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Scott specializes in complex litigation and business disputes.

On June 11, St. Louis County officials signed an executive order, effective immediately, that would “ban the box” and ensure that St. Louis County will no longer ask job applicants for criminal histories in their initial employment applications.  Other jurisdictions in Missouri with ban-the-box laws include Jackson County, Columbia, and Kansas City.

“A parolee’s failure to find full-time employment becomes, quite frankly, a serious public safety issue for every county resident,” St. Louis County Executive Steve Stenger told the St. Louis Post-Dispatch. “Without a decent job, ex-prisoners are far more likely to struggle with substance abuse. And they are far more likely to engage in criminal activity.”

The executive order provides that “employment decisions will not be based on the criminal history of a job applicant unless demonstrably job-related and consistent with business necessity, or unless state or federal law prohibits hiring an applicant with certain convictions for a particular position.”

Currently, more than 150 cities and counties nationwide as well as 32 states have passed ban-the-box legislation that delays questions about criminal records of job applicants until later in the hiring process. Eleven of those states have required the removal of criminal history questions from job applications for private employers.

Troutman Sanders will continue to monitor related legislative developments concerning employment background screening and employee hiring.

On May 21, the U.S. Supreme Court, in a 5-4 decision penned by Justice Neil Gorsuch, held that employers can include a clause in their employment contracts that requires employees to arbitrate their disputes individually and to waive the right to resolve those disputes through class actions and other joint proceedings. The Court ruled such requirements are enforceable under the Federal Arbitration Act (“FAA”).

The decision is a major victory for employers, as arbitration can be a tool to funnel employee disputes into out-of-court resolution and away from class actions. The ruling, moreover, takes its place in a lengthy and growing list of rulings by the Supreme Court enforcing arbitration agreements and the pro-arbitration policies of the FAA over the resistance of some lower federal courts and state courts.

The court addressed three cases in this decision:

  • A class action from the Fifth Circuit against Murphy Oil USA Inc. under the Fair Labor Standards Act (“FLSA”);
  • A wage and hour class from the Seventh Circuit against Epic Systems, a healthcare software company, alleging that it violated the FLSA; and
  • A class action from the Ninth Circuit claiming Ernst & Young violated the FLSA and California labor laws by misclassifying employees to deny them overtime wages.

According to the majority decision, the FAA mandates enforcing the terms of an agreement to arbitrate, given that the FAA was enacted “in response to a perception that courts were unduly hostile to arbitration.” The FAA thus instructed courts to “respect and enforce the parties’ chosen arbitration procedures” – such as the agreement to “use individualized rather than class or collective action procedures.”

The appellee-employees argued that the National Labor Relations Act (“NLRA”), passed in 1935, rendered class action and other joint-proceeding waivers unenforceable in arbitration agreements because the NLRA gives workers the right to organize “and engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” The Supreme Court rejected that position, stating, “The NLRA secures to employees rights to organize unions and bargain collectively, but it says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum.”

“The policy may be debatable but the law is clear: Congress has instructed that arbitration agreements like those before us must be enforced as written,” wrote Justice Gorsuch.

Further, the majority refused to defer to the conclusion of the National Labor Relations Board (“NLRB”) that the NLRA trumps the FAA. The Court found such Chevron deference was inappropriate since the NLRB was interpreting the NLRA “in a way that limits the work of” the FAA. The majority also declined to defer to the NLRB’s prior conclusion that the NLRA trumps the FAA.

Justice Ruth Bader Ginsburg penned a strongly-worded dissent, deeming the majority’s decision an attack on “statutes designed to advance the well-being of vulnerable workers.”

Going Forward

The Epic Systems decision is good news for employers nationwide as it enhances their ability to limit exposure to employee claims in class arbitration, class actions, and other joint proceedings.

Moving forward, we see several potential developments:

  1. Undoubtedly, more employers will include class and joint-proceeding waivers in their arbitration agreements, and will make those agreements mandatory for new hires. This will become the norm for employers.
  2. Defenders of the decision point to an overall reduction in costs for all parties, as arbitration of individual disputes may allow for more efficient and quicker resolution of claims.
  3. Democrats in Congress likely will push to pass legislation to reduce the overall impact on employees from the Epic Systems decision. The passage of any such legislation, however, will be difficult in the Republican-controlled Congress.
  4. The logical underpinnings and reasoning in the Epic Systems decision have ramifications beyond the employment context. Pro-employee advocates have long argued that employment law or the relationship between employer and employee somehow justified different treatment than other contractual relationships meaning that the FAA did not apply or these special circumstances trumped the FAA. Likewise, in the consumer context, many pro-consumer advocates have raised a host of similar arguments that the relationship between consumer and businesses (such as credit card companies, auto finance entities, and debt collectors) provides justification for courts to disregard plainly worded arbitration provisions embedded in applicable contracts under supposed public policy rationales. Epic Systems reiterates the Supreme Court’s view that the FAA will govern the interpretation of arbitration provisions, including in the class action context, by reviewing the plain language used by the parties and will reject arguments that amount to a rewriting or failure to enforce the clear language in arbitration provisions.

Employers who do not have an arbitration program, or a program that has not been recently refreshed, might now consider adding or updating arbitration clauses to their agreements. Indeed, consumer-facing companies of all types can take additional comfort in the efficacy of arbitration agreements in designing and implementing arbitration programs for consumer claims.

Troutman Sanders advises clients in developing and administering consumer arbitration agreements, and has a nationwide defense practice representing employers in many types of class actions and individual claims. We will continue to monitor these developments.

On May 2, Kansas Governor Jeff Colyer signed a “ban the box” order applicable to state government positions but not private businesses or state contractors.  Kansas agencies will no longer ask job applicants whether they have a criminal record during the initial application process. The state legislators argued that asking about criminal records on applications unfairly stigmatized individuals with records years – even decades – after their convictions and made it more difficult for individuals released from prison to be employed.

Applicants may still be asked about criminal history later in the hiring process, and applications for jobs where individuals with felonies are specifically prohibited from working will also continue inquiring about the applicant’s criminal history.

“It provides applicants with the opportunity to explain their unique facts and circumstances and what has happened to them and how their lives have changed,” Colyer said.  Colyer indicated that he was in favor of expanding the “ban the box” law to private businesses, but enactment would be up to the Kansas legislature.

Currently, Kansas has no “ban the box” law, unlike thirty-one other states.  Eleven of those states have required the removal of criminal history questions from job applications for private employers, and more than 150 cities and counties in the United States have a “ban the box” ordinance.

Troutman Sanders will continue to monitor related legislative developments concerning employment background screening and employee hiring.

On May 1, the city council of Wilmington, North Carolina unanimously approved a new “ban the box” ordinance for city employees.  The ordinance mandates that candidates for employment will not be asked about their criminal history nor have a criminal background check conducted until a decision has been made to offer the candidate employment. According to Wilmington officials, the new ordinance will ensure people with criminal arrest or conviction records will not be unduly denied employment or discouraged from being employed by the city.

The ordinance also enacted seven-year lookback periods on misdemeanor assault, all sexual offenses, homicide, and financial crimes as automatic disqualifiers.  It also added language allowing applicants to provide evidence of mitigation of any misdemeanor or felony (other than sexual) that has been fully disposed of for more than seven years to proceed in the application process.

Wilmington is now one of more than 150 cities and counties in the United States to enact a “ban the box” ordinance.

Troutman Sanders will continue to monitor related legislative developments concerning employment background screening and employee hiring.

According to a recent report from WebRecon, filings of Fair Credit Reporting Act cases have continued to increase in 2018.  FCRA claims led consumer litigation filings in February, while Fair Debt Collection Practices Act (“FDCPA”) and Telephone Consumer Protection Act (“TCPA”) cases declined during the same month.  The overall statistics for consumer litigation in February 2018 were as follows:

  • 2,458 complaints filed with the Better Business Bureau
  • 4,439 complaints filed with the Consumer Financial Protection Bureau
  • 788 FDCPA cases filed, of which 181 were class actions (23.0%)
  • 296 TCPA cases filed, of which 66 were class actions (22.3%)
  • 422 FCRA cases filed, of which 153 were class actions (36.3%)

Notably, the 422 FCRA filings in February 2018 far outnumbered the 265 filings from the same month last year.

Troutman Sanders will continue to monitor industry trends and will provide updates as they are available.

On April 3, both the City and County of San Francisco amended the Fair Chance Ordinance (“FCO”) – their existing ban-the-box law – to align it with the new, corollary California law (AB 1008) that took effect on January 1, 2018. San Francisco’s new amendments take effect on October 1, 2018.

The amendments to the existing FCO include:

  • Removing the restriction that employers, housing providers, contractors, and subcontractors may inquire about, require disclosure of, and base housing and employment decisions on convictions for decriminalized behavior that are seven years old or less. There is no seven-year limitation in the amended FCO.
  • The FCO will now apply to employers that employ five or more persons (previously it was 20 or more).
  • A first violation can result in a penalty of up to $500, whereas previously none was assessed.
  • A second violation can result in a penalty of up to $1,000 (previously up to $50). Subsequent violations can result in penalties of up to $2,000 (previously up to $100).
  • If multiple people are impacted by the same procedural violation at the same time, the violation would be treated as one violation for each impacted person (previously treated as a single violation rather than multiple violations).
  • Penalties must be paid to the person impacted by the violation, not the City/County of San Francisco.
  • The right to sue is no longer limited to the City Attorney. Any employee or applicant whose rights have been violated can sue.
  • Employers are now prohibited from inquiring about, requesting disclosure of, or utilizing a person’s conviction history until after a conditional offer of employment has been made (the previous measure limited inquiry until after either a live interview or conditional offer).

Troutman Sanders will continue to monitor related legislative developments concerning employment background screening and employee hiring.

On March 20, Naples Hotel Group LLC removed a putative Fair Credit Reporting Act class action to the U.S. District Court for the Middle District of Florida. The complaint, originally filed February 13 in the Ninth Judicial Circuit Court in Orange County, Florida, alleges that Naples improperly obtained and used consumer reports about prospective and existing employees – through an outside consumer reporting agency – without complying with the FCRA’s disclosure and authorization requirements. The lead plaintiffs, Shawana Sanders and Kenyatta Williams, are former employees of Naples.

The putative class is defined as all Naples Hotel Group employees and job applicants in the United States who were the subject of a consumer report procured by the company within five years of the complaint’s filing.

According to the plaintiffs, the authorization forms used to obtain their consumer reports during the initial application process contained “extraneous provisions” that distracted the applicants from understanding the import of the disclosure. According to the plaintiffs, Naples knew it was required by law to provide a stand-alone form, separate from its employment application, before obtaining and using consumer reports. They allege that Naples further violated the FCRA when it took adverse action against them.

“Without clear notice that a consumer report is going to be procured, applicants and employees are deprived of the opportunity to make informed decisions or otherwise assert protected rights,” according to the complaint.

These types of FCRA disclosure form claims are incredibly popular with the plaintiffs’ bar, and judicial decisions vary widely based on circuit and fact pattern. Last year in Syed v. M-I, LLC, the Ninth Circuit Court of Appeals issued a significant decision on the discrete issue of FCRA willfulness as applied to disclosure form claims, ultimately concluding that the prospective employer willfully violated the FCRA by including a liability waiver in its background check disclosure form. Troutman Sanders previously reported on the Syed decision. 

Troutman Sanders will continue to monitor related legislative developments concerning employment background screening and employee hiring.

On March 13, Washington Governor Jay Inslee signed bill HB 1298, the Washington Fair Chance Act (“WFCA”), which will make it unlawful for an employer to include any question on any application for employment, inquire either orally or in writing, receive information through a criminal history background check, or otherwise obtain information about an applicant’s criminal record (arrests or convictions) until after the employer initially determines that the applicant is “otherwise qualified” for the position.

The Act goes into effect on June 7, 2018. Washington is the eleventh state nationwide to enact a “ban-the-box” law that covers both public and private sector employers. All West Coast states and some West Coast cities (including Los Angeles, Portland, and Seattle) have now enacted similar laws.

“Employer” is defined broadly under the WFCA to include “public agencies, private individuals, businesses and corporations, contractors, temporary staffing agencies, training and apprenticeship programs, and job placement, referral, and employment agencies.”

The new law will not apply to:

  • Any employer hiring a person who will or may have unsupervised access to children under the age of 18 or a vulnerable adult or person as defined elsewhere in state law;
  • Any employer, including a financial institution, who is expressly permitted or required under any federal or state law to inquire into, consider, or rely on information about an applicant’s or employee’s criminal record for employment purposes;
  • Certain law enforcement or criminal justice agencies;
  • Employers seeking non-employee volunteers; or
  • Any entity required to comply with the rules or regulations of a self-regulatory organization, as defined in section 3(a)(26) of the Securities and Exchange Act.

Penalties will start with a notice of violation and offer of agency assistance for the first violation. A second violation can result in monetary penalties up to $750 and up to $1,000 for each subsequent violation.

Troutman Sanders will continue to monitor related legislative developments concerning employment background screening and employee hiring.

On March 9, the Ninth Circuit affirmed dismissal of a putative FACTA class action on Article III standing grounds, citing the requirement of a “concrete injury” reinforced by the U.S. Supreme Court’s 2016 decision in Spokeo v. Robins. In Noble et al. v. Nevada Checker Cab Corp. et al., No. 16-16573, the court held that the plaintiffs had not alleged a concrete injury simply because the defendant taxi companies had included the first and last four digits of their credit card numbers on receipts. FACTA prohibits printing more than the last five digits of a card on receipts.

The panel noted that the plaintiffs failed to allege a breach of privacy or any tangible harms resulting from the first-digit disclosure. Further, the court relied on its February 2018 decision in Bassett v. ABM Parking Services Inc., in which it rejected standing for a plaintiff who claimed a FACTA violation for including his card expiration date on a receipt.

“As in Bassett, appellants here did not allege that anyone else had received or would receive a copy of their credit card receipts. As in Bassett, appellants’ alleged injury depended entirely on a FACTA violation,” the Ninth Circuit stated. “Bassett’s reasoning controls the issue in this case, and we are bound by it.”

Finally, the Ninth Circuit found that the alleged violation did not result in the disclosure of information envisioned by Congress in protecting against identity theft. Like the disclosed expiration date, the first digit of the card number (which simply identifies the brand of the card) by itself posed a minimal risk.

A copy of the decision can be found here.

Troutman Sanders will continue to monitor these developments and provide any further updates as they are available.

On February 7, the Washington State House of Representatives approved a bill that would “ban the box” and prohibit requests about past criminal history in initial employment applications. According to The Spokesman-Review, the bill, dubbed the “Fair Chance Act,” passed on a mostly partisan vote after supporters said it was important to give people a second chance and opponents said was unfair to businesses.

“You have to get through that door.  The only way to do it is not to mark that box,” Rep. Sherry Appleton, D-Poulsbo, said.  “This is a bill of justice.”

Before voting on the Fair Chance Act, the House narrowly rejected an amendment that would have kept cities like Spokane from having stricter requirements than the state. The Spokane City Council adopted its own “ban the box” ordinance in November 2017.

The state bill allows a warning from the state attorney general for the first offense and a fine on the second offense.

The bill now moves to the Senate for a vote, then to Governor Jay Inslee for signature if approved by the Senate.