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Archive for June, 2014

EEOC and FTC Issue Joint Publications on Employee Background Checks

Posted on: June 26th, 2014

By: Frank Hupfl

The Equal Employment Opportunity Commission (“EEOC”) and US Federal Trade Commission (“FTC”) recently co-authored two publications on the use of background checks in both the workplace and during the hiring process. The first publication is titled “Background Checks: What Job Applicants and Employees Should Know” and is directed at job applicants and employees. The second, titled “Background Checks: What Employers Need to Know” is directed at employers. In both publications, the agencies highlight and explain the rights and responsibilities of the respective parties in the use of background checks in employment decisions.

The publications reiterate the basic tenet that it is illegal for employers to use background checks in a discriminatory manner based on membership in a protected class. The publications further state that, except in rare circumstances, an employer’s best practice is to not request an employee’s genetic information, including family medical history. Further, employers should not ask medical questions before a conditional job offer is made and such questions should be made only after an individual has begun working and the employer has objective evidence that the employee is unable to do the job or poses a safety risk because of a medical condition.

The joint publications also contain guidance on the Fair Credit Reporting Act (“FCRA”). Under the FCRA, employers must notify applicants and employees that they might use the information obtained from a background check in making an employment decision. The notice must be in writing and in a stand-alone format. In the event an employer decides to take an adverse employment action based on a report obtained through a consumer background reporting company, the FCRA requires that the employer provide notice to the employee or applicant that includes a copy of the consumer report relied upon. The employer must also provide a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act” to the employee or applicant prior to the adverse action. After taking the adverse action, the employer must:

  • inform the applicant or employee that he or she has been rejected because of the information;
  • provide the name, address, and phone number of the company that sold the report;
  • inform the applicant or employee that the company selling the report did not make the hiring decision, and cannot give specific reasons for it; and
  • inform the employee or applicant that he or she has the right to dispute the accuracy or completeness of the report and get an additional free report from the reporting company within 60 days.

The joint publications should highlight to employers that the EEOC and FTC are making the proper use of background checks a principal target of enforcement. Employers that utilize background checks for employees and for applicants in the hiring process should carefully scrutinize their existing policies to ensure compliance under both Title VII and the FCRA.

California Supreme Court Upholds Class Action Waiver in Employment Arbitration Agreements But Held Waiver of Representative Claims Under PAGA Was Not Permitted.

Posted on: June 24th, 2014


By: Sandra McIntyre

Recently, in Iskanian v. CLS Transportation, the California Supreme Court upheld the enforceability of class action waivers in employment arbitration agreements, but held that employees cannot waive representative claims under the California Private Attorneys General Act (“PAGA”).

In Iskanian, an employee signed an agreement to arbitrate disputes related to his employment.  The agreement contained a class action waiver and a representative action waiver.  He then filed a class action lawsuit, alleging Labor Code violations, including failure to provide meal and rest breaks; failure to pay overtime compensation; and, failure to pay business expense reimbursements.  The California Supreme Court held that the class action waiver was enforceable, but the PAGA waiver was not.  The California Supreme Court reasoned that the U.S. Supreme Court’s holding in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) allows employees to waive their right to class arbitration, but the same reasoning does not apply to PAGA claims, wherein an employee brings a representative action to prosecute Labor Code violations on behalf of the State of California for Labor Code violations suffered by the employee and other similarly situated employees.

In light of the Iskanian decision, employers with arbitration agreements should consider amending their agreements to include a class action waiver and employers without arbitration agreements now have another good reason to implement them.

Historic Flood? Not the City’s Fault.

Posted on: June 19th, 2014

By: Bart Gary and Stephanie Stewart

No one in the greater Atlanta area will forget the devastating and deadly floods in September 2009, which spawned a great deal of litigation.  One such case finally found its way to the Georgia Court of Appeals, which characterized the flooding event as one of “historic proportions.”  The Plaintiff sought to hold the City of Lafayette liable in negligence for property damages caused by the flooding event on September 21, 2009.  In an effort to overcome the obvious obstacle presented by the “historic event,” the property owner relied upon a legal short cut known as res ipsa loquitur.  This Latin term translates, “the thing speaks for itself;” meaning that the loss is such that it could not have happened but for the negligence of the Defendant.  Although it is a short cut, the Plaintiff must prove that the injury was caused by an agency or instrumentality within the exclusive control of the Defendant.  Accordingly, the Court held that September 21, 2009 flooding event of “historic proportions” was an intermediary cause that was not in the exclusive control of the City.  As such, the Plaintiff could not recover damages.  The doctrine of res ipsa loquitur is controversial and is often invoked, but seldom receives treatment from Courts.  It seems that it would not apply to acts of God, including unusual flooding events.

Battlefield Investments, Inc. v. City of Lafayette, 756 S.E.2d 639 (Ga. Ct. App. 2014)

Private University Campus Police Officers Not Entitled to Immunity Under Georgia Tort Claims Act

Posted on: June 19th, 2014

By: Wayne Melnick 

On Monday, June 16, 2014, the Georgia Supreme Court ruled that police officers working for private universities in Georgia are not entitled to immunity from suit under the Georgia Tort Claims Act (“GTCA”).  In Hartley v. Agnes Scott College et al., (Case No. S13G1152), a unanimous court reversed the decision of the Georgia Court of Appeals (which itself had reversed the trial court in a sharply divided 4-3 en banc decision).

The genesis of the case occurred when Agnes Scott College policy officers arrested Hartley on various charges.  Those charges were subsequently dropped and Hartley sued the college and officers for false arrest and other claims alleging that he would never have been arrested had a reasonable investigation been performed because Hartley was not even in the state at the time the alleged actions underlying the arrest (an assault) took place.  The trial court denied a motion to dismiss based on the GTCA finding the campus officers were not state officers or employees entitled to the immunity provided by that statutory scheme.

The Georgia Court of Appeals reversed and the case went up on certiorari to consider the following issue: “Did the Court of Appeals err in ruling that the campus police officers in this case qualify as State officials or employees within the meaning of O.C.G.A. § 51-21-22(7)?”

In reversing the Court of Appeals, Justice Nahmias, writing for a unanimous court, determined that the portions of the GTCA regarding campus police cannot be read in a vacuum.  Rather, the GTCA is a “unified scheme” which as a whole was designed to provide immunity for torts committed by state actors acting within the scope of their employment on behalf of the state while allowing for claims against the state government entity for which the state officer or employee was acting when he allegedly committed the tort.  As the Court noted, if the plaintiff does name the officer or employee individually as a defendant, the state government entity for which the state officer or employee was acting must be substituted as a party defendant.  This is perfectly consistent with the statutory immunity provided in O.C.G.A. § 36-92-3 providing immunity to local government officers or employees who commit torts involving the use of covered motor vehicles and requiring the local government entity for whom the officer or employee was working at the time be substituted as the party defendant in such a case where the officer or employee is sued individually.

The Court then determined that “[t]he statutory tort claims scheme simply cannot operate if there is no ‘state government entity for which the state officer or employee was acting’ when he committed the alleged tort to be named or substituted as the defendant, [O.C.G.A.]§ 50-21-25(b), so that there is no ‘state government entity” which can be notified of the claim, sued, served, assessed premiums by the Department and Office of Administrative Services to cover judgments.  Because the officers sued in this case were working for a private university and not the state, and there was no dispute that the Agnes Scott College did not satisfy the definition of being a “state government entity,” there was no state government entity for which the officers were performing their duties.  Consequently, the Court determined that the GTCA provided no immunity for the officers.

Most curious, though, is that the Georgia Supreme Court declined to consider whether those same officers would be entitled to official immunity as provided under Article I, Section II, Paragraph IX(d) of the Georgia Constitution (providing immunity for discretionary actions by “officers and employees of the state.”).  In noting the issue was not raised in or ruled on in the trial court on the subject motion to dismiss, ruled on by the Court of Appeals or fully briefed before the Supreme Court in this case, the court simply elected to “express no opinion on this issue, leaving for potential development and consideration as this case proceeds.”

So, while we know the GTCA provides no immunity for private campus police officers, the question of whether official immunity as provided for discretionary actions taken by state actors will provide safe harbor to those same officers will be answered another day.

If you would like a copy of the Georgia Supreme Court’s ruling, please contact the author.

The Devil is in the Details

Posted on: June 18th, 2014

By: Seth Kirby and Bart Gary 

The Georgia Court of Appeals recently decided a case concerning whether a home builder was entitled to coverage under a commercial general liability policy for damages sustained by the homeowner due to construction errors. In keeping with recent precedent, the Court held that the insurance policy did not provide coverage for the costs incurred to repair the builder’s defective installation of flashing on the home’s exterior. The policy did, however, provide coverage for all other damage caused by the defective flashing. Thus, the damages awarded to the homeowner to repair and replace walls, flooring, electrical wiring and other parts of the home damaged by water intrusion was covered by the policy.   In other words, the majority of damages awarded to the homeowner was paid for by the builder’s insurer.

The rational of the Court of Appeals in making their decision in Builders Insurance v. Tenenbaum is not novel.  It is a recognition that unintentional damage to other property caused by the defective work of a builder is an accident caused by an occurrence and therefore covered by a  commercial general liability policy. What is notable about the decision is the Court’s rejection of the carrier’s alternative late notice defense for failure to reserve its rights on that issue in its initial reservation of rights letter.  The Court held that the insurance carrier knew or should have known that it might have a defense to coverage based upon the builder’s failure to timely notify the carrier of the claim at the time the complaint was submitted for coverage.  This conclusion was apparently drawn from the fact that a demand letter to the builder that predated the suit by over a year had been attached to the complaint but had not been provided to the carrier until suit was filed. The insurer did not raise this issue with the builder in its offer to provide a defense under reservation of rights, and consequently it could not rely upon late notice to deny liability following trial. A mid-representation supplemental reservation of rights did not save the defense for the insurance company as the Court deemed it to be untimely.

Also of note is the fact the Court did not address the potential application of business risk exclusions contained in typical commercial general liability policies.  It would seem that those exclusions, which bar coverage for any damages caused to “your work” or “your product” would bar coverage to a home builder for any damages caused to the home which he built.  Instead, this builder essentially got a “do over” at the expense of his insurance carrier.  Why the exclusions were not addressed in this case is presently unknown.  It is possible that the defenses were also waived for failure to specifically raise then in the original reservation of rights or were not argued before the trial or appellate court.  In any event, the case serves as an important reminder to carriers of the need to carefully and fully evaluate all aspects of coverage before a defense is provided and to specifically and clearly discuss all defenses to coverage that may exist in the initial reservation of rights. For our construction clients, understanding the limitations of coverage provided by your insurance is essential when evaluating your exposure to builder’s risk. If involved in a lawsuit, a full analysis of any reservation of rights issued by the carrier or carriers that potentially provide you with coverage for the suit should be a top priority.