for public employees.
Picking up where federal law leaves off. The report also provides roadmaps for each the various state labor law reforms that, presumably, help lawmakers understand where federal law leaves off and state law picks up. “Many states have decided to take the lead in boosting their business climates by passing critical labor law reforms,” said Glenn Spencer, vice president of WFI. “Given the record of the past seven years, they’ve realized that Washington doesn’t always know best.”
Keeping unions in check. The majority of the featured labor reform laws are aimed at keeping unions in check—mostly music to the business community, which tends to view unions as a hindrance rather than a help. Still, a January 2015 Gallop poll found that Americans always have been more likely to say that they approve than disapprove of labor unions, and historically, have sympathized with unions over companies in labor disputes. Nonetheless, Gallop called the public’s appetite for strengthening unions “moderate at best.” Its data showed that 35 percent of Americans say they would personally like to see labor unions have more influence than they have today (January 2015), versus 27 percent who prefer less influence, and 23 percent who would like union influence to remain the same.
About the WFI. The Workforce Freedom Initiative calls itself “a grassroots mobilization and advocacy campaign to preserve democracy in the American workplace, restrain abusive union pension fund activism, and block the anti-competitive agenda advocated by many labor unions.”