Independent contractors and the FCRA

Must employers provide the protections required by the Fair Credit Reporting Act (FCRA) to prospective independent contractors? 

Not according to a new decision from an Iowa court (see Smith v. Mutual of Omaha Insurance Company, No. 4:17-cv-00443 (S.D. Iowa Oct. 4, 2018)) which grappled with the question in the context of a lawsuit filed by an individual against an insurance company where he applied to contract as a salesperson but was rejected because of a falsely reported felony in his background check. The plaintiff accused the insurance company of violating the FCRA by failing to provide him with the statutorily required prior notice that the background check resulted in his not being hired.    

The insurance company asked the court to dismiss the lawsuit, claiming that the FCRA only requires such notice when an applicant seeks to be hired as an employee, and not as an independent contractor. Since the plaintiff applied for an independent contractor position, he was not entitled to the protections of the statute, the insurance company argued. 

The plaintiff countered that he was applying to be an employee of the insurance company and that it was too early to dismiss the case, as further discovery was needed. In the alternative, he argued that the FCRA should still govern his relationship even as an independent contractor.

In ruling on the FCRA issue, Judge John Jarvey began with the language of the law. The FCRA is a broad statute, Judge Jarvey said, and some of its most stringent protections apply when a background check is being obtained “for employment purposes.” 

The definitions section of the FCRA, at 15 U.S.C. § 1681a(h), states that “[t]he term ‘employment purposes’ when used in connection with a consumer report means a report used for the purpose of evaluating a consumer for employment, promotion, reassignment or retention as an employee.” This text “makes clear that the pre-adverse action notice requirement only applies when a consumer report is used for employment purposes,” Judge Jarvey wrote. “The meaning of ‘employment purposes’ is specifically defined in the statute, and it is defined as being ‘used for the purpose of evaluating a consumer for employment, promotion, reassignment or retention as an employee.’”  District courts in Ohio and Wisconsin have reached the same conclusion, Judge Jarvey noted, citing the decisions for support. 

Notably, the Federal Trade Commission (FTC) in its 2011 staff report entitled “40 Years of Experience with the Fair Credit Reporting Act” provided a seemingly contrasting interpretation. The FTC stated that “the term ‘employment purposes’ is interpreted liberally to effectuate the broad remedial purpose of the FCRA and may apply to situations where an entity uses individuals who are not technically employees to perform duties. Thus, it includes a trucking company that obtains consumer reports on individual drivers who own and operate their own equipment; a title insurance company that obtains consumer reports on individuals with whom it frequently enters into contracts to sell its insurance, examine title, and close real property transactions; or a nonprofit organization staffed in whole or in part by volunteers.” 

The FTC’s view can be reconciled with that of Judge Jarvey’s by taking the approach that the applicability of FCRA’s requirements depends on the facts and circumstances of the particular relationship, rather than the formal designation of someone as an independent contractor. 

Given the still remaining disputed issue of whether or not the plaintiff would have been an employee or an independent contractor for the insurance company, the court ordered limited discovery on the issue and declined to dismiss the suit. 

Are you hiring? Do you have a Recruiting Checklist?

Job descriptions. Make sure you have a job description for each position in your company. Job descriptions should reflect careful thought as to the roles the individual will fill, the required skill sets, and other attributes that are important to completing their tasks.

  1. Compile a “success profile.” In addition to creating job descriptions, it’s important to develop a “success profile” of the ideal employee for each position.
  2. Draft the ads, describing the position and the key qualifications required. Be sure to post ads in the places most likely to be noticed by your target candidates.
  3. Develop a series of phone-screening questions. Compile a list of suitable questions you can ask over the phone to help you quickly identify qualified candidates and eliminate everyone else. This will save you time compared to bringing every candidate into the office.
  4. Review the resumes you receive and rank your best candidates. Once you start receiving resumes…you will have to go through them and eliminate those that are a poor fit.
  5. Use the phone to screen candidates. Once you’ve narrowed your stack of resumes to a handful of potential applicants, call the candidates and use your phone-screening questions to further narrow the field. Using a consistent set of questions in both this step and your face-to-face interviews will help ensure you’re evaluating candidates equally.
  6. Rank your candidates and schedule those that are the best fit for an in-person interview. Based on the responses to your phone interviews, select the candidates you feel are best qualified for the next step in the process.
  7. Assess your potential candidates for their skills and attributes using a proven assessment tool. A resume and phone interview can only tell you so much about a job applicant, so you’ll need a dependable assessment tool to help you analyze the core behavioral traits and cognitive reasoning speed of your applicants. For example, a good test will provide insights as to whether the individual is conscientious or lackadaisical, introverted or extroverted, agreeable or uncompromising, open to new ideas or close-minded, and emotionally stable or anxious and insecure. The success profile you created for each position will help you determine which behavioral traits are important for that position. For example, you would expect a successful salesperson to be extroverted. On the other hand, someone filling a clerical position might be more introverted.These assessment tests can be administered in person or online. Online testing and submission of results can help you determine whether the applicant should be invited for a personal interview.
  8. Schedule and conduct candidate interviews. Once you’ve selected candidates based on the previous steps, schedule and conduct the interviews. Use a consistent set of 10 or 12 questions to maintain a structured interview and offer a sound basis for comparing applicants.
  9. Select the candidate. Make your selection by matching the best applicant to the profiled job description.
  10. Make your offer to the candidate. The information you collected during the interview process will provide you with important insights as to starting compensation levels and training needs.
  11. Order a report for employment screening purposes on the candidate to uncover any potential red flags. 

Glossary of Legal Terms

a | b | c | d | e | f | g | h | i | j | l | m | n | o | p | r | s | t | u | v | w

A


Acquittal
A jury verdict that a criminal defendant is not guilty, or the finding of a judge that the evidence is insufficient to support a conviction.

Active judge
A judge in the full-time service of the court. Compare to senior judge.

Administrative Office of the United States Courts (AO)
The federal agency responsible for collecting court statistics, administering the federal courts’ budget, and performing many other administrative and programmatic functions, under the direction and supervision of the Judicial Conference of the United States.

Admissible
A term used to describe evidence that may be considered by a jury or judge in civil and criminal cases.

Adversary proceeding
A lawsuit arising in or related to a bankruptcy case that begins by filing a complaint with the court, that is, a “trial” that takes place within the context of a bankruptcy case.

Affidavit
A written or printed statement made under oath.

Affirmed
In the practice of the court of appeals, it means that the court of appeals has concluded that the lower court decision is correct and will stand as rendered by the lower court.

Alternate juror
A juror selected in the same manner as a regular juror who hears all the evidence but does not help decide the case unless called on to replace a regular juror.

Alternative dispute resolution (ADR)
A procedure for settling a dispute outside the courtroom. Most forms of ADR are not binding, and involve referral of the case to a neutral party such as an arbitrator or mediator.

Amicus curiae
Latin for “friend of the court.” It is advice formally offered to the court in a brief filed by an entity interested in, but not a party to, the case.

Answer
The formal written statement by a defendant in a civil case that responds to a complaint, articulating the grounds for defense.

Appeal
A request made after a trial by a party that has lost on one or more issues that a higher court review the decision to determine if it was correct. To make such a request is “to appeal” or “to take an appeal.” One who appeals is called the “appellant;” the other party is the “appellee.”

Appellant
The party who appeals a district court’s decision, usually seeking reversal of that decision.

Appellate
About appeals; an appellate court has the power to review the judgment of a lower court (trial court) or tribunal. For example, the U.S. circuit courts of appeals review the decisions of the U.S. district courts.

Appellee
The party who opposes an appellant’s appeal, and who seeks to persuade the appeals court to affirm the district court’s decision.

Arraignment
A proceeding in which a criminal defendant is brought into court, told of the charges in an indictment or information, and asked to plead guilty or not guilty.

Article III judge
A federal judge who is appointed for life, during “good behavior,” under Article III of the Constitution. Article III judges are nominated by the President and confirmed by the Senate.

Assets
Property of all kinds, including real and personal, tangible and intangible.

Assume
An agreement to continue performing duties under a contract or lease.

Automatic stay
An injunction that automatically stops lawsuits, foreclosures, garnishments, and most collection activities against the debtor the moment a bankruptcy petition is filed.

Return to top

B


Bail
The release, prior to trial, of a person accused of a crime, under specified conditions designed to assure that person’s appearance in court when required. Also can refer to the amount of bond money posted as a financial condition of pretrial release.

Bankruptcy
A legal procedure for dealing with debt problems of individuals and businesses; specifically, a case filed under one of the chapters of title 11 of the United States Code (the Bankruptcy Code).

Bankruptcy administrator
An officer of the Judiciary serving in the judicial districts of Alabama and North Carolina who, like the United States trustee, is responsible for supervising the administration of bankruptcy cases, estates, and trustees; monitoring plans and disclosure statements; monitoring creditors’ committees; monitoring fee applications; and performing other statutory duties.

Bankruptcy code
The informal name for title 11 of the United States Code (11 U.S.C. §§ 101-1330), the federal bankruptcy law.

Bankruptcy court
The bankruptcy judges in regular active service in each district; a unit of the district court.

Bankruptcy estate
All interests of the debtor in property at the time of the bankruptcy filing. The estate technically becomes the temporary legal owner of all of the debtor’s property.

Bankruptcy judge
A judicial officer of the United States district court who is the court official with decision-making power over federal bankruptcy cases.

Bankruptcy petition
A formal request for the protection of the federal bankruptcy laws. (There is an official form for bankruptcy petitions.)

Bankruptcy trustee
A private individual or corporation appointed in all Chapter 7 and Chapter 13 cases to represent the interests of the bankruptcy estate and the debtor’s creditors.

Bench trial
A trial without a jury, in which the judge serves as the fact-finder.

Brief
A written statement submitted in a trial or appellate proceeding that explains one side’s legal and factual arguments.

Burden of proof
The duty to prove disputed facts. In civil cases, a plaintiff generally has the burden of proving his or her case. In criminal cases, the government has the burden of proving the defendant’s guilt. (See standard of proof.)

Business bankruptcy
A bankruptcy case in which the debtor is a business or an individual involved in business and the debts are for business purposes.

Return to top

C


Capital offense
A crime punishable by death.

Case file
A complete collection of every document filed in court in a case.

Case law
The law as established in previous court decisions. A synonym for legal precedent. Akin to common law, which springs from tradition and judicial decisions.

Caseload
The number of cases handled by a judge or a court.

Cause of action
A legal claim.

Chambers
The offices of a judge and his or her staff.

Chapter 11
A reorganization bankruptcy, usually involving a corporation or partnership. A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. Individuals or people in business can also seek relief in Chapter 11.

Chapter 12
The chapter of the Bankruptcy Code providing for adjustment of debts of a “family farmer” or “family fisherman,” as the terms are defined in the Bankruptcy Code.

Chapter 13
The chapter of the Bankruptcy Code providing for the adjustment of debts of an individual with regular income, often referred to as a “wage-earner” plan. Chapter 13 allows a debtor to keep property and use his or her disposable income to pay debts over time, usually three to five years.

Chapter 13 trustee
A person appointed to administer a Chapter 13 case. A Chapter 13 trustee’s responsibilities are similar to those of a Chapter 7 trustee; however, a Chapter 13 trustee has the additional responsibilities of overseeing the debtor’s plan, receiving payments from debtors, and disbursing plan payments to creditors.

Chapter 15
The chapter of the Bankruptcy Code dealing with cases of cross-border insolvency.

Chapter 7
The chapter of the Bankruptcy Code providing for “liquidation,” that is, the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors. In order to be eligible for Chapter 7, the debtor must satisfy a “means test.” The court will evaluate the debtor’s income and expenses to determine if the debtor may proceed under Chapter 7.

Chapter 7 trustee
A person appointed in a Chapter 7 case to represent the interests of the bankruptcy estate and the creditors. The trustee’s responsibilities include reviewing the debtor’s petition and schedules, liquidating the property of the estate, and making distributions to creditors. The trustee may also bring actions against creditors or the debtor to recover property of the bankruptcy estate.

Chapter 9
The chapter of the Bankruptcy Code providing for reorganization of municipalities (which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts).

Chief judge
The judge who has primary responsibility for the administration of a court; chief judges are determined by seniority

Claim
A creditor’s assertion of a right to payment from a debtor or the debtor’s property.

Class action
A lawsuit in which one or more members of a large group, or class, of individuals or other entities sue on behalf of the entire class. The district court must find that the claims of the class members contain questions of law or fact in common before the lawsuit can proceed as a class action.

Clerk of court
The court officer who oversees administrative functions, especially managing the flow of cases through the court. The clerk’s office is often called a court’s central nervous system.

Collateral
Property that is promised as security for the satisfaction of a debt.

Common law
The legal system that originated in England and is now in use in the United States, which relies on the articulation of legal principles in a historical succession of judicial decisions. Common law principles can be changed by legislation.

Community service
A special condition the court imposes that requires an individual to work – without pay – for a civic or nonprofit organization.

Complaint
A written statement that begins a civil lawsuit, in which the plaintiff details the claims against the defendant.

Concurrent sentence
Prison terms for two or more offenses to be served at the same time, rather than one after the other. Example: Two five-year sentences and one three-year sentence, if served concurrently, result in a maximum of five years behind bars.

Confirmation
Approval of a plan of reorganization by a bankruptcy judge.

Consecutive sentence
Prison terms for two or more offenses to be served one after the other. Example: Two five-year sentences and one three-year sentence, if served consecutively, result in a maximum of 13 years behind bars.

Consumer bankruptcy
A bankruptcy case filed to reduce or eliminate debts that are primarily consumer debts.

Consumer debts
Debts incurred for personal, as opposed to business, needs.

Contingent claim
A claim that may be owed by the debtor under certain circumstances, e.g., where the debtor is a cosigner on another person’s loan and that person fails to pay.

Contract
An agreement between two or more people that creates an obligation to do or not to do a particular thing.

Conviction
A judgment of guilt against a criminal defendant.

Counsel
Legal advice; a term also used to refer to the lawyers in a case.

Count
An allegation in an indictment or information, charging a defendant with a crime. An indictment or information may contain allegations that the defendant committed more than one crime. Each allegation is referred to as a count.

Court
Government entity authorized to resolve legal disputes. Judges sometimes use “court” to refer to themselves in the third person, as in “the court has read the briefs.”

Court reporter
A person who makes a word-for-word record of what is said in court, generally by using a stenographic machine, shorthand or audio recording, and then produces a transcript of the proceedings upon request.

Credit counseling
Generally refers to two events in individual bankruptcy cases: (1) the “individual or group briefing” from a nonprofit budget and credit counseling agency that individual debtors must attend prior to filing under any chapter of the Bankruptcy Code; and (2) the “instructional course in personal financial management” in chapters 7 and 13 that an individual debtor must complete before a discharge is entered. There are exceptions to both requirements for certain categories of debtors, exigent circumstances, or if the U.S. trustee or bankruptcy administrator have determined that there are insufficient approved credit counseling agencies available to provide the necessary counseling.

Creditor
A person to whom or business to which the debtor owes money or that claims to be owed money by the debtor.

Return to top

D


Damages
Money that a defendant pays a plaintiff in a civil case if the plaintiff has won. Damages may be compensatory (for loss or injury) or punitive (to punish and deter future misconduct).

De facto
Latin, meaning “in fact” or “actually.” Something that exists in fact but not as a matter of law.

De jure
Latin, meaning “in law.” Something that exists by operation of law.

De novo
Latin, meaning “anew.” A trial de novo is a completely new trial. Appellate review de novo implies no deference to the trial judge’s ruling.

Debtor
A person who has filed a petition for relief under the Bankruptcy Code.

Debtor’s plan
A debtor’s detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time.

Declaratory judgment
A judge’s statement about someone’s rights. For example, a plaintiff may seek a declaratory judgment that a particular statute, as written, violates some constitutional right.

Default judgment
A judgment awarding a plaintiff the relief sought in the complaint because the defendant has failed to appear in court or otherwise respond to the complaint.

Defendant
An individual (or business) against whom a lawsuit is filed.

Defendant
In a civil case, the person or organization against whom the plaintiff brings suit; in a criminal case, the person accused of the crime.

Deposition
An oral statement made before an officer authorized by law to administer oaths. Such statements are often taken to examine potential witnesses, to obtain discovery, or to be used later in trial. See discovery.

Discharge
A release of a debtor from personal liability for certain dischargeable debts. Notable exceptions to dischargeability are taxes and student loans. A discharge releases a debtor from personal liability for certain debts known as dischargeable debts and prevents the creditors owed those debts from taking any action against the debtor or the debtor’s property to collect the debts. The discharge also prohibits creditors from communicating with the debtor regarding the debt, including through telephone calls, letters, and personal contact.

Dischargeable debt
A debt for which the Bankruptcy Code allows the debtor’s personal liability to be eliminated.

Disclosure statement
A written document prepared by the chapter 11 debtor or other plan proponent that is designed to provide “adequate information” to creditors to enable them to evaluate the chapter 11 plan of reorganization.

Discovery
Procedures used to obtain disclosure of evidence before trial.

Dismissal with prejudice
Court action that prevents an identical lawsuit from being filed later.

Dismissal without prejudice
Court action that allows the later filing.

Disposable income
Income not reasonably necessary for the maintenance or support of the debtor or dependents. If the debtor operates a business, disposable income is defined as those amounts over and above what is necessary for the payment of ordinary operating expenses.

Docket
A log containing the complete history of each case in the form of brief chronological entries summarizing the court proceedings.

Due process
In criminal law, the constitutional guarantee that a defendant will receive a fair and impartial trial. In civil law, the legal rights of someone who confronts an adverse action threatening liberty or property.

Return to top

E


En banc
French, meaning “on the bench.” All judges of an appellate court sitting together to hear a case, as opposed to the routine disposition by panels of three judges. In the Ninth Circuit, an en banc panel consists of 11 randomly selected judges.

Equitable
Pertaining to civil suits in “equity” rather than in “law.” In English legal history, the courts of “law” could order the payment of damages and could afford no other remedy (see damages). A separate court of “equity” could order someone to do something or to cease to do something (e.g., injunction). In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in “law” cases but not in “equity” cases.

Equity
The value of a debtor’s interest in property that remains after liens and other creditors’ interests are considered. (Example: If a house valued at $60,000 is subject to a $30,000 mortgage, there is $30,000 of equity.)

Evidence
Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case in favor of one side or the other.

Ex parte
A proceeding brought before a court by one party only, without notice to or challenge by the other side.

Exclusionary rule
Doctrine that says evidence obtained in violation of a criminal defendant’s constitutional or statutory rights is not admissible at trial.

Exculpatory evidence
Evidence indicating that a defendant did not commit the crime.

Executory contracts
Contracts or leases under which both parties to the agreement have duties remaining to be performed. If a contract or lease is executory, a debtor may assume it (keep the contract) or reject it (terminate the contract).

Exempt assets
Property that a debtor is allowed to retain, free from the claims of creditors who do not have liens on the property.

Exemptions, exempt property
Certain property owned by an individual debtor that the Bankruptcy Code or applicable state law permits the debtor to keep from unsecured creditors. For example, in some states the debtor may be able to exempt all or a portion of the equity in the debtor’s primary residence (homestead exemption), or some or all “tools of the trade” used by the debtor to make a living (i.e., auto tools for an auto mechanic or dental tools for a dentist). The availability and amount of property the debtor may exempt depends on the state the debtor lives in.

Return to top

F


Face sheet filing
A bankruptcy case filed either without schedules or with incomplete schedules listing few creditors and debts. (Face sheet filings are often made for the purpose of delaying an eviction or foreclosure

Family farmer
An individual, individual and spouse, corporation, or partnership engaged in a farming operation that meets certain debt limits and other statutory criteria for filing a petition under Chapter 12.

Federal public defender
An attorney employed by the federal courts on a full-time basis to provide legal defense to defendants who are unable to afford counsel. The judiciary administers the federal defender program pursuant to the Criminal Justice Act.

Federal public defender organization
As provided for in the Criminal Justice Act, an organization established within a federal judicial circuit to represent criminal defendants who cannot afford an adequate defense. Each organization is supervised by a federal public defender appointed by the court of appeals for the circuit.

Federal question jurisdiction
Jurisdiction given to federal courts in cases involving the interpretation and application of the U.S. Constitution, acts of Congress, and treaties.

Felony
A serious crime, usually punishable by at least one year in prison.

File
To place a paper in the official custody of the clerk of court to enter into the files or records of a case.

Fraudulent transfer
A transfer of a debtor’s property made with intent to defraud or for which the debtor receives less than the transferred property’s value.

Fresh start
The characterization of a debtor’s status after bankruptcy, i.e., free of most debts. (Giving debtors a fresh start is one purpose of the Bankruptcy Code.)

Return to top

G


Grand jury
A body of 16-23 citizens who listen to evidence of criminal allegations, which is presented by the prosecutors, and determine whether there is probable cause to believe an individual committed an offense. See also indictment and U.S. attorney.

Return to top

H


Habeas corpus
Latin, meaning “you have the body.” A writ of habeas corpus generally is a judicial order forcing law enforcement authorities to produce a prisoner they are holding, and to justify the prisoner’s continued confinement. Federal judges receive petitions for a writ of habeas corpus from state prison inmates who say their state prosecutions violated federally protected rights in some way.

Hearsay
Evidence presented by a witness who did not see or hear the incident in question but heard about it from someone else. With some exceptions, hearsay generally is not admissible as evidence at trial

Home confinement
A special condition the court imposes that requires an individual to remain at home except for certain approved activities such as work and medical appointments. Home confinement may include the use of electronic monitoring equipment – a transmitter attached to the wrist or the ankle – to help ensure that the person stays at home as required.

Return to top

I


Impeachment
1. The process of calling a witness’s testimony into doubt. For example, if the attorney can show that the witness may have fabricated portions of his testimony, the witness is said to be “impeached;” 2. The constitutional process whereby the House of Representatives may “impeach” (accuse of misconduct) high officers of the federal government, who are then tried by the Senate.

In camera
Latin, meaning in a judge’s chambers. Often means outside the presence of a jury and the public. In private.

In forma pauperis
“In the manner of a pauper.” Permission given by the court to a person to file a case without payment of the required court fees because the person cannot pay them.

Inculpatory evidence
Evidence indicating that a defendant did commit the crime.

Indictment
The formal charge issued by a grand jury stating that there is enough evidence that the defendant committed the crime to justify having a trial; it is used primarily for felonies. See also information.

Information
A formal accusation by a government attorney that the defendant committed a misdemeanor. See also indictment.

Injunction
A court order preventing one or more named parties from taking some action. A preliminary injunction often is issued to allow fact-finding, so a judge can determine whether a permanent injunction is justified.

Insider (of corporate debtor)
A director, officer, or person in control of the debtor; a partnership in which the debtor is a general partner; a general partner of the debtor; or a relative of a general partner, director, officer, or person in control of the debtor.

Insider (of individual debtor)
Any relative of the debtor or of a general partner of the debtor; partnership inwhich the debtor is a general partner; general partner of the debtor; or corporation of which the debtor is a director, officer, or person in control.

Interrogatories
A form of discovery consisting of written questions to be answered in writing and under oath.

Issue
1. The disputed point between parties in a lawsuit; 2. To send out officially, as in a court issuing an order.

Return to top

J


Joint administration
A court-approved mechanism under which two or more cases can be administered together. (Assuming no conflicts of interest, these separate businesses or individuals can pool their resources, hire the same professionals, etc.)

Joint petition
One bankruptcy petition filed by a husband and wife together.

Judge
An official of the Judicial branch with authority to decide lawsuits brought before courts. Used generically, the term judge may also refer to all judicial officers, including Supreme Court justices.

Judgeship
The position of judge. By statute, Congress authorizes the number of judgeships for each district and appellate court.

Judgment
The official decision of a court finally resolving the dispute between the parties to the lawsuit.

Judicial Conference of the United States
The policy-making entity for the federal court system. A 27-judge body whose presiding officer is the Chief Justice of the United States.

Jurisdiction
The legal authority of a court to hear and decide a certain type of case. It also is used as a synonym for venue, meaning the geographic area over which the court has territorial jurisdiction to decide cases.

Jurisprudence
The study of law and the structure of the legal system

Jury
The group of persons selected to hear the evidence in a trial and render a verdict on matters of fact. See also grand jury.

Jury instructions
A judge’s directions to the jury before it begins deliberations regarding the factual questions it must answer and the legal rules that it must apply.

Return to top

L


Lawsuit
A legal action started by a plaintiff against a defendant based on a complaint that the defendant failed to perform a legal duty which resulted in harm to the plaintiff.

Lien
A charge on specific property that is designed to secure payment of a debt or performance of an obligation. A debtor may still be responsible for a lien after a discharge.

Liquidated claim
A creditor’s claim for a fixed amount of money.

Liquidation
The sale of a debtor’s property with the proceeds to be used for the benefit of creditors.

Litigation
A case, controversy, or lawsuit. Participants (plaintiffs and defendants) in lawsuits are called litigants.

Return to top

M


Magistrate judge
A judicial officer of a district court who conducts initial proceedings in criminal cases, decides criminal misdemeanor cases, conducts many pretrial civil and criminal matters on behalf of district judges, and decides civil cases with the consent of the parties.

Means test
Section 707(b)(2) of the Bankruptcy Code applies a “means test” to determine whether an individual debtor’s chapter 7 filing is presumed to be an abuse of the Bankruptcy Code requiring dismissal or conversion of the case (generally to chapter 13). Abuse is presumed if the debtor’s aggregate current monthly income (see definition above) over 5 years, net of certain statutorily allowed expenses is more than (i) $10,000, or (ii) 25% of the debtor’s nonpriority unsecured debt, as long as that amount is at least $6,000. The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income.

Mental health treatment
Special condition the court imposes to require an individual to undergo evaluation and treatment for a mental disorder. Treatment may include psychiatric, psychological, and sex offense-specific evaluations, inpatient or outpatient counseling, and medication.

Misdemeanor
An offense punishable by one year of imprisonment or less. See also felony.

Mistrial
An invalid trial, caused by fundamental error. When a mistrial is declared, the trial must start again with the selection of a new jury.

Moot
Not subject to a court ruling because the controversy has not actually arisen, or has ended

Motion
A request by a litigant to a judge for a decision on an issue relating to the case.

Motion in Limine
A pretrial motion requesting the court to prohibit the other side from presenting, or even referring to, evidence on matters said to be so highly prejudicial that no steps taken by the judge can prevent the jury from being unduly influenced.

Motion to lift the automatic stay
A request by a creditor to allow the creditor to take action against the debtor or the debtor’s property that would otherwise be prohibited by the automatic stay.

Return to top

N


No-asset case
A Chapter 7 case in which there are no assets available to satisfy any portion of the creditors’ unsecured claims.

Nolo contendere
No contest. A plea of nolo contendere has the same effect as a plea of guilty, as far as the criminal sentence is concerned, but may not be considered as an admission of guilt for any other purpose.

Nondischargeable debt
A debt that cannot be eliminated in bankruptcy. Examples include a home mortgage, debts for alimony or child support, certain taxes, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution or a criminal fine included in a sentence on the debtor’s conviction of a crime. Some debts, such as debts for money or property obtained by false pretenses and debts for fraud or defalcation while acting in a fiduciary capacity may be declared nondischargeable only if a creditor timely files and prevails in a nondischargeability action.

Nonexempt assets
Property of a debtor that can be liquidated to satisfy claims of creditors.

Return to top

O


Objection to dischargeability
A trustee’s or creditor’s objection to the debtor being released from personal liability for certain dischargeable debts. Common reasons include allegations that the debt to be discharged was incurred by false pretenses or that debt arose because of the debtor’s fraud while acting as a fiduciary.

Objection to exemptions
A trustee’s or creditor’s objection to the debtor’s attempt to claim certain property as exempt from liquidation by the trustee to creditors.

Opinion
A judge’s written explanation of the decision of the court. Because a case may be heard by three or more judges in the court of appeals, the opinion in appellate decisions can take several forms. If all the judges completely agree on the result, one judge will write the opinion for all. If all the judges do not agree, the formal decision will be based upon the view of the majority, and one member of the majority will write the opinion. The judges who did not agree with the majority may write separately in dissenting or concurring opinions to present their views. A dissenting opinion disagrees with the majority opinion because of the reasoning and/or the principles of law the majority used to decide the case. A concurring opinion agrees with the decision of the majority opinion, but offers further comment or clarification or even an entirely different reason for reaching the same result. Only the majority opinion can serve as binding precedent in future cases. See also precedent.

Oral argument
An opportunity for lawyers to summarize their position before the court and also to answer the judges’ questions.

Return to top

P


Panel
1. In appellate cases, a group of judges (usually three) assigned to decide the case; 2. In the jury selection process, the group of potential jurors; 3. The list of attorneys who are both available and qualified to serve as court-appointed counsel for criminal defendants who cannot afford their own counsel.

Parole
The release of a prison inmate – granted by the U.S. Parole Commission – after the inmate has completed part of his or her sentence in a federal prison. When the parolee is released to the community, he or she is placed under the supervision of a U.S. probation officer.

The Sentencing Reform Act of 1984 abolished parole in favor of a determinate sentencing system in which the sentence is set by sentencing guidelines. Now, without the option of parole, the term of imprisonment the court imposes is the actual time the person spends in prison.


Party in interest
A party who has standing to be heard by the court in a matter to be decided in the bankruptcy case. The debtor, U.S. trustee or bankruptcy administrator, case trustee, and creditors are parties in interest for most matters.

Per curiam
Latin, meaning “for the court.” In appellate courts, often refers to an unsigned opinion.

Peremptory challenge
A district court may grant each side in a civil or criminal trial the right to exclude a certain number of prospective jurors without cause or giving a reason.

Petit jury (or trial jury)
A group of citizens who hear the evidence presented by both sides at trial and determine the facts in dispute. Federal criminal juries consist of 12 persons. Federal civil juries consist of at least six persons.

Petition
The document that initiates the filing of a bankruptcy proceeding, setting forth basic information regarding the debtor, including name, address, chapter under which the case is filed, and estimated amount of assets and liabilities.

Petition preparer
A business not authorized to practice law that prepares bankruptcy petitions.

Petty offense
A federal misdemeanor punishable by six months or less in prison.

Plaintiff
A person or business that files a formal complaint with the court.

Plan
A debtor’s detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time.

Plea
In a criminal case, the defendant’s statement pleading “guilty” or “not guilty” in answer to the charges. See also nolo contendere.

Pleadings
Written statements filed with the court that describe a party’s legal or factual assertions about the case.

Postpetition transfer
A transfer of the debtor’s property made after the commencement of the case.

Prebankruptcy planning
The arrangement (or rearrangement) of a debtor’s property to allow the debtor to take maximum advantage of exemptions. (Prebankruptcy planning typically includes converting nonexempt assets into exempt assets.)

Precedent
A court decision in an earlier case with facts and legal issues similar to a dispute currently before a court. Judges will generally “follow precedent” – meaning that they use the principles established in earlier cases to decide new cases that have similar facts and raise similar legal issues. A judge will disregard precedent if a party can show that the earlier case was wrongly decided, or that it differed in some significant way from the current case.

Preferential debt payment
A debt payment made to a creditor in the 90-day period before a debtor files bankruptcy (or within one year if the creditor was an insider) that gives the creditor more than the creditor would receive in the debtor’s chapter 7 case.

Presentence report
A report prepared by a court’s probation officer, after a person has been convicted of an offense, summarizing for the court the background information needed to determine the appropriate sentence.

Pretrial conference
A meeting of the judge and lawyers to plan the trial, to discuss which matters should be presented to the jury, to review proposed evidence and witnesses, and to set a trial schedule. Typically, the judge and the parties also discuss the possibility of settlement of the case.

Pretrial services
A function of the federal courts that takes place at the very start of the criminal justice process – after a person has been arrested and charged with a federal crime and before he or she goes to trial. Pretrial services officers focus on investigating the backgrounds of these persons to help the court determine whether to release or detain them while they await trial. The decision is based on whether these individuals are likely to flee or pose a threat to the community. If the court orders release, a pretrial services officer supervises the person in the community until he or she returns to court.

Priority
The Bankruptcy Code’s statutory ranking of unsecured claims that determines the order in which unsecured claims will be paid if there is not enough money to pay all unsecured claims in full.

Priority claim
An unsecured claim that is entitled to be paid ahead of other unsecured claims that are not entitled to priority status. Priority refers to the order in which these unsecured claims are to be paid.

Pro per
A slang expression sometimes used to refer to a pro se litigant. It is a corruption of the Latin phrase “in propria persona.”

Pro se
Representing oneself. Serving as one’s own lawyer.

Pro tem
Temporary.

Probation
Sentencing option in the federal courts. With probation, instead of sending an individual to prison, the court releases the person to the community and orders him or her to complete a period of supervision monitored by a U.S. probation officer and to abide by certain conditions.

Probation officer
Officers of the probation office of a court. Probation officer duties include conducting presentence investigations, preparing presentence reports on convicted defendants, and supervising released defendants.

Procedure
The rules for conducting a lawsuit; there are rules of civil procedure, criminal procedure, evidence, bankruptcy, and appellate procedure.

Proof of claim
A written statement describing the reason a debtor owes a creditor money, which typically sets forth the amount of money owed. (There is an official form for this purpose.)

Property of the estate
All legal or equitable interests of the debtor in property as of the commencement of the case.

Prosecute
To charge someone with a crime. A prosecutor tries a criminal case on behalf of the government

Return to top

R


Reaffirmation agreement
An agreement by a debtor to continue paying a dischargeable debt after the bankruptcy, usually for the purpose of keeping collateral or mortgaged property that would otherwise be subject to repossession.

Record
A written account of the proceedings in a case, including all pleadings, evidence, and exhibits submitted in the course of the case.

Redemption
A procedure in a Chapter 7 case whereby a debtor removes a secured creditor’s lien on collateral by paying the creditor the value of the property. The debtor may then retain the property.

Remand
Send back.

Reverse
The act of a court setting aside the decision of a lower court. A reversal is often accompanied by a remand to the lower court for further proceedings.

Return to top

S


Sanction
A penalty or other type of enforcement used to bring about compliance with the law or with rules and regulations.

Schedules
Lists submitted by the debtor along with the petition (or shortly thereafter) showing the debtor’s assets, liabilities, and other financial information. (There are official forms a debtor must use.)

Secured creditor
A secured creditor is an individual or business that holds a claim against the debtor that is secured by a lien on property of the estate. The property subject to the lien is the secured creditor’s collateral.

Secured debt
Debt backed by a mortgage, pledge of collateral, or other lien; debt for which the creditor has the right to pursue specific pledged property upon default. Examples include home mortgages, auto loans and tax liens.

Senior judge
A federal judge who, after attaining the requisite age and length of judicial experience, takes senior status, thus creating a vacancy among a court’s active judges. A senior judge retains the judicial office and may cut back his or her workload by as much as 75 percent, but many opt to keep a larger caseload.

Sentence
The punishment ordered by a court for a defendant convicted of a crime.

Sentencing guidelines
A set of rules and principles established by the United States Sentencing Commission that trial judges use to determine the sentence for a convicted defendant.

Sequester
To separate. Sometimes juries are sequestered from outside influences during their deliberations.

Service of process
The delivery of writs or summonses to the appropriate party.

Settlement
Parties to a lawsuit resolve their dispute without having a trial. Settlements often involve the payment of compensation by one party in at least partial satisfaction of the other party’s claims, but usually do not include the admission of fault.

Small business case
A special type of chapter 11 case in which there is no creditors’ committee (or the creditors’ committee is deemed inactive by the court) and in which the debtor is subject to more oversight by the U.S. trustee than other chapter 11 debtors. The Bankruptcy Code contains certain provisions designed to reduce the time a small business debtor is in bankruptcy.

Standard of proof
Degree of proof required. In criminal cases, prosecutors must prove a defendant’s guilt “beyond a reasonable doubt.” The majority of civil lawsuits require proof “by a preponderance of the evidence” (50 percent plus), but in some the standard is higher and requires “clear and convincing” proof.

Statement of financial affairs
A series of questions the debtor must answer in writing concerning sources of income, transfers of property, lawsuits by creditors, etc. (There is an official form a debtor must use.)

Statement of intention
A declaration made by a chapter 7 debtor concerning plans for dealing with consumer debts that are secured by property of the estate.

Statute
A law passed by a legislature.

Statute of limitations
The time within which a lawsuit must be filed or a criminal prosecution begun. The deadline can vary, depending on the type of civil case or the crime charged.

Sua sponte
Latin, meaning “of its own will.” Often refers to a court taking an action in a case without being asked to do so by either side.

Subordination
The act or process by which a person’s rights or claims are ranked below those of others.

Subpoena
A command, issued under a court’s authority, to a witness to appear and give testimony.

Subpoena duces tecum
A command to a witness to appear and produce documents.

Return to top

T


Temporary restraining order
Akin to a preliminary injunction, it is a judge’s short-term order forbidding certain actions until a full hearing can be conducted. Often referred to as a TRO.

Testimony
Evidence presented orally by witnesses during trials or before grand juries.

Toll
See statute of limitations.

Tort
A civil, not criminal, wrong. A negligent or intentional injury against a person or property, with the exception of breach of contract.

Transcript
A written, word-for-word record of what was said, either in a proceeding such as a trial, or during some other formal conversation, such as a hearing or oral deposition

Transfer
Any mode or means by which a debtor disposes of or parts with his/her property.

Trustee
The representative of the bankruptcy estate who exercises statutory powers, principally for the benefit of the unsecured creditors, under the general supervision of the court and the direct supervision of the U.S. trustee or bankruptcy administrator. The trustee is a private individual or corporation appointed in all chapter 7, chapter 12, and chapter 13 cases and some chapter 11 cases. The trustee’s responsibilities include reviewing the debtor’s petition and schedules and bringing actions against creditors or the debtor to recover property of the bankruptcy estate. In chapter 7, the trustee liquidates property of the estate, and makes distributions to creditors. Trustees in chapter 12 and 13 have similar duties to a chapter 7 trustee and the additional responsibilities of overseeing the debtor’s plan, receiving payments from debtors, and disbursing plan payments to creditors.

Typing service
A business not authorized to practice law that prepares bankruptcy petitions.

Return to top

U


U.S. attorney
A lawyer appointed by the President in each judicial district to prosecute and defend cases for the federal government. The U.S. Attorney employs a staff of Assistant U.S. Attorneys who appear as the government’s attorneys in individual cases.

U.S. trustee
An officer of the U.S. Department of Justice responsible for supervising the administration of bankruptcy cases, estates, and trustees; monitoring plans and disclosure statements; monitoring creditors’ committees; monitoring fee applications; and performing other statutory duties.

Undersecured claim
A debt secured by property that is worth less than the amount of the debt.

Undue hardship
The most widely used test for evaluating undue hardship in the dischargeability of a student loan includes three conditions: (1) the debtor cannot maintain – based on current income and expenses – a minimal standard of living if forced to repay the loans; (2) there are indications that the state of affairs is likely to persist for a significant portion of the repayment period; and (3) the debtor made good faith efforts to repay the loans.

Unlawful detainer action
A lawsuit brought by a landlord against a tenant to evict the tenant from rental property – usually for nonpayment of rent.

Unliquidated claim
A claim for which a specific value has not been determined.

Unscheduled debt
A debt that should have been listed by the debtor in the schedules filed with the court but was not. (Depending on the circumstances, an unscheduled debt may or may not be discharged.)

Unsecured claim
A claim or debt for which a creditor holds no special assurance of payment, such as a mortgage or lien; a debt for which credit was extended based solely upon the creditor’s assessment of the debtor’s future ability to pay.

Uphold
The appellate court agrees with the lower court decision and allows it to stand. See affirmed.

Return to top

V


Venue
The geographic area in which a court has jurisdiction. A change of venue is a change or transfer of a case from one judicial district to another.

Verdict
The decision of a trial jury or a judge that determines the guilt or innocence of a criminal defendant, or that determines the final outcome of a civil case.

Voir dire
Jury selection process of questioning prospective jurors, to ascertain their qualifications and determine any basis for challenge.

Voluntary transfer
A transfer of a debtor’s property with the debtor’s consent.

Return to top

W


Wage garnishment
A nonbankruptcy legal proceeding whereby a plaintiff or creditor seeks to subject to his or her claim the future wages of a debtor. In other words, the creditor seeks to have part of the debtor’s future wages paid to the creditor for a debt owed to the creditor.

Warrant
Court authorization, most often for law enforcement officers, to conduct a search or make an arrest.

Witness
A person called upon by either side in a lawsuit to give testimony before the court or jury.

Writ
A written court order directing a person to take, or refrain from taking, a certain act.

Writ of certiorari
An order issued by the U.S. Supreme Court directing the lower court to transmit records for a case which it will hear on appeal.

Return to top

A Policy Regarding Holiday Decorations…

As the Second Circuit Court of Appeals has aptly stated, “no holiday season is complete, at least for the courts, without one or more First Amendment challenges to public holiday displays.” Before decking the halls, employers should consider the location of holiday decorations. Employers who plan to decorate common work areas should strive to avoid the appearance of endorsing one religion over another. For example, if a nativity scene is displayed in the reception area or lunch room, the employer may be perceived as favoring the Christian religion. Some employees may this find offensive. Therefore, employers who wish to decorate the workplace should use non-religious, winter-themed decorations such as snowflakes, snowmen, candy canes, holly, and gingerbread houses.

Since non-religious decorations are permissible, there is always a debate over whether a Christmas tree is a religious symbol. While a decorated tree may have religious connotations for some people, the U.S. Supreme Court has determined that a Christmas tree is generally a secular nonreligious symbol. This view was also adopted by the EEOC. Thus, employers may include Christmas trees among their decorations even if an employee objects. Nevertheless, for purposes of promoting positive employee relations, employers should be sensitive to the diversity of their workplace. Thus, even if you have a tree, ornaments with religious connotations, such as crosses, angels, or nativity references should not be allowed.

Another albeit much more risky approach to holiday decorations is to include religious and nonreligious decorations representing a diverse set of cultural beliefs. In determining whether a public entity’s holiday and seasonal display that attempts to include all types of religions and beliefs conforms with the Establishment Clause, federal courts consider three factors: (1) whether the display is noncoercive; (2) whether the display does not give a direct benefit to religion in such degree to establish or tend to establish religion; and (3) whether the display conveys a message to the reasonable observer that the combined display was an effort to acknowledge cultural diversity. (See American Civil Liberties Union of New Jersey ex rel. Lander v. Schundler)

Employees who wish to decorate their own personal workspaces with Christmas, Kwanzaa or Hanukah themed decorations present a more difficult question. Prohibiting employees from displaying religious holiday-themed decorations in their own workspaces may give rise to claims of violation of free speech and religious expression. Also, because the law requires employers to accommodate religious beliefs, employers should not try to suppress religious expression in an employee’s personal workspace unless it creates an undue hardship on business operations, or if it is visible to the public in a way that implies the entity’s endorsement of a religion.

Finally, mistletoe should never be allowed in any area of the workplace including individual workspaces because it could lead to sexual harassment or hostile work environment claims.

OFAC: Know it and love it

With businesses increasingly including sanctions compliance language based on regulations from the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) in contracts and agreements, employers should take a minute to familiarize themselves with the issue and the potential for costly liability.

OFAC administers and enforces sanctions against countries or individuals (like terrorists or narcotics traffickers) with actions ranging from trade restrictions to the blocking of assets. For U.S. companies, the agency’s enforcement applies to banks, insurers, and others in the financial industry that may be engaged in covered dealings. OFAC takes action against U.S. entities that engage in transactions prohibited by Congress such as trade with an embargoed country or a transaction with a specially designated national (SDN).

Violation of the regulations, which apply to all U.S. citizens, can result in substantial fines and penalties. Criminal penalties can reach up to $20 million and imprisonment up to 30 years; civil fees can range from up to $65,000 to $1,075,000 per violation, depending on the activity at issue.

In an effort to avoid running afoul of such terrifying numbers, companies will include OFAC sanctions compliance language within corporate acquisition agreements, insurance policies, and credit agreements. Businesses are increasingly adding such language in light of stepped up enforcement efforts by OFAC that have resulted in sizable settlement agreements with U.S. entities.

For example, some contracts may include language requiring a party to state that it is not the target of any OFAC sanctions status, that no OFAC investigations are in process, or that it does not engage in transactions with countries like Iran or North Korea. Other deals may feature a provision affirming that a company is not owned by an individual on the list of SDNs, that the company is not based or located in an embargoed country, or assuring that the monies used to make an investment or purchase were not provided by a sanctioned country or individual.

However, it is important to note that the use of compliance language does not insulate a company from OFAC liability. While such a provision may create a contract-based remedy to recover monetary damages based on a fine or settlement with the agency, the clause cannot eliminate liability. Like any other governmental regulator, OFAC is not bound by private contract and can take action even with such terms in place.

To learn more about OFAC, click here. Link: http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/answer.aspx

When Employment Meets Antitrust

Can employers be criminally liable for antitrust violations? According to the Department of Justice (DOJ), the answer is yes.

Violations of antitrust law in the employment context have made headlines in recent years, as the government has cracked down on “no-poach” and “salary-fixing” agreements between companies. Taking the issue increasingly seriously, the DOJ issued guidance promising to bring criminal charges against employers for such illegal conduct.

First, some background. From an antitrust perspective, greater competition among employers not only helps employees – who can negotiate for higher wages or better benefits between companies – but also benefits consumers more generally. Therefore, Section One of the Sherman Act prohibits employers from expressly or implicitly agreeing not to compete with one another, even for seemingly innocuous and beneficial reasons (like saving money).

Demonstrating the government’s interest in employment antitrust violations, the DOJ filed suit in 2010 against Adobe Systems, Apple, eBay, Google, Intel, Intuit, Lucasfilm and Pixar, accusing the companies of promising not to recruit each other’s employees. While the cases resulted in consent judgments for the companies involved, the deals didn’t come cheap. Intuit, Lucas Films and Pixar paid a total of $20 million to settle, while Adobe, Apple, Google and Intel agreed to a $324 million settlement.

In 2016, the DOJ and the Federal Trade Commission (FTC) – the two federal agencies that share responsibility to enforce the antitrust laws – released guidance to help employers avoid potential violations of federal law. The overriding message from the agencies: an agreement among competing employers to limit or fix the terms of employment for potential hires may violate the antitrust laws if the agreement constrains individual firm decision making with regard to wages, salaries or benefits, the terms of employment or even job opportunities.

The DOJ also vowed to proceed criminally against naked wage-fixing or no-poach agreements going forward.

“These types of agreements eliminate competition in the same irredeemable way as agreements to fix product prices or allocate consumers, which have traditionally been criminally investigated and prosecuted as hardcore cartel conduct,” the DOJ explained. If an investigation uncovers wage-fixing or no-poaching agreements, the agency “may, in the exercise of prosecutorial discretion, bring criminal, felony charges against the culpable participants in the agreement, including both individuals and companies.”

To avoid facing jail time for an employment crime, businesses need to educate human resources professionals and employees responsible for hiring about the dangers of no-poach and salary-fixing agreements and establish a compliance program to avoid any errors.

Top on the “not to do” list: entering into agreements regarding the terms of employment with companies that compete to hire employees. This prohibition applies to all agreements, whether written or unwritten, spoken or unspoken. Even informal agreements – for example, where individuals at two competing companies agree that employees at a given position should not be paid above a certain amount or a particular range, or the individuals promise each other not to hire or solicit each other’s workers – are illegal.

It is important to remember that the prohibition on salary-fixing extends beyond simply what a worker is paid and includes other benefits as well, from transit subsidies to meals. If one HR professional wants to stop offering increasingly expensive gym memberships to employees and reaches out to other companies to ask that they stop offering gym memberships as well, that would likely violate antitrust law if the companies reached an agreement.

So-called “gentleman’s agreements” with other companies are equally illegal, even if they are unwritten and informal; nor does the use of a third party intermediary insulate an employer from liability under antitrust law, such as a situation where a group of nonprofits hire a consultant who communicates a “pay scale” to all the organizations to establish a wage cap.

Employers should also take care to avoid sharing sensitive information with competitors, which could serve as evidence of an implicit illegal agreement

Even the mere suggestion of an illegal agreement may constitute an antitrust violation, despite the fact that an agreement is not reached. The FTC filed an enforcement action against an online retailer that emailed a proposal to a competitor that both companies offer their products at the same price. The competitor passed on the invitation and notified the FTC. Even though no agreement was reached, the “invitation to collude” was sufficient for the company to face legal action.

With salary-fixing and no-poach agreements on the government’s radar – and the threat of criminal charges and penalties looming – employers should make an effort to develop antitrust training and compliance programs before a problem arises.

This blog entry was originally posted on Scherzer.com

New Tricks, Old Scams: How to Protect Yourself

Scam artists are finding new ways to scare people into sending them money. In Oct 2019, the FTC released a report that stated “Consumers 60 and older report losing money to scams less often than younger adults, but when they do lose money, they report higher individual losses.” This is counter to the notion that older adults are more likely to fall victim to what are often highly effective email, phone, and online scams.

As we see the rise of Internet-connected devices (often referred to as Internet of Things (IoT)) these numbers are only going to increase. This makes security training even more imperative.

Ways to protect yourself

Scammers are reinventing the classic fear-based email scam by merging traditional threats with a victim’s previously breached data that can be often found on the Dark Web.

Others use social media outlets such as Facebook to steal private information.

This seemingly harmless quiz is nothing more than a masked attempt at trying to steal someone’s personal information. Other quizzes might ask for “the street you grew up on,” “favorite sports team,” “favorite city to visit,” “your first car,” or “your first pet.” Don’t these look like security questions for a password recovery?

What should you do?

Be smart. You are probably familiar with the old saying “if it’s too good to be true…” Email scams and website spoofing are among the most common forms of online scams. In fact, they ranked above scholarship/grant scams, as well as fake charity scams in 2017.

Tips to avoid becoming another online statistic as a victim of fraud:

  • Ignore emails that are from financial institutions, stores, or other businesses that you don’t have a relationship with. If you do, go directly to the site and log in. If that doesn’t help, contact the company directly.
  • Don’t click on links or download attachments from emails warning you that your password must be changed or that your account has been suspended. These are often phishing links or malicious files that can cause harm to your computer.
  • If you think one of your online accounts has been compromised, change your password ASAP.
  • If you don’t recognize the sender, delete the email.
  • Do not forward or reply to suspicious emails (unless directed by your IT staff), as this may spread the scam.
  • Report any scams that you might find to the Federal Trade Commission at https://www.ftccomplaintassistant.gov/.

The challenges of employment applications for multi-state employers

, , ,

One of the hottest trends in employment in recent years has been the passage of “ban-the-box” and salary inquiry prohibitions in states and cities across the country.

Limitations on salary inquiry have popped up in recent years as part of the legislative fight against wage discrimination and the gender pay gap. Proponents of such prohibitions argue that salary history questions feed into the discrepancy between what male and female employees are paid by continuously repeating history.

Currently, California, Delaware, Massachusetts, Oregon and Puerto Rico have banned inquiries about prior salary, as have cities including New Orleans, New York and Philadelphia, with dozens of other states and local governments considering such measures.

The colloquial term “ban-the-box” refers to a box that applicants check to indicate they have a criminal record on standardized application forms. About 20 states and more than 150 local entities have already enacted legislation addressing inquiries into criminal history. The trend even went federal in 2015 with the Fair Chance Act introduced in Congress. Although the measure did not pass, it demonstrated the popularity of the movement.

The proposed federal legislation also shined a light on the situation facing multistate employers, with different laws in different states and in some situations, different laws in different cities or municipalities within the same state. One law may contain an outright ban on inquiries into salary or criminal history while another may place restrictions on the timing of the questions. Some laws define covered employers to include businesses with five or more employees; another may not apply its limitations to employers with less than 50 workers.

As an example, although the state already limited employers’ ability to ask job applicants about any juvenile court matters, the California legislature broadened its ban-the-box protections for employees with a new law in 2017. Employers in the state are restricted from making hiring decisions based on an applicant’s convictions records and forbidden from considering conviction history until a conditional offer of employment has been extended.

If an employer elects not to hire an applicant because of a prior conviction, the employer is required to conduct an individualized assessment to determine whether the history has a “direct and adverse relationship” with the job duties that justifies denial of the position. Written notice must be provided to an applicant that his/her conviction history has disqualified the applicant from employment, along with five days to respond and dispute the decision. A second notice must be provided with the final decision not to hire.

In contrast, Vermont’s ban-the-box measure takes a different approach, allowing employers to question applicants about their criminal records during the job interview, albeit providing an applicant with the opportunity to explain their record. And under New York City’s law, an employer commits a per se violation of the statute by using recruiting materials of any kind (including advertisements, solicitations or applications) that express, directly or indirectly, any limitation or specification regarding criminal history.

While the overarching principle remains consistent, the details of the laws vary from jurisdiction to jurisdiction. For multi-state employers, coping with such a patchwork of legal requirements poses a serious challenge.

As the number of state and local jurisdictions with laws addressing salary inquiries or criminal history continues to expand, multi-state employers should brace themselves for a giant compliance puzzle – and consider getting help from an expert.

The legalities of monitoring employees online

As a general principle, employers are legally permitted to monitor their employees online during business hours. Keeping a close eye on workers can help maintain company confidentiality, limit workers from surfing the web on company time, and ensure the prevention of harassment.

But such monitoring does come with caveats, as well as risks.

For example, screening employee email on the employer’s network may be permissible but may require advance notice. In states such as Connecticut and Delaware, laws are in place that require employers to provide prior notice before electronically monitoring employees. A union contract may also place certain limits on monitoring and public-sector employees may have some rights under the Fourth Amendment with regard to unreasonable search and seizure.

Federal law can also come into play. Although the Electronic Communications Privacy Act (ECPA) generally prohibits the monitoring of electronic communications, it contains a “business purpose exception” that permits employers to monitor the electronic communications of workers if the company has a “legitimate business purpose.” The statute also allows monitoring with consent and many companies do this by including such permission as part of the onboarding process for new employees before granting access to the company’s networks or systems.

Another wrinkle: third-party communications. States such as California and Illinois mandate that all parties to a communication provide consent to its interception in transit. For employers, that means providing notice to recipients of employee emails and obtaining their consent before scanning a message from a friend or third party. Many companies post a notice on the company’s website and/or include a statement in employee emails that all messages are subject to monitoring and any response implies consent with the employer’s practices.

Even with all these issues, monitoring emails may be more straightforward than focusing on employee social media accounts. The Stored Communications Act (SCA) addresses the situation of accessing electronic communications stored by a provider (such as Gmail or Microsoft), as distinct from an employer accessing emails on its own system. Under the SCA, employers can be liable for the unauthorized access and disclosure of electronic communications in storage on corporate servers of a provider.

Further, roughly half the states ban employers from either requiring or requesting a worker to verify a personal online account like a Facebook profile, blog or Instagram or to log on to their social media account. While technology is available for employers to get around these laws (using keystroke logging software, for example, or taking screenshots), some of the information being monitored by an employer could itself be protected – such as union organizing activities under the National Labor Relations Act, attorney-client communications or in some states, geolocation data.

Mobile devices add another layer to the analysis. For workers using employer-provided mobile phones or devices, the employer has the right to legally monitor use from contact lists to photos and videos to Internet visits and emails. As for bring-your-own-device (BYOD) situations, the terms are generally dictated by the employer’s BYOD policy, but this is an emerging area of law and therefore murky.

All of these legal considerations are centered in the United States. Companies that operate outside the U.S. borders will have international law to contend with as well, notably the European Union General Data Protection Regulation (GDPR) and regulations found in its member states. As a general matter, EU law and the GDPR offer employees a greater level of privacy than that found in the United States. Last year, the EU’s highest court did rule that companies can monitor employee email – if workers are notified in advance.

Perhaps most importantly, employers should recognize that like all things related to technology, the legalities of monitoring employees online are constantly evolving. Being able to adapt to changing laws, regulation and technology will keep employers on their toes.

Update on Employment Background Screening Legislation

This post was originally posted on Scherzer.com

“BAN-THE-BOX”

List of jurisdictions is growing

“Ban-the-box” measures, which generally prohibit employers from inquiring about a candidate’s criminal history (including performing background checks) until later in the hiring process, and impose significant compliance requirements, will soon be the norm rather than an exception. The list of localities that have enacted such legislation is growing fast and now includes Austin, Baltimore, Buffalo, Chicago, Columbia – MO, Los Angeles (enforcement started July 1, 2017), Montgomery County – MD, New York City, Philadelphia, Portland, Prince George’s County – MD, Rochester, San Francisco, and Seattle, and ten states (Connecticut, District of Columbia, Hawaii, Illinois, Massachusetts, Minnesota, New Jersey, Oregon, Rhode Island, and Vermont (effective July 1, 2017)).

Although not labeled as “ban-the-box,” California’s Department of Fair Employment and Housing regulations (the “Regs”) that went into effect July 1, 2017, impose certain similar requirements when employers consider criminal history information in employment decisions. As reported in our previous blog, the Regs are substantially based on the enforcement guidance issued by the Equal Employment Opportunity Commission in April 2012, and prohibit employers from using a candidate’s criminal history in personnel decisions if such information will have an adverse impact on individuals that are in a legally protected class.

Amended rules for New York City’s “ban-the-box” took effect August 5, 2017

Nearly two years after the enactment of New York City’s Fair Chance Act (FCA), and without much fanfare, the City’s Commission on Human Rights published its amended rules that  establish certain definitions and procedures, and clarify the comprehensive requirements of the FCA when using criminal history in employment decisions, and considering applicants for licenses, registrations, and permits.

CREDIT CHECK RESTRICTIONS

Eleven states (California – AB 22; Colorado – The Employment Opportunity Act; Connecticut  – SB 361; District of Columbia – Fair Credit in Employment Amendment Act, Hawaii – HB 31 SD1; Illinois  – HB 4658; Maryland- HB 87;  Nevada – SB 127; Oregon – SB 1045; Vermont – Act No. 154 (S. 95); Washington – RCW 19.182 and  RCW 19.182.020) and at least two localities  (New York City – Stop Credit Discrimination in Employment Act, and Philadelphia – Bill No. 160072), have enacted laws that generally prohibit private employers from checking a candidate’s credit history, except in circumstances where a credit screen is justified by the position’s responsibilities or is required by law.

WAGE HISTORY INQUIRIES

Pay equity initiatives, which among their provisions include a ban on inquiries about a candidate’s wages, are gaining momentum nationwide. The following jurisdictions have enacted such laws and many more are considering similar measures: Delaware – HS1 (effective December 14, 2017); Massachusetts – Pay Equity Act (effective July 1, 2018); New York City – Intro 1253 (effective October 31, 2017); Oregon HB 2005 (effective December 1, 2019); Philadelphia – Fair Practices Ordinance: Protections Against Unlawful Discrimination (set to go into effect May 23, 2017 but now facing a legal challenge); Puerto Rico – Equal Pay Act (effective March 8, 2017); and San Francisco – Parity in Pay Ordinance (effective July 1, 2018).

Pending before California’s Senate is AB 168 that would prohibit employers from seeking an applicant’s salary history and impose significant penalties for violations. Notably, California already has a pay equity law, AB 1676, and although the law does not ban salary history inquiries, it does prohibit employers from using a candidate’s prior wages as the sole basis to justify a pay disparity.

WORK AUTHORIZATION VERIFICATIONS

Revised Form I-9

The USCIS released a revised version of Form I-9, Employment Eligibility Verification on July 17, 2017. Employers can use this revised version or continue using Form I-9 with a revision date of “11/14/16 N” through September 17, 2017. Beginning September 18, 2017, however, employers must use the new form (with the revision date of “07/17/17 N”).

Reminder to California employers

California’s  AB 1065 that went into effect January 1, 2017, makes it unlawful for employers to:

  1. request additional or different documents than those required under federal law to verify that an individual is not an unauthorized immigrant;
  2. refuse to accept documents provided by the applicant that reasonably appear to be genuine;
  3. refuse to honor documents or work authorization based on specific status or term that accompanies the authorization to work; and
  4. attempt to re-investigate or re-verify a candidate’s authorization to work using an unfair immigration-related practice.