Quirky Question # 183:

We recently made an offer to an applicant for an important job at our company. The offer was conditioned on a satisfactory background check and her passing our standard drug test. She had no problem with the drug test. But, when we did the background check, we discovered that she had sued her former employer for violations of the Fair Labor Standards Act. Based on that fact, we want to pull the offer. Do you see any problems with that decision? Are we buying litigation?

Roy’s Analysis:

You ask whether you are “buying litigation” if you reject an otherwise qualified candidate for employment solely because you have discovered that she previously sued a former employer for alleged violations of the Fair Labor Standards Act (FLSA).  In one important respect, your question is incomplete.  Another way to frame your inquiry is whether you are “buying litigation you cannot win?”  Whereas you may be setting your company up for a lawsuit by withdrawing your conditional job offer, this is a lawsuit that you can and should win. Before addressing that topic more specifically, let me flag a few other issues for your consideration.

First, why is it so important to you that your applicant previously sued a former employer for FLSA violations?  Have you concluded that this fact alone makes it more likely that she will institute litigation against your company?  If so, why?

It could be that her former employer did violate the FLSA.  Perhaps her former employer did not pay her, or other employees, the minimum wage.  Perhaps her former employer did not provide overtime compensation for hours she or others worked over 40 each week. Perhaps her former employer misclassified her as an exempt employee to avoid the overtime obligation?  Assuming that any of these hypotheticals were true, and she sought redress for these statutory violations, why would those facts disqualify her from working for your company?

Although, as discussed further below, you may not have a legal obligation to explore these issues, you might want to gain a better understanding of the facts that precipitated her prior litigation.  Did she try to rectify the statutory violations before initiating suit?  Did the employer admit that it had ignored key FLSA provisions?  Did the lawsuit settle promptly?  Did she prevail in the litigation?  Or, conversely, was the lawsuit frivolous and quickly dismissed?  In this last context, I could understand your concern about retaining the former disappointed litigant.  In the former fact patterns, not so much.

Second, you said that you made an offer to this candidate for an “important job at your company.”  Apparently, given the fact that your company made her an offer, you also concluded that she was qualified for the position.  Do you really want to pass on an applicant who is qualified for an important position at your company because she previously was involved in litigation against a former employer?  How would you feel if this otherwise qualified candidate went to work for one of your key competitors?

Third, and I touched on this above, what risk are you trying to protect against by not carrying through with your offer of employment.  Do you feel that your own company is engaging in some borderline practices where the FLSA is concerned, practices that might be exposed if you hire a former FLSA litigant?  If that is driving your decision, I think you are focusing on the wrong issue.  You instead should be investing your efforts in ensuring compliance with the FLSA.  If you have concerns about how your employees are being classified (exempt or non-exempt) or whether you are calculating hours worked correctly, or whether your company is obligated to compensate your employees for the time they spend donning and doffing their uniforms, you should obtain the requisite legal guidance and address these issues.  There are quite a few plaintiffs’ law firms trolling for companies that fail to comply with the FLSA.  Sooner or later, they will focus on problematic practices at your company (assuming there are any), regardless of whether you hire a former FLSA plaintiff.

Fourth, is this an approach to which your company generally adheres, i.e., not hiring someone who has sued a former employer?  If so, you may be violating other statutory schemes, which have broader protections than the FLSA with regard to applicants.  To the extent this is a general practice, you should move very cautiously to avoid potential liability.

But, with all of those observations in mind, let’s focus on the specifics of your question – is it a violation of the FLSA to retaliate against an applicant because she previously initiated an FLSA suit?  Although the final verdict may not have been delivered on this subject, the current state of the law is that the FLSA is NOT violated by a company that retaliates against an applicant by withdrawing a conditional offer of employment.

The United States Court of Appeals for the Fourth Circuit had an opportunity to examine this precise issue in the recent case of Dellinger v. Science Applications International Corporation, No. 10-1499 (August 12, 2011). In that case, the plaintiff, Natalie Dellinger, applied for a position with the defendant company.  The company made her a contingent job offer, conditioned on her passing a drug test and completing various forms.  One question on one of the forms inquired about past civil litigation in which she had been a party and Dellinger revealed that she had sued her prior employer for a violation of the FLSA.  On that basis, Science Applications International (SAI) withdrew her pending job offer.

Dellinger sued under the retaliation provisions of the FLSA.  Her prospective employer, SAI, brought a motion to dismiss her lawsuit.  The District Court granted the employer’s motion to dismiss on the grounds that the FLSA anti-retaliation provision did not extend to applicants, but rather was limited to “employees.”  That decision was appealed to the Fourth Circuit, which affirmed the lower court by a 2-1 decision.

While recognizing that retaliating against an applicant because of her prior FLSA lawsuit might constitute “morally unacceptable retaliatory conduct,” the appellate court found the statutory language of the anti-retaliation provision clear, concluding that it “was not free to broaden the scope of a statute whose scope is defined in plain terms . . ..”

To reach this conclusion, the court parsed through the specific language of the statute’s anti-retaliation provision, as well as the general purpose of the statute.  The anti-retaliation provision prohibits discrimination against “any employee because such employee has filed any complaint or instituted . . . any proceeding under or related to this chapter.”  29 U.S.C. § 215(a)(3).  The case implicated the question of whether an applicant is an “employee” authorized to sue under the statute.  The Fourth Circuit stated, “we conclude that only employees can sue their current or former employers for retaliation under the FLSA and that an applicant is not an employee.”  The circuit court found that “an applicant who never began or performed any work could not, by the language of the FLSA, be an ‘employee.’”  This conclusion, the court observed, was linked to the underlying purposes of the statute and framed in the context of the relationship between employer and employee.

In reaching this determination, the appellate court noted that it had been unable to find any case that extended FLSA anti-retaliation protections to applicants as well as employees.  Moreover, there have been a number of cases that reached the same conclusion adopted by the Fourth Circuit.  Given the statutory language and these other decisions, the appellate court stated, “we hold that the FLSA anti-retaliation provision, 29 U.S.C. § 215(a)(3), does not authorize prospective employees to bring retaliation claims against prospective employers.”

In short, if your company elected to withdraw an employment offer to an applicant because she previously had instituted litigation under the FLSA, she could not successfully sue your company for retaliation under the FLSA.  So while this decision may result in your company “buying litigation,” your firm is not buying litigation it will lose.

Finally, one last admonition – while you may be free to retaliate against an applicant who previously filed an FLSA lawsuit against a different employer, you may not retaliate against an employee, or a former employee, who once brought an FLSA suit against your company.  In this context, the FLSA’s anti-retaliation could reach even a decision to communicate to a prospective employer of your ex-employee that she once sued your firm.  This would be particularly true if you communicated this information to penalize the ex-employee for suing your firm.  Although your ex-employee could not successfully sue the prospective employer who rejected her application based on the information shared by your company, she could sue your firm in her capacity as your former employee.