GamblingGrowing up, my dad was a huge country music fan. I refused to appreciate this style of music for no other reason than it was what my parents liked. But one song I vividly remember was the Gambler by Kenny Rogers.

The refrain from that song always plays in my mind when it it comes to addressing e-discovery preservation obligations: “You got to know when to hold ’em …”

Having worked with lawyers and business organizations to address e-discovery challenges since 2001, it is easy to appreciate the feeling that “knowing when to hold ’em,” i.e., when should a “litigation hold” be implemented in response to an employment discrimination claim, is analogous to hitting a moving target in the dark. 

This is because there are multiple instances along a preservation time-line of “when” the duty to preserve may arise. Examples include:

  • When an employee files an internal complaint of discrimination or harassment?
  • When a rejected applicant sends a letter threatening a claim for failing to hire the applicant? 
  • When the employer launches an internal investigation?
  • When an EEOC charge is filed? And what happens if the EEOC issues a Dismissal of the charge, but the charging party still has the statutory 90 days to file a federal suit? Is the employer now obligated to continue the preservation during this 90 day period or risk sanctions?

Additionally, an employer’s obligations to preserve information may range from the complaining employee and his or her supervisor, a department, or the entire company.

Further, it is important to emphasize that individual plaintiffs must carefully comply with preservation obligations because Michigan courts have dismissed claims for failing to do so. Gillett v. Mich. Farm Bureau (Dec. 22, 2009) (Plaintiff’s sexual harassment claim dismissed after plaintiff admitted deleting e-mails from a personal account after filing suit).

Additional Thoughts on Getting the Litigation Hold Right – Reasonable Anticipation

The remainder of the Gambler’s refrain explains that one also has to “know when to walk away and know when to run.” Unfortunately, employers and employment attorneys do not have the option to walk or run away when e-discovery preservation goes wrong in litigation (which happens more than it should).

It is, therefore, important to focus on the “what” should be preserved and “when” preservation is required. The general rule for when this hold must be implemented is when litigation is “reasonably anticipated.” But there is no bright-line rule as to when a party crosses this threshold. Therefore, determining whether a party should reasonably anticipate litigation is a fact-intensive inquiry. 

Once that threshold is crossed, however, there is almost always more value in taking a conservative view as to “when” a litigation hold must be implemented as well as what must be preserved. Additionally, experienced counsel should be able to work with in-house counsel and management to implement a defensible, yet cost-effective preservation plan.   

Two remaining considerations when it comes to implementing the hold: 

  • The litigation hold notice should be issued to all record custodians/employees reasonably likely to have information relevant to a claim. Also, these “key players” may include outside vendors; and
  • An employer should cautiously work with its legal counsel to determine if the employer’s IT professionals should actually carry out the litigation hold process for electronic data (e.g., databases, e-mail accounts, computers, cell phones PDAs, or on flash drives) as well as with regard to taking control of backup tapes and stopping any automatic overwriting of electronic data of such preservation should be conducted by a retained expert/technology trial consultant. 

The litigation hold process should be created in collaboration with management, IT professionals, and experienced legal counsel. If you have questions about litigation hold practices, the attorneys of E-Business Counsel have worked with business clients and employers to minimize legal risks and defense costs in addressing preservation obligations and the litigation hold process in broad range of litigation matters, including employment law claims, product liability, and complex commercial litigation.  

Computer Crime HandcuffsI previously discussed an employer’s obligation for reporting child pornography found on company IT resources. See What Should an Employer Do if Child Pornography is Discovered in the Workplace. One of the recommendations made in that post was to report child pornography to law enforcement, “no exceptions.”

The importance for following this recommendation was recently highlighted by the indictment of a Kansas City, Missouri Bishop for failing to report hundreds of images of alleged child pornography on a priest’s laptop.  

Specifically, Father Ratigan was charged with three state child pornography counts earlier this year. The indictment claims that Bishop Robert Finn learned of these images in December 2010, but failed to report them to the police until May 2011. 

The Take Away for Employers

This indictment is an unfortunate reminder for any employer responding to the discovery of child pornography in the workplace that careful consideration must be given to the employer’s legal obligations for reporting such conduct.

For a comprehensive overview of points that should be considered and discussed with competent legal counsel, see the recommendations provided here. 

 

 

Nuts & Bolts.jpegEmployers, HR professionals, and job applicants generally understand that there are questions that can be asked during the interview process and there are questions that cannot be asked because they violate state and federal employment statutes.

For example, under Michigan law, an employer may not “use a written or oral inquiry or form of application that elicits or attempts to elicit information concerning the religion, race, color, national origin, age, sex, height, weight, or marital status of a prospective employee.” MCL 37.2206.

While there is not a specific Federal law imposing such inquiries, certain inquiries may create an inference of unlawful discrimination if the employer cannot demonstrate a legitimate, nondiscriminatory reason for each challenged inquiry.

Preemployment Questions Do’s and Don’ts

The following guide is intended to assist employers and employees in understanding what is a potentially discriminatory or otherwise an unlawful inquiry in the hiring process. This guide, however, is not a substitute for an attorney’s independent judgment and analysis:

  • Age: An applicant may lawfully be asked whether he or she is 18 years of age or older but only for the purpose of determining if the individual is of legal age for employment. It is, however, unlawful to ask the applicant’s age or date of birth because of age discrimination concerns. In this regard, problems may arise when an employer requires that an applicant produce a driver’s license because it discloses the date of birth and may reveal the race of the applicant). To avoid these issues, employers should make an offer of employment before making a copy of the applicant’s driver’s license. If driving is as a qualification for the position, the offer of employment should be contingent upon an applicant producing a valid drivers license.
  • Arrests and Convictions: An employer may lawfully ask if: (i) The applicant has ever been convicted of a crime (misdemeanor or felony). If so, the employer may ask when, where, and the nature of the offense; (ii) The applicant has ever been arrested for or charged with a felony; and (iii) There are any felony charges currently pending against the applicant. It is unlawful for all employers except law enforcement agencies to inquire regarding misdemeanor arrests that did not result in conviction.
  • Birthplace: Employers cannot lawfully ask (i) The birthplace of an applicant or (ii) The birthplace of an applicant’s parents, spouse, or other relatives; (iii) The applicant to produce a birth certificate, naturalization papers, or baptismal record.
  • Citizenship: An applicant may lawfully be asked if he or she is authorized to work in the U.S. But unless asked as part of the federal I-9 process to ensure that an illegal alien is not being hired, it is unlawful to ask (i) The applicant’s country of citizenship; (ii) If the applicant is a naturalized or native-born citizen; (iii) The date when the applicant acquired citizenship, or (iv) If the applicant’s parents or spouse acquired citizenship. A request for this information must be made after a conditional offer of employment has been made. The Immigration and Naturalization Service provides information for employers that lists the documents employers may review for I-9 purposes. It is also lawful to ask about languages the applicant speaks and writes fluently.
  • Disability: Employers may lawfully ask if an applicant is able to perform the essential duties of the job, with or without accommodation. It is, however, unlawful for employers to ask questions about an applicant’s physical or mental condition if that condition is not directly related to the requirements of the specific job or if the answers are used to make employment decisions in violation of the Americans with Disabilities Act (ADA) or Michigan’s corresponding statute, Persons with Disabilities Civil Rights Act (PDCRA). 
  • Education: While it is certainly lawful and appropriate to ask about an applicant’s academic, vocational, or professional education and the public or private schools the applicant attended, employers should be careful about asking for dates of attendance of high school or college because such information may implicate an applicant’s age.
  • Genetic information: Under both Michigan and federal law (Genetic Information Nondiscrimination Act of 2008, also called “GINA”), it is unlawful to ask about an applicant’s genetic information or to require the applicant to submit to a genetic test or to provide genetic information. Michigan law also makes it unlawful to acquire, directly or indirectly, any genetic information concerning an applicant or the applicant’s family. See MCL 37.1201(d), (e), and MCL 37.1202(1). GINA also prohibits employers from failing or refusing to hire any employee because of genetic information with respect to the employee. 42 USC 2000ff-1(a)(1). 
  • Height/Weight: Under both Michigan and federal law, it is unlawful to inquire about the applicant’s height or weight.
  • Marital status and children: Employers cannot lawfully (i) Require an applicant to provide any information regarding marital status or children; (ii) Ask if the applicant is single or married; (iii) Ask for the name of the applicant’s spouse; (iv) Ask if the applicant’s spouse is employed; (iv) Ask if an applicant has children. Employers may, however, lawfully ask if the company employs the applicant’s spouse.
  • Name: Employers cannot lawfully ask an applicant for their original name if it has been changed by court order or the applicant’s maiden name.
  • National origin: It is lawful to inquire into languages the applicant speaks and writes fluently. It is, however, unlawful to inquire into (i) The applicant’s lineage, ancestry, national origin, descent, parentage, or nationality unless pursuant to the federal I-9 process referenced above; (ii) The nationality of the applicant’s parents or spouse; or (iii) How the applicant acquired the ability to read, write, or speak a foreign language.
  • Photograph: Employers cannot lawfully require an applicant to submit a photograph before making an offer of employment.
  • Race or color: Employers cannot lawfully inquire as to the applicant’s complexion or skin color.
  • Religion or creed: Employers cannot lawfully inquire into an applicant’s religious denomination, religious affiliations, and religious beliefs. It is also unlawful to ask what church or parish an applicant attends, who the applicant’s religious or spiritual leader is, or what religious holidays the applicant observes. 

Aside from these areas of restrictions, employers should be mindful that where a discrimination claim is made, the employer will generally have the burden of proof to demonstrate that information sought during preemployment interviews was necessary for legitimate business reasons and is not used to make discriminatory hiring decisions. While seeking such information to evaluate an applicant’s qualifications for employment does not guarantee an employer will not ever be charged with discrimination, making sure that all information sought is job-related will significant increase an employer’s odds for successfully defending a discrimination claim.

Shareholder Agreement.jpgA recent Michigan Court of Appeals Opinion has significant impact on small businesses, employment discrimination claims, and arbitration agreements. This decision is likely to especially impact professional businesses such as law firms and doctors groups.

Specifically, in Hall v Stark Reagan, P.C., two former law partners were forced out of their professional corporation after contesting the involuntary redemption of their shares. The plaintiffs claimed this decision was based on unlawful age discrimination and sued under Michigan’s Elliot-Larsen Civil Rights Act (ELCRA), MCL 37.2101 et seq.

Employment Discrimination Claims – Who is an Employee

The defendants argued that the plaintiff shareholders lacked standing to sue under the Michigan Civil Rights Act because only “employees” may sue under the Michigan Civil Rights Act and as shareholders of the firm, the plaintiffs instead qualified as employers. 

The Court rejected this argument and reasoned that to merit protection under the CRA, a plaintiff must show some form of nexus or connection between the employer and the status of the nonemployee. The key to liability under the ELCRA is not simply the status of an individual as an “employee.” Rather, liability is contingent upon the employer’s affecting or controlling that individual’s work status.

Accordingly, an employer can be held liable under Michigan Civil Rights Act for discriminatory acts against a nonemployee if the nonemployee can demonstrate that the employer affected or controlled a term, condition, or privilege of the nonemployee’s employment.

Limiting Application of Arbitration Provision  

The defendants also argued that the claims were should be submitted to arbitration pursuant to the partnership agreement. The Court disagreed noting that even in contracts containing broad arbitration provisions, the determination of whether a particular claim must be submitted to arbitration necessarily depends on the existence of some nexus between the dispute and the contract containing the arbitration clause.

The test for determining arbitrability of a particular claim under a broad arbitration provision is whether a significant relationship exists between the claim and the agreement containing the arbitration clause, regardless of the legal label attached to the dispute.  

The Take Away

A person’s status as a partner will not preclude that partner from asserting a discrimination claim under ELCRA. 

The Court’s conclusion regarding the arbitration provision also signals that courts will more carefully scrutinize arbitration provisions to determine if issues are properly subject to arbitration. For this reason, it is important to assess existing arbitration agreements to ensure they stand up to this increased scrutiny.  

Weak Link.jpgLast week I had the opportunity to present at the 2011 Thomas M. Cooley Law Review Symposium’s  Who’s Mining Your Business: Privacy Infringement and Profits. The Law Review members, spearheaded by Dayana Echeverry, put together a phenomenal program. It was a great opportunity to share the stage with an incredible panel of Internet privacy and data mining thought leaders. Specifically, Dick De Veaux and Chris Clifton and Andreas Weigend. Also, Professor Derek Witte did a great job (as usual) moderating the event.  

Here is a copy of my presentation, which focused on Information Protection and Privacy Law for businesses (PDF).

While the overall focus of the seminar was on consumer data mining and the applicable regulatory and legal landscape, here are a few important points relevant to employers and employees.

Michigan Data Breach Notification Statute 

Michigan, like most states, has a data security breach notification law. This law imposes certain obligations on businesses if there is breach of “personal identifying information” (Personal Information”). Personal Information is statutorily defined, but it includes information commonly collected by businesses in the ordinary course of operations, such as name, contact information, social security number, place of employment, mother’s maiden name, a person’s account password, or credit card number. 

Under Michigan’s data breach law, one trigger for notifying consumers of a data breach is the access and acquisition by an unauthorized person of unencrypted or unredacted computerized data or of encrypted data if there was also unauthorized access to the encryption key. MCL 445.72. Failing to comply with the notification provisions of Michigan Data Breach statute is $250 for each failure to provide notice, with cumulative liability not to exceed $750,000. MCL 445.72(12).

In terms of national numbers, the nonprofit Identify Theft Resource Center identified over 360 data breaches that have occurred through September 2011. These breaches involve cumulatively over 13 million records.

Employees are often the Cause of Most Data Breaches 

When it comes to security breaches, employees are often the weakest link in a company’s data security defense. In fact, the majority of breach investigations I’ve been involved with trace back to employee mistakes – usually inadvertent mistakes. This anecdotal evidence is also consistent with reported breaches. Consider for example, the following:

  • Aetna discovered on May 28, 2010 that a file cabinet containing individual health information was not cleaned out before it was given to a vendor for removal. The documents inside the file cabinet contained the individual health information of approximately 6,372 individuals, including names, addresses, zip codes, dates of birth, and social security numbers of Aetna’s members.
  • Blue Cross & Blue Shield of Rhode Island reported on April 6, 2010, that it had inadvertently donated a filing cabinet to a non-profit organization on December 20, 2009, that contained approximately 12,000 members protected health information. This information included names, addresses, telephone numbers, Social Security numbers, and Medicare identification numbers.

Again, these examples, like many others, are human and process failures – not technology failures.  

Recommendations for Preventing Data Breaches

Businesses are a prime target for casual and organized hackers because they often maintain troves of consumer data. To guard against data breaches it is important to be proactive and not reactive. A few points that businesses should consider include: 

  • Develop, implement, and test the data breach response plan. That plan should identify a response team and tasks each member is responsible for once a breach is discovered;
  • Educate and train all employees who have access to Personal Information about best practices for protecting this data while in their possession and on the appropriate use and transfer of this information. Updates on information security best practices and the latest threats should be provided on a regular basis; and  
  • Assess what information the business organization possesses and only retain data that serves a business or legal purpose. Properly secure the data to be retained with respect to industry acceptable standards and legal requirements. And properly dispose of information that will no longer be retained.

A complete data security protocol is beyond the scope of this post. It should, however, be developed in collaboration with internal IT professionals, executive management, and legal counsel. But a signficant cornerstone of this protocol must focus on educating and training employees on best practices for handling consumer data.  

Roll of the DiceThe Internal Revenue Service announced on 9/21/2011 that businesses that have improperly labelled their employees as independent contractors will be allowed to reclassify workers and make only a small payment to cover past payroll taxes.

The IRS is calling this program the Voluntary Worker Classification Settlement Program (the “Reclassification Program”). Under the IRS Reclassification Program, companies will only owe approximately 1% of wages paid to reclassified workers in the past year, with no interest or penalties due. Incorrectly classifying individuals as independent contractors allow companies to avoid withholding or paying employee workers compensation, unemployment insurance, and federal taxes.

To be eligible, a business must:

  • Have consistently treated the workers as non-employees; 
  • Have filed required 1099 tax forms for the past three years; and 
  • Not be under a worker classification audit by federal or state agencies.

What the Right Hand Giveth … 

The IRS’s Reclassification Program, in theory, will be beneficial to many businesses. But as Yogi Berra famously noted, “In theory there is no difference between theory and practice. In practice there is.”

First, theory and benefits: The distinction between who is an independent contractor versus an employee is not always clear-cut. For example, in making this determination, the IRS uses a twenty factor common law test for determing if an individual is an employee or independent contractor (PDF). Thus, employers may simply and mistakenly reach one conclusion that is later second-guessed by the IRS.  

Additionally, conflicting results as whether an individual is an employee or independent contractor may be reached under different agencies and statutes, which may further complicate reaching the “right” decision. In this regard, in enforcing the Fair Labor Standards Act’s wage and hour provisions the Department of Labor distinguishes the two categories based on whether an individual provides services to the company in the course of an independent occupation and if the business entity controls only the results of the work but not the means by which the work is accomplished (29 U.S.C. 201 et seq.). 

Accordingly, the IRS’s Reclassification Program offers significant incentive and cost-savings for employers who may have misclassified individuals as independent contractors.

As to practice and risks, the Wall Street Journal reported that the IRS and Department of Labor entered into information sharing agreements as part of the DOL’s efforts to continue to crack down on businesses that have misclassified workers. Nine states have also signed onto these agreements, with more expected. Michigan was not identified in either category by the WSJ. 

Thus, the information gained under the IRS’s Classification Program may provide a detailed road map for DOL officials to pursue businesses that improperly label workers as independent contractors rather than as employees. 

The Take-away for Employers

Until the DOL provides further clarification or assurances as to how employers entering into the IRS’s Reclassification Program will be treated, the benefits of the IRS’s Reclassification Program must be weighed against the potential downside of responding to cases brought by the DOL and re-classified employees seeking to recover back wages and benefits they believe they may be entitled to.

Absent any further action by the DOL, if an employer elects to enter into the IRS’s Reclassification Program, it is important to try and negotiate for certain provisions that may limit liability or the fallout in subsequent DOL or individual claims.   

Football PenaltyGoing into last weekend I was overcome with sports euphoria with U of M, the Spartans, and the Lions being undefeated and the Tigers on the verge of winning their Division. 

Unfortunately that winning streak did not continue. But success by 3 out of 4 of my Michigan teams wasn’t too bad (thanks Sparty for dropping the ball).

The Spartan’s lost, however, provides a good reminder that mistakes simply kill success. Consider for example that in their loss the Spartans had two costly turnovers and 12 penalties, including several offensive holding penalties that backed up critical drives.    

For employers mistakes in responding to sexual harassment claims may be costly and jeopardize successfully defending a claim that is later filed. In this regard, the following are several areas that deserve focused attention, preferably with the assistance of experienced legal counsel: 

  • It is critical for employers to make sure managers and supervisors understand what to do if they receive a complaint or experience harassment and that the appropriate action is taken in a timely manner;
  • Make sure that employees understand their options and obligations for reporting harassment and that both are documented. This is because under Burlington Indus v Ellerth, 524 US 742 (1998), and Faragher v City of Boca Raton, 524 US 775 (1998), the second element of an employer’s affirmative defense requires an employer to show that the employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer. Ellerth, 524 US at 765. 
  • The investigation should identify likely sources of relevant documents and digital information that may provide objective evidence of harassment. This point needs to be carefully considered because a party has an obligation to suspend any automatic deletion procedures and to otherwise preserve information once litigation is commenced or a party reasonably anticipates litigation, i.e., possibly investigating misconduct. In fact, e-discovery sanctions commonly relate to a party’s failure to take appropriate preservation efforts prior to actual litigation being filed. To minimize later e-discovery costs, legal counsel should collaborate with IT professionals to implement appropriate litigation hold procedures in order to properly preserve relevant information; 
  • Information during the investigation phase should only be disclosed on a need to know basis; and 
  • It is important to remain objective. Every investigation should start without any preconceived notions of guilt or innocence on the part of any particular party.  

This list is certainly not an exhaustive playbook. But eliminating mistakes in these critical areas will go a long way towards improving the overall sexual harassment investigation process. 

Jury.jpgAn unlikely employer recently found out that discharging or otherwise disciplining an employee for complying with jury duty is not only bad publicity but also violates Michigan law.   

Specifically, the Detroit Free Press (by Christina Hall) reported that a law firm employee called for jury duty in a murder case pending in Macomb County Circuit Court allegedly produced a letter from her law firm employer indicating that if she did not return to work that she would be replaced. The law firm was not disclosed by the Free Press.

The Macomb County Circuit Court Judge, Mary Chrzanowski, found it “unbelievable” that a law firm had the “audacity to do this.”

The Judge is absolutely right. Jury service is a critical civic duty and a cornerstone of our democratic society. And I’m sure this law firm will be “reminded” about this the next time their attorneys appear before Judge Chrzanowski (I would hate to be the attorney to draw that short straw).  

And this incident is also a good reminder for employers that Michigan – like most states – forbid employers from disciplining or discharging an employee because the employee obeyed or intended to obey a jury summons. See MCL § 600.1348. In fact, Michigan employers who take such action are guilty of a misdemeanor and may be held (and have been held) in contempt of court for violating this statute. 

Take-aways for Employers when it comes to Employees and Jury Duty

In addition to the obvious, i.e., don’t  discharge or discipline an employee for complying with jury duty, a few more points to consider: 

Employees, even employees at will, may not be terminated for a reason that violates the public policy of the state, which includes complying with jury duty. Smetts v. Whiteford Systems, Inc., 1990 U.S. Dist. LEXIS 3908 (W.D. Mich. Apr. 11, 1990)(denying motion for summary judgment because a question of fact remained as to whether plaintiff’s juror summons was a “significant factor” in employer’s decision to discharge plaintiff).

Employers should have a jury duty provision in their employee handbook. Among the topics that this provision should address are: 

  • Describing the procedures an employee is required to follow after being notified that the employee has been summoned for jury service.
  • If the employee is excused from jury duty, must the employee return to work that day?
  • Determining whether employees will be paid during their leave for jury duty and, if so, at what rate? Also, how will any pay an employee received from the courts for jury duty be handled?

In regard to this last point, it is important to note jury duty pay issues may bring into play the Fair Labor Standards Act. Consider for example that under the overtime regulations, employees must be paid on a salary basis to be considered exempt from the FLSA’s overtime requirements. 29 CFR 541.602. There are a number of requirements to meet this exemption, including deductions may not be made for absences due to jury duty or attendance as a witness. 29 CFR 541.602(a). An employer, however, may offset any jury or witness pay received by the employee against the salary due for the week in question. 29 CFR 541.602(b)(3).

As with any content on this site, this material should not be used as a substitute for an attorney’s independent judgment, drafting, and research of your particular situation.

Targeting Social Media.jpg

It is no secret that the NLRB has put employer’s social media policies and employee discipline discharges arising out of social media (a/k/a Facebook Firings) in its cross-hairs.

This fact was recently highlighted in another NLRB Press Release (9/7/11) where an administrative law judge found that a Buffalo nonprofit organization unlawfully discharged five employees after they posted comments on Facebook concerning working conditions, including work load and staffing issues.

Similar to the Buffalo matter, NLRB social media claims generally concern an employee termination related to Facebook postings, blogs, and Tweets, as well as social media policies considered to be overly broad by the NLRB.

Several resources have recently been published that highlight these issues and provide assistance to companies and human resource professionals to avoid ending up in the NLRB’s cross hairs when it comes to social media and the NLRA.

First, the NLRB’s Acting General Counsel recently released a report detailing its investigation into cases involving employer’s social media policies and employee’s use of social media. The NLRB Social Media Report (PDF) is a must read for employers.  

Second, the U.S. Chamber of Commerce released a well-written, comprehensive Report: A Survey of Social Media Issues Before the NLRB (PDF). This should also be a must-read report for human resource professionals and employers. 

The Take-away

The prudent course of action if an employer is considering disciplining or firing an employee for a Facebook posting or other conduct relating to social media is to examine the issue of protected concerted activity under the National Labor Relations, preferably with their labor and employment counsel to avoid ending up as the next NLRB press release. 

Job Search.jpgA proposed Michigan bill, “The Fair Consideration of the Unemployed Act” (PDF) would prohibit discrimination against the unemployed when it comes to job postings. This bill was introduced by State Representative Jim Ananich, D-Flint.

If signed into law employers could face a $5,000 fine for a first violation and a $10,000 for each subsequent violation.  

As proposed, the Michigan Fair Consideration Act would prohibit an employer or its agent, from publishing job postings “stating or suggesting” that:

  • Current employment is a job qualification; 
  • An application from a job applicant who is currently unemployed will not be reviewed and the applicant will not be considered for an interview or be hired; and
  • Only applications for employment from applicants who are currently employed will be considered or reviewed.

Similar legislation was passed in New Jersey and was introduced in the U.S. House in June.

Is There a Need for Unemployment Discrimination Legislation?

A recent article in the New York Times, The Help-Wanted Sign Comes With a Frustrating Asterisk (by Catherine Rampell) seems to substantiate there is some bias against the unemployed. That article noted:

A recent review of job vacancy postings on popular sites like Monster.com, CareerBuilder and Craigslist revealed hundreds that said employers would consider (or at least “strongly prefer”) only people currently employed or just recently laid off. 

Current Protection for the Unemployed  

Under Michigan and federal law, the practice of excluding unemployed people from job applications does not facially violate discrimination laws because unemployment is not a protected status, like age or race.

This practice, however, may have a disproportionate impact on older workers and minorities. In this regard, the Equal Employment Opportunity Commission held a hearing earlier this year to examine the practice of excluding currently unemployed people from job applicant pools. According to Department of Labor records, 33.8% of unemployed workers are 40 or older and this number jumps to 52% among the long term unemployed. Latinos and African Americans are also over represented in the pool of the unemployed.

Take aways

The Michigan legislation did not move forward in committee prior to taking its summer recess. So Michigan employers may use employment/unemployment status in screening applicants. But that does not mean that this practice is recommended. 

First, an employer screening applicants based on unemployment status could face a claim that such a practice has an unlawful disparate impact on applicants falling under a protected category, e.g., age or race. It is, therefore, prudent to carefully review all current and prospective job postings to determine if employment status is listed or referenced as a criteria for applying.      

Second, the unemployment rate has steadily risen since 2001 (going from 4.2% in January 2001 to the current 9.1% rate). This translates to approximately 14 million people being unemployed. While the practice of automatically excluding 14 million applicants based on unemployment status may not be illegal, it hardly constitutes “due diligence” in screening job applicants. Similar issues were also discussed about rejecting applicants based on a past bankruptcy filing.  

Third, employers already face a well-developed regulatory landscape when it comes to unlawful discrimination in hiring and other employment decisions. But adding the restriction proposed in Michigan’s Fair Consideration Act – if strictly limited to job postings – provides a sufficiently bright-line restriction. That restriction should be easily implemented and does not impose on employers any new record keeping requirements.

We will continue to monitor this legislation and would appreciate hearing perspectives from both job applicants and hiring professionals on this topic, whether you think it is needed, and if you have an personal experience with either.