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Dealership’s use of dismissed criminal conviction to terminate employee creates fact issue

By Ronald Miller, J.D.

The Labor Commissioner presented evidence sufficient to prove that the employer was aware or had reason to believe that the employee’s criminal conviction had been judicially dismissed.

A trial court erred in granting an employer’s motion for nonsuit in an action brought by the Labor Commissioner on behalf of the employee based on allegations that the employer violated Labor Code Sections 98.6 and 432.7 by using a record of a dismissed criminal conviction as a factor in the employee’s termination, ruled a California Court of Appeals. Here, the employer had credible information suggesting that a DMV report of an active criminal conviction was incorrect or incomplete because it was clearly in conflict with a background check of the employee. The employee also testified that she explained to her superiors during the termination meeting that her conviction had been dismissed. Whether the employer conducted an adequate investigation of the conflicting background checks or information disclosed at the termination meeting before firing the employee created disputed factual questions about the employer’s motivations for terminating the employee (Garcia-Brower v. Premier Automotive Imports of CA, LLC, October 15, 2020, Sanchez, G.).

Labor Code section 432.7 prohibits an employer from asking a job applicant to disclose any conviction that has been judicially dismissed and bars an employer from using any record of a dismissed conviction as a factor in the termination of employment. Section 98.6 prohibits an employer from retaliating against an applicant or employee because the applicant or employee exercised a right afforded him or her under the Labor Code.

Criminal conviction. In May 2010, the employee pleaded no contest to misdemeanor grand theft based on her embezzlement of $2,600 from her then employer. She took responsibility for her wrongdoing and paid restitution, completed community service, and served three years of probation. After successfully completing her probation, she petitioned to have her conviction dismissed. The petition was granted and her conviction was dismissed in November 2013.

In 2014, the employee applied for a clerk position with the employer. The job application asked if the applicant had ever pleaded guilty or no contest to, or been convicted of, a misdemeanor or a felony. Exercising her rights under the Labor Code, the employee did not disclose the dismissed 2010 conviction on her job application.

Background check. The employee passed the employer’s criminal background check and had been working for the company for four weeks when the Department of Motor Vehicles (DMV) mistakenly reported that she had an active criminal conviction. Rather than investigate the discrepancy between the background reports, the employer terminated her for “falsification of job application,” even after she explained to her superiors that her conviction had been dismissed by court order. Although the DMV issued a corrected notice three weeks later, the employee was not rehired.

Administrative complaint. The employee filed a retaliation complaint with the Labor Commissioner in April 2014 after her termination. In December 2016, the Labor Commissioner determined that the employee had been unlawfully discharged and ordered her reinstatement with back pay. The employer lost its administrative appeal. After the employer refused to comply with the Commissioner’s orders, an enforcement action was filed on the employee’s behalf. The Commissioner alleged that the employer unlawfully retaliated against the employee for exercising her right to omit disclosure of the dismissed conviction on her job application, and relied on a dismissed conviction as a factor in terminating her employment.

At the close of the Commissioner’s case, the trial court granted the employer’s motion for nonsuit, finding an absence of any evidence that it was aware at the time it terminated the employee that her conviction had been judicially dismissed. This appeal followed.

Dismissed conviction. The appeals court concluded that the trial court erred in granting nonsuit and reversed the lower court’s judgment. To establish a violation of Section 432.7, the Commissioner was required to prove that the employer utilized any record concerning a conviction that had been judicially dismissed as a factor in terminating employment.

Here, the evidence was uncontested that an employer-employee relationship was established and later severed by the employer and that the discharge caused the employee harm. The question at issue was whether sufficient evidence at trial was adduced to show that the employer utilized a record concerning the employee’s judicially dismissed conviction as a factor in its termination decision.

While there was no evidence that the employee’s supervisors were initially aware that the conviction flagged by the Department of Justice was actually a dismissed conviction, it had credible information suggesting that the DMV letter was incorrect or incomplete, as the DOJ report to the DMV was clearly in conflict with the background check. However, the employer took no steps to contact the DMV or otherwise investigate the discrepancy before deciding to terminate the employee.

Thus, the appeals court concluded that the Labor Commissioner presented evidence sufficient to prove that the employer was aware or had reason to believe that the employee’s criminal conviction had been judicially dismissed. It was for a jury to weigh whether to credit the employer’s explanations or to find that it was substantially motivated by an unlawful purpose in discharging the employee.

Retaliation claim. Sufficient evidence was also presented to allow a jury to infer that the employer retaliated against the employee for failing to disclose her dismissed conviction on her job application, and that it used the dismissed conviction as an impermissible factor in her termination. Whether the employer conducted an adequate investigation of the conflicting background checks or information disclosed at the termination meeting before firing the employee created disputed factual questions about the employer’s motivations for terminating her.

Here, the appeals court disagreed with the employer’s contention that the employee’s statements at her termination meeting were properly disregarded as coming after its decision to terminate her employment. The employee testified that she explained to her superiors at the termination meeting that her conviction had been dismissed. This disclosure put the managers directly on notice that the conviction on her background check had been judicially dismissed and that she had exercised her right not to disclose the dismissed conviction on her job application. The employer’s failure to investigate these circumstances before terminating the employee supported an inference that it knew she could be telling the truth and that its basis for firing her—a “falsified” job application—was pretextual.

To conclude that the employer should be insulated as a matter of law from its rushed employment decision ran counter to the statutory protections embodied in Sections 432.7 and 98.6 and other employment law decisions. Accordingly, the judgment of the trial court was reversed.