Employment Law Update - Fall 2007
Background Checks and Mistaken Identity
By: Kevin C. McCormick
Many Maryland employers routinely use outside companies to conduct background checks on applicants and employees to verify their prior employment history. As demonstrated in a recent decision from the Maryland Court of Special Appeals, both the employer and outside contractor can be sued for defamation if the search is not conducted properly and if the employer takes an adverse action against the individual (fires him or her) based on the information.
Background Facts
A.A. Southern Services, Inc. (Southern Services) provides termite and pest control to residential homeowners. The company routinely requests criminal background checks on its technicians with residential home access, and the checks are performed both during the initial hiring process and annually thereafter.
Montgomery County Investigative Services, Ltd. (MIS) conducts criminal, civil, traffic and Social Security inquiries, as well as hospital record checks for its clients. If requested, MIS will conduct a court data base search and provide the client with a summary and matching printouts.
The Details
In early March 2002, Robert T. Horne applied for a job at Southern Services, and he was advised that he would have to undergo a background check as part of the employment process. He admitted that he had been previously arrested and charged with transporting a handgun and impersonating a police officer. Horne pled guilty to the first charge of transporting a handgun and received probation before judgment, and the second charge resulted in a verdict of not guilty.
On March 12, 2002, Horne was hired as a residential pest control technician, and his routine background check was initiated on March 29, 2002, by Southern Services' district office in Manassas.The subject of the requested background check was listed as "Robert Horne," with no middle initial given. Horne's address, his Social Security number, and his date of birth were provided.
The background check request was forwarded to MIS and Tammy White, an MIS employee, who began the investigation.
On April 2, 2002, White faxed a copy of her report which showed that MIS had performed three separate background searches concerning Horne. The first two searches found only the prior criminal charges that Horne had already disclosed during his employment interview, but the third search found additional information through a review of criminal records in Montgomery County Circuit Court.
Horne's prior criminal charges were identified, along with another criminal matter - a charge of theft resulting in a guilty finding and six months' jail time. A related conspiracy charged was nolle prosse, or dismissed by the prosecutor. No date of birth and no Social Security number connected Horne to this criminal conviction for theft.
The MIS criminal background report communicated that Horne had been convicted and incarcerated for theft. There was no alert about the possibility of misidentification based on anything more than a common name.
As it turned out, the "Robert Horne" who was convicted of theft had been sentenced for that crime in May 1986, when the other Robert Horne was only 12 years old. White failed to note the disparity with the date of birth for employee Horne with convicted thief Horne.
When the results of the background check were received by Southern States, Horne was fired from his job despite his protests that he had never been convicted of or incarcerated for theft and he was not the "Robert Horne" who was listed on the criminal background report.
The Case
On April 11, 2003, Horne filed a complaint in the Circuit Court for Montgomery County, Maryland, alleging that he was defamed by MIS, Tammy White, and Southern States. Horne's claim against the three defendants went to trial before a jury in December 2005. At the close of Horne's case, the trial court dismissed Horne's claims against Southern Services. The claims against MIS and White, however, proceeded to verdict and Horne was awarded damages.
The matter was appealed and the Court of Special Appeals attempted to sort out the decisions by the trial court, as well as the jury. In so doing, the appellate court reviewed the Maryland law related to defamation and the defense of privilege.
As the court noted, Southern States, as well as MIS and its employee, White, were entitled to a qualified or conditional privilege arising out of the employer-employee relationship. This would be true for MIS and White, even though they did not technically employ Horne, because MIS and White had a common interest in the subject
matter, i.e., performing a background check on Horne. The court also noted that this did not make Southern States, MIS and White immune from suit. Under Maryland law, conditional privilege could be defeated if Horne could establish that there was actual malice involved in the publication of the defamatory statement, i.e., that Horne was a convicted thief. According to the court, actual malice exists when the person making the false statement knew that either the statement was false or that it was almost certainly false, or had obvious reasons to
distrust the accuracy of the statement.
With regard to White, the court had little difficulty in affirming the jury's verdict that she acted with reckless disregard for the truth when she prepared and sent the incorrect background check report to Southern States.
As it turned out, White had no formal training to conduct background investigations or interpret the results.
Regarding Southern Services, the appellate court found that, although Southern Services initially enjoyed a qualified privilege, the evidence at trial could have permitted the jury to find that Southern Services acted with sufficient actual malice to defeat the privilege. Under Maryland law, a qualified privilege may be lost if it is exercised in an unreasonable or abusive manner.
Whether a privilege has been abused is usually a question of fact for the jury. In this case, contrary to the trial court's finding, the appellate court found that the Southern Services' actions were sufficiently abusive so as to defeat the conditional privilege.
According to the trial testimony, Horne was told of his discharge by James Lambert, the local manager. Lambert apparently stated that Horne was being fired "because he was a convicted thief." Horne's discharge took place in an open office (a public work area) in the presence and full hearing of at least three of Horne's fellow workers. During the discussion that followed, Horne denied that he had ever been convicted of theft, but Lambert continued, stating that, "you've done six months in prison, man."
Other employees were present during the conversation. Lambert then volunteered to get the background check report to review it. After obtaining the fax, Lambert showed it to Horne in the presence of other co-workers and proclaimed, "See, right there, right there, six months jail time, right there, man," and then continued, "You're a convict, man."
On those facts, the court held that the evidence was legally sufficient to generate a jury question as to whether the circumstances in which the defamation published by Southern Services was sufficiently abusive and excessive as to overcome its qualified privilege. Because the trial judge did not let the jury consider this issue, the case was remanded for retrial on that issue. As a result, both MIS and Southern States will have to accept a jury verdict as to the damages that they caused to Horne.
TIPS FOR EMPLOYERS
• Retain qualified, trained, competent investigators to conduct background checks.
• Verify that the reports produced concern the applicant.
• Reconfirm all report findings.
• Hold appropriate conversations with employees in a private area.
DOL Publishes Final Rule on Labor Certifications
By: Peter D. Guattery, Esq.
On May 17, 2007, the Department of Labor published a Final Rule in the Federal Register, making changes to the rules for labor certifications as means of reducing fraud. The rule went into effect on July 16, 2007.
Employers will no longer be permitted to substitute new aliens into approved but unused labor certifications. Any labor substitutions submitted after July 16 will result in I-140 denial.
As a result of this change, United States Citizenship and Immigration Services (USCIS) announced that as of May 18, 2007, it would no longer accept Premium Processing I-140 petitions requesting labor substitution. USCIS cited its inability to meet the demand for premium processing on these cases as its reason for the change.
The second big change made by the rule is that all approved labor certifications will "expire" 180 days after they are approved, unless submitted in support of an I-140 petition, as of July 16. The current law places no expiration date on labor certifications. The DOL rationale for the change is that it will prevent labor certifications from being sold on the "black market."
The third major change made by the final rule is that foreign nationals are no longer permitted to pay attorney's fees or costs associated with labor certification applications filed by their employer. The new rule places the cost of the labor certification process on the employer, including costs of advertising and other recruitment steps. An alien may pay the services of his or her own attorney in connection with the labor certification process, but where the attorney represents both parties, the employer is responsible for all related fees.
Penalties for employers, attorneys, or agents who willfully misrepresent or engage in fraud on their Labor Certification applications are severe. If suspected of fraud or willful misrepresentation, they may be suspended or debarred from the process of Labor Certification.
USCIS Increases Filing Fees
As of July 30, 2007, the USCIS increased fees for filing petitions. These increases follow a comprehensive review process and the posting of a proposed fee structure for public comment earlier this year. For a full list of increases, please consult the USCIS's website at www.uscis.gov.
The proposed increases for commonly used forms are as follows:
- Form I-129 increases from $190 to $320;
- Form I-140 increases from $195 to $475;
- Form I-485 increases from $325 to $930; and
- Form N-400 increases from $400 to $675.
Senate Immigration Bill Dies
On June 28, 2007, Senate Majority Leader Harry Reid pulled the immigration bill following a vote in which the Senate fell 14 votes short of the 60 votes required to close the debate on immigration reform. The vote was 46 to 53. Expectations are that the bill will resurface in some form after the 2008 elections.
Supreme Court Issues Pay Discrimination Decision
By: Jeanne M. Phelan, Esq.
On May 29, 2007, the Supreme Court decided a significant statute of limitations issue in pay discrimination cases under Title VII of the Civil Rights Act of 1964 in Ledbetter v. Goodyear Tire & Rubber Co., 127 S. Ct. 2162. According to the decision, employees must file a charge of discrimination regarding compensation decisions with the Equal Employment Opportunity Commission (EEOC) within 180 or 300 days from the date of each pay decision that the employee believes is discriminatory, rather than waiting until several years of decisions accumulate before filing a charge. This had been a recurring issue in discrimination litigation because employees often do not file pay discrimination claims while employed, but more frequently bring them upon termination or in the course of a lawsuit filed after termination.
Background
Pay discrimination is confusing in general, given that several federal statutes - Title VII, the Equal Pay Act, the Age Discrimination in Employment Act (ADEA) and the Americans with Disabilities Act (ADA) - may apply, in addition to state and local statutes. These statutes have differing rules regarding when a claim must be filed, how a claim is filed, and what evidence is necessary to prove a violation.
Under Title VII and the ADEA and ADA, an employee complaining of discrimination must file a charge of discrimination within either 180 or 300 days of the date of the discriminatory action. The 300-day limitation period applies where the state or local jurisdiction has a fair employment practices agency approved by the EEOC.
Prior to the Ledbetter decision, the federal appellate courts issued inconsistent rulings regarding the application of the Title VII limitations periods in pay discrimination cases. This resulted in different limitations periods based on the geographic area. For example, in the 11th Circuit Court of Appeals covering Alabama, Florida, and Georgia where the Ledbetter case arose, employees were required to challenge pay decisions within 180 or 300 days after the decision was made. Other jurisdictions, including the 4th Circuit, which covers Maryland, Virginia, West Virginia, North Carolina, and South Carolina, adopted a rule that treated each paycheck as a new act of discrimination. The latter approach permitted employees to challenge compensation decisions made many years prior to the limitations period if they affected the employee's pay within the limitations period. Employers found themselves in the position of having to defend pay decisions made five or ten years prior to the employee's complaint.
The Decision
In the Ledbetter decision, the Supreme Court rejected the argument that each paycheck should be considered a separate act of discrimination. The Court concluded that the paychecks were merely effects of decisions made prior to the Title VII limitations period; they do not restart the limitations period. As a result, Ledbetter's claims that discriminatory decisions regarding her pay were made in the early 1980s and mid-1990s by a biased supervisor were time-barred because she waited until 1998 to file a charge.
As was the case with many of the Supreme Court's decisions this year, the Ledbetter case was decided by a 5-4 vote, and the minority provided a vigorous dissent. The dissent suggested that an employee's failure to challenge a decision made many years earlier could be addressed by the doctrine of laches - a legal principle that can be invoked where the opposing party has unreasonably delayed in bringing a claim and that delay prejudices the other party's ability to mount a defense. The majority dismissed the laches argument by stating that Congress's choice of what are comparatively short limitations periods expressed the belief that claims of discrimination would be best resolved if they were challenged promptly.
Implications for Employers
The Ledbetter decision does not unequivocally offer a safe harbor for employers. First, there is a possibility that Congress may enact legislation to alter or reverse the Ledbetter decision. Second, employees may claim that the limitations period should be extended by the "discovery rule." This would be based on an argument that the employee was not aware of the pay differential at the time the decision was made and that the 180 or 300-day period should not begin to run until the point that the pay differential was discovered. Attempts to invoke the discovery rule can be expected in claims against organizations that keep pay information confidential. The Supreme Court has not yet decided whether the discovery rule can be applied to extend the limitations period under Title VII. Third, employees may use other statutes to challenge discriminatory pay decisions. In many jurisdictions, employees may bring claims under state or local law. In Maryland, Article 49B, which prohibits discrimination on the bases covered by Title VII, the ADEA, and the ADA and marital status and sexual orientation, has just been amended by the Maryland Legislature to permit the same damages permitted under Title VII and allow employees to bring suit in state court.
It remains to be seen how Article 49B's six-month limitations period will be applied to pay discrimination claims. The Maryland appellate courts have already rejected the application of an earlier Supreme Court limitations decision to the Maryland statute.
Further, where the claim of pay discrimination is based upon sex, an employee may bring a claim under the Equal Pay Act or a similar state statute. Equal Pay Act claims consider an employee's pay during the two or three years prior to the date suit is filed. If an employee can show that she received lower pay than a co-employee of the opposite sex for performing work substantially equal in skill, effort, and responsibility under similar working conditions, the pay differential will be considered a violation unless the employer can prove that it is based on:
- a seniority system;
- a merit system;
- a system pegging earnings to quality or quantity of production; or
- any factor other than sex.
Recommendations
Employers should vigilantly document non-discriminatory reasons for pay decisions and retain business records that support the pay decisions throughout the period of an employee's employment and for several years thereafter. The exact length of time depends on the jurisdiction involved. Additionally, given the anticipated use of
the "discovery rule," employers who keep pay rates or raises confidential should reconsider this practice when weighed against the interest in ferreting out claims of pay discrimination promptly while the memories of witnesses are fresh and supporting documents still available. While there is some concern that providing employees with such information could promote an increased number of charges of discrimination (and it may in some cases), employees may already be well aware of factors that support disparities, such as comparative performance, attendance, and the like. They may be less likely to challenge the decision than they would be years later when these memories have faded and witnesses are no longer available.
Recent Legislative Developments in Maryland
By: Kevin C. McCormick, Esq.
Living Wage Legislation
Governor O'Malley wasted little time in approving Maryland's living wage legislation applicable to certain government contractors and subcontractors. In so doing, Maryland became the first state to enact such a broad provision for the employees of contractors who do business with the state.
Under the terms of the new law, which takes effect October 1, 2007, workers must be paid either $11.30 per hour or $8.50 per hour, depending upon where the work is performed. In the Tier 1 areas, which include Montgomery County, Prince George's County, Howard County, Anne Arundel County, Baltimore County and Baltimore City, employees are required to be paid the higher hourly rate of $11.30. For contractors who work in any other area, so called Tier 2 areas, the hourly wage rate must be at least $8.50 per hour.
If the employer provides health insurance to its employees, then the employer may be entitled to receive a credit against the payment of the "living wage" for the hourly cost of the employer's share of the health insurance premium for the employee.
The new law applies to all contractors or subcontractors that have state contracts for services valued at $100,000 or more. Small employers with fewer than ten employees are exempt so long as the contract is not in excess of $500,000. Nonprofits are also exempt.
As to enforcement, any contractor covered by the new law must post a notice advising its employees of the following: the new law, employees' rights under the new law, and the Commissioner of Labor and Industry's name, address, and phone number. Failure to post the notice can result in a civil penalty not exceeding $50 per violation.
If the Commissioner determines that an employer violated the new law, the employer may be ordered to provide restitution to each affected employee and pay the state liquidated damages of $20 per day for each employee who was paid less than the hourly rate required. Moreover, if an employee was paid less than the wage rate required under the law, that employee may sue to recover the amount of the difference between the wage rate required and the amount paid to the employee. The new law also contains a provision for prohibiting any retaliation against an employee because of the exercise of any rights under this statute.
Finally, any employer who violates the requirement to pay the appropriate wage may be found guilty of a misdemeanor and on conviction is subject to a fine not exceeding $500 or imprisonment not exceeding one year, or both.
Enforcement Provisions Under Article 49B Enhanced
The legislature also enhanced the enforcement tools available under Article 49B of the Maryland Code Annotated, effective October 1, 2007.
Under the new law, an aggrieved current or former employee making a claim under Article 49B (alleging discriminating on the basis of race, age, sex, national origin, and/or disability) can file a civil action in Circuit Court and demand a jury trial instead of relying on the more traditional administrative remedies resulting in a hearing before the Maryland Commission on Human Relations.
The civil action can be brought by the Commission or by the individual. If the individual pursues the litigation, he or she must first file a complaint with the MCHR and then wait at least 180 days before filing the civil lawsuit. The civil action must be filed in the Circuit Court of the county where the alleged act of discrimination took place.
In addition to allowing for a direct civil lawsuit in Circuit Court with a jury trial, the law also enhances the damages that are recoverable for violations of Article 49B. Compensatory damages are subject to the same statutory cap that exists under Title VII.
The changes to the enforcement procedures under Article 40B cannot be applied retroactively to any pending claims.
New Compensatory Damages Cap:
| Number of Employees | Compensatory & Punitive Damages |
| 15 - 100 | $50,000 |
| 101 - 200 | $100,000 |
| 201 - 500 | $200,000 |
| 501+ | $300,000 |
Statewide Smoking Ban Approved
The Maryland Legislature enacted a statewide smoking ban, effective October 1, 2007, known as the Clear Indoor Act of 2007. Under this law, smoking is prohibited in an indoor place of employment, as well as an indoor area of any establishment licensed or permitted for the sale or possession of alcoholic beverages. Thus, the ban applies to all restaurants and bars as well as places of employment.
Since 1995, a smoking ban has been in place for all office buildings and other indoor work places. The ban has been enforced by the Maryland Occupational Safety and Health Administration.
Under the new law, the penalty for violating the smoking ban in both bars and restaurants and work places, is as follows:
- A first violation would result in a written warning.
- A second violation could result in a civil penalty of $100; and
- Each subsequent violation could be subject to a civil penalty of at least $250.
Any employer who discharges or discriminates against an employee who has made a complaint under the new law, has given information to the Department of Health and Mental Hygiene about violations or has caused a proceeding to be instituted under the law, or has testified in a proceeding under the new law, could face a civil penalty of between $2,000 to $10,000.