On January 19, 2011, the United States Supreme Court decided the case of NASA v. Nelson, No. 09-530. The Court unanimously (a six justice majority, two concurring opinions, and Justice Kagan recusing herself), held that it did not violate the Constitution for employees of a government contractor to be required to submit to background checks in order to retain their jobs. The Court stated that the reasonableness of the government’s inquiries and the privacy protections in place meant that the background checks did not violate a “constitutional right to informational privacy.” The practical implications of this decision are discussed in the last section of this article.
Federal employees have historically been required to submit to background checks as a condition of employment. This requirement was extended to employees of government contractors following a 2004 recommendation by the 9/11 Commission. As a result of an Executive Order issued in 2007, all contract employees at a NASA center operated by the California Institute of Technology were required to submit to the National Agency Check with Inquiries (NACI) or their employment would be terminated.
The NACI includes a Standard Form for Non-Sensitive positions (SF-85), which asks “whether an employee has ‘used, possessed, supplied, or manufactured illegal drugs’ in the last year.” Employees who answer affirmatively also are required to provide details, including “any treatment or counseling received.” Once this form has been completed and the employee has signed a release authorizing the government to obtain further information, the government sends the employee’s references a questionnaire (Form 42).
The questionnaire asks the references open-ended questions about whether they have “any reason to question” the employee’s “honesty or trustworthiness,” or have “adverse information” concerning the employee’s “violations of the law,” “financial integrity,” “abuse of alcohol and/or drugs,” “mental or emotional stability,” “general behavior or conduct” or “other matters.” All information obtained during the NACI is subject to the protections of the Privacy Act of 1974, 5 U.S.C. § 522.
Two months before the deadline for all contract employees at the NASA center to complete the NACI, 28 of them brought suit, claiming that the background check violated their “constitutional right to informational privacy.”
The District Court denied the employees’ motion for a preliminary injunction. The Ninth Circuit granted an injunction pending an appeal, and later reversed the District Court’s order. In doing so, the appellate court held that some parts of SF-85 and Form 42 were likely violations of the employees’ informational privacy rights and therefore, should be preliminarily enjoined. The Ninth Circuit denied a rehearing en banc.
The Court began with a discussion of the origin of the right to informational privacy. Two 1977 cases, Whalen v. Roe, 429 U.S. 589 (1977), and Nixon v. Administrator of General Services, 433 U.S. 425 (1977), referred to a privacy “interest in avoiding disclosure of personal matters,” Whalen, and a constitutional “interest in avoiding disclosure,” Nixon. The Court noted that since 1977, “the Court has said little else on the subject of an ‘individual interest in avoiding disclosure of personal matters,’” and that “no other decision has squarely addressed a constitutional right to informational privacy.” The Court then assumed, noting that it had also done so in Whalen, that the complained of action – the questions on drug use and treatment on SF-85 and the open-ended questions on Form 42 – implicated a “privacy interest of constitutional significance.”
Next, the Court explained the reasoning behind its narrow holding allowing the background checks in this situation. This began by pointing out that the background checks were being conducted by the government “in its capacity ‘as proprietor’ and manager of its ‘internal operation.’” The Court stated that this provides the government with greater latitude in dealing with its employees than it would have when it is acting as sovereign in acts with citizens. The Court then provided a detailed account of just how common it is for employers to conduct the type of background checks at issue.
The Court noted that the challenged questions were part of a standard background check similar to the type used by “millions of private employers” and cited a statistic that “more than 88%” of U.S. companies conduct employee background checks. The Court also cited the fact that the President has had statutory authority to check on the fitness for service of civil service applicants since 1871.
The Court dismissed the contract employees’ argument that the distinction between their status as contract employees and civil servants meant that the government should have less ability to act as an employer, by explaining that the “two classes of employees perform ‘functionally equivalent duties,’” and that access to the NASA facility depended on the nature of the work performed, not formal employment status.
Therefore, the Court concluded that the illegal drug inquiries in SF-85 and Form 42 were “reasonable, employment-related inquiries that further the government’s interests in managing its internal operations.” Positive answers to questions regarding drug treatment, would, the Court explained, be used as mitigating factors in determining whether the use of illegal drugs should prevent access to federal facilities – an approach the court deemed “reasonable” and “humane.”
The Court specifically held that the government did not need to demonstrate that its questions were “necessary” or the “least restrictive means possible” when requesting “job-related personal information in an employment background check.” The Court noted that a heightened standard did not apply to New York’s collection of patient prescription information in Whalen, and a heightened standard was even less appropriate in situations such as this, when the government acts, “not as a regulator, but as the manager of its internal affairs.”
The Court went through a similar analysis of the open ended questions on Form 42. The Court stated that open ended questions were “reasonably aimed” at employing competent employees. The Court supported this statement with statistics about the common practice of conducting reference checks with open ended questions in the public and private sectors, then quoting the efficacy of open-ended questions at turning up information that would not be discovered through a series of closed answer questions.
Finally, the Court focused on the privacy protections of the information gathered in these background checks. These include protection under the Privacy Act, which allows for collection of only information that is “relevant and necessary” for a lawful purpose and requires written consent before information is released. The Court noted that in Whalen, it was held that “‘a statutory or regulatory duty to avoid unwarranted disclosures’ generally allays these privacy concerns.” The fact that there are exceptions to the non-disclosure requirements in the Privacy Act does not, according to the Court, mean that the statute provides insufficient protection.
Therefore, the Court held that, “In light of the protection provided by the Privacy Act’s nondisclosure requirement, and because the challenged portions of the forms consist of reasonable inquiries in an employment background check, we conclude that the Government’s inquiries do not violate a constitutional right to informational privacy.” Justices Scalia and Thomas agreed, but did so because they believe that a constitutional right to informational privacy does not exist.
Justice Scalia noted that informational privacy is a good idea – one which should be protected through the enactment of statutes. He listed reasons why the Court’s opinion “does damage,” including the fact that it holds that a constitutional right to informational privacy was not violated, “without deciding whether there is a right to informational privacy.” The Court’s explicit list of factors in its decision, he states, makes NASA easily distinguishable and the subject of informational privacy a likely topic of further suits.
The NASA holding provides a reminder for all employers to assess their employee screening and record retention policies.
First, employers should remember that different rules apply depending on the type of employer, the employment status of the person whose background will be checked, and what, if any, contracts the person will be working under. As a baseline, constitutional protections are only implicated for government employers or employees working under a government contract. However, state and federal statutes provide a number of privacy protections which apply to public and private employers, such as ADA protections, which prohibit questions regarding drug addiction and treatment until after a conditional offer has been made.
Second, employers must avoid conducting background checks in a way that opens them to charges of discrimination. One practice that has a potentially discriminatory impact is to have a general policy against hiring anyone with a criminal record or a poor credit score. This could have a disproportionate impact against racial minorities and is a focus of the EEOC’s current E-RACE Initiative. Employers should ensure that there is a correlation between background checks, or other pre-employment screening, and the duties of the position. Background checks and other pre-employment inquiries always need to avoid asking job candidates about protected characteristics, such as age, ethnicity, and marital status.
Third, employers should make sure that background investigations are done when necessary. The Court’s opinion in NASA points out the high prevalence of employee background checks and the efficacy of open-ended questions when conducting them – employers could face legal exposure, such as a negligent hiring claim, for failing to do them when it is appropriate. For example, an employer hiring for a position with a heightened potential for harm, such as a caretaker for a vulnerable population, such as nursing home residents, should conduct thorough and documented background checks.
Finally, all employers must ensure that information learned through background checks is kept secure and confidential. Employers’ failure to do so could lead to claims under state and federal statutes, such as state law-based invasion of privacy claims or federal claims under GINA or HIPAA.