On May 4, 2017, a court in New York provided answers to questions regarding who may be liable under the state’s fair employment law for discrimination based on an individual’s conviction record. The opinion in Griffin v. Sirva, Inc. is noteworthy because it is increasingly common for more than one company to play a role in criminal background checks (e.g., a company may require such checks by its subcontractors or suppliers).

Summary of the Case

Two laborers were fired by a moving a company after background checks revealed their convictions for serious sexual offenses. The laborers responded with a lawsuit under the New York State Human Rights Law §§ 296(15) and (6). These sections prohibit denial of employment based on criminal convictions and extend liability to those who aid or abet in such discrimination, respectively. Along with their direct employer, Astro Moving and Storage Co. (“Astro”), the plaintiffs also sued Allied Van Lines, Inc. and its parent company Sirva, Inc. (together “Allied”).

Allied itself had no employment relationship with either plaintiff. Rather, Allied and Astro had a contract for Astro to provide warehouse and transportation services. This contract sensibly required Astro to make sure its employees who worked for Allied’s customers (in their homes and businesses) had passed a background check. Because the plaintiffs had been convicted of sexual offenses, they failed the screens, and the contract would not permit Astro to let the plaintiffs work for Allied’s customers. While the plaintiffs could have still theoretically worked on Astro’s non-Allied accounts, Astro made the decision to fire them. The plaintiffs still sued Allied for violation of the New York Law, alleging that Allied played a role in the background screening and should be liable for the ensuing terminations.

The case proceeded in federal court in New York. The district court dismissed the case against Allied, finding § 296(15) applied only to direct “employers,” and could not extend to entities without any employment relationship with the plaintiffs. The district court also dismissed the aiding and abetting claim under § 296(6) because Allied had not “participated in firing plaintiffs.” On appeal, the Second Circuit Court of Appeal found that the law was “too undeveloped” to resolve whether Allied could be liable under the circumstances. As a result, the Second Circuit “certified” three questions to the New York Court of Appeal to answer regarding who may be liable under the statute.

Certified Question No. 1: Does § 296(15) liability apply only to an aggrieved party’s direct “employer”?

The New York Court of Appeals answered “Yes,” holding that the law can only apply to the actual employer. The first sentence of § 296(15), the court reasoned, does not specifically include the word “employer,” but states that “any person, agency, bureau, corporation or association” may be liable. The plaintiffs argued that this must mean the law is not limited to “employers,” but can extend to any “person.” The Court disagreed. It noted that liability under § 296(15) arises only upon a violation of Article 23-A of the Correction Law (“Article 23-A), which was incorporated into § 296(15). Article 23-A addresses employment determinations made by public and private employers, and could not reasonably be construed as extending liability to non-employers. In addition, the Court found that an examination of legislative history of § 296(15) lead to the same conclusion that the law is strictly limited to “employers,” and not intended to reach other third parties.

Certified Question No. 2: If § 296(15) is limited to “employers,” how should courts determine whether or not the entity is the aggrieved party’s employer?

The Court found that this question had already been answered by state courts. In State Div. of Human Rights v. GTE Corp, the Appellate Division identified the four factors for determining who is an “employer” for purposes of state law: (1) the selection and engagement of the worker; (2) the payment of salary and wages; (3) the power of dismissal; and (4) the power of control of the worker’s conduct. The Court concluded that these factors still determine who may be a liable “employer” under § 296(15) – “with the greatest emphasis placed on the alleged employer’s power ‘to order and control’ the employee in his or her performance.”

Certified Question No. 3: Does § 296(6), providing for aiding and abetting liability, apply to § 296(15) such that an out-of-state principal corporation that requires its New York agent to discriminate based on a criminal conviction may be held liable? As a preliminary matter, the Court noted that the Second Circuit’s question did not seem to concern whether there was any actual discrimination by Astro in this instance, or whether Allied aided or abetted in this. In fact there was not any discrimination, as several years prior a jury cleared Astro of the alleged violation of § 296(15). Responding to the general inquiry, the Court held that § 296(15) could apply to an out-of-state non-employer that aids and abets in employment discrimination of an agent. The Court explained that unlike §296(15), § 296(6) extends liability beyond “employers” to any persons, citing a case involving a newspaper that posted the employer’s facially discriminatory job advertisements.

Recommendations

The Court of Appeal’s ruling that only employers may be liable for discrimination is helpful to companies that do business in New York. Still, it will be important to monitor how this area of the law continues to evolve, including how courts interpret and apply the four factors for determining a company’s status as an employer. On the general topic of background checks, it is also important for employers to be mindful of other laws in New York – and nationwide – that govern the background check process (e.g., the federal Fair Credit Reporting Act1 and New York General Business Law2) and prolific “ban the box” laws in cities such as the City of New York,3 Seattle,4 San Francisco5 and most recently Los Angeles.6