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JULY 2002 I. LEGISLATIVE/REGULATORY
UPDATE New Law Limiting Use of Social Security Numbers As discussed in the April 2002 update, a new law, SB 168 (Bowen), went into effect July 1, 2002. SB 168 was drafted to address the growing identity theft problem by imposing significant additional prohibitions upon employers to safeguard the use of social security numbers as identifiers. Codified as Civil Code section 1798.85, the new law limits the use of social security numbers by forbidding the following:
SB 168 does contain an exemption for employers with pre-existing policies or practices that conflict with the new prohibitions but only if the following three conditions are met. First, the conflicting practice must be continuous and uninterrupted. If the practice ceases for any reason in the future, then the prohibitions of SB 168 will automatically apply. Second, if an employer wishes to continue a pre-existing prohibited practice, then its employees must be provided with an annual disclosure advising them of the right to request that their social security numbers not be used in a manner prohibited by SB 168. Finally, within 30 days of receiving such a written request, the company must, free of charge, stop using the individual's social security number. Beyond the above-referenced exemption, several other exceptions also exist. Most significantly for employers, SB 168 does not affect the collection, use, or release of social security numbers as required by state or federal law. For example, California Labor Code section 226(a)(7) expressly mandates that social security numbers be placed on paycheck stubs and, therefore, would be unaffected by SB 168's prohibitions. Likewise, SB 168 does not apply to the use of a social security number for internal verification or administrative purposes. For example, social security information contained in employment applications or employee benefit forms stored in personnel files may still be maintained as long as employers take necessary precautions to ensure that such information is not disclosed to the public and is accessible only to a limited number of authorized individuals. Finally, SB 168 exempts applications and forms sent by mail to employees. No definition of what constitutes "applications" or "forms" exists in the statute, however. In sum, in light of the new prohibitions
enacted under SB 168, companies should conduct immediate and thorough
audits of their employment and client mailing policies concerning the
collection, use, and disclosure of social security numbers. EEOC Provides New Guidance on Workplace Rights in Response to 9/11 Backlash Since the attacks of September 11, 2001 the Equal Employment Opportunity Commission (EEOC) has experienced a significant increase in discrimination complaints based on religion and national origin. During this nine-month period, the EEOC received 497 charges of discrimination based on the Muslim religion, compared to only 193 such charges during all of 2000. To help companies prevent workplace harassment, the EEOC recently released a fact sheet called "Questions and Answers about Employer Responsibilities Concerning the Employment of Muslims, Arabs, South Asians and Sikhs." The EEOC also prepared a companion fact sheet that answers questions about employee rights. The new EEOC guidance reaffirms longstanding legal prohibitions of workplace discrimination based on ethnicity, national origin, or religion. This includes making hiring preferences based on notions of customer preference about someone's attire, or refusing to hire an employee because he or she must wear a religiously mandated article of clothing, such as a turban. The EEOC has restated its position that "customer preference" does not establish undue hardship for an employer, and exceptions to accommodate religious beliefs should be made to otherwise enforceable dress code policies. The EEOC also emphasized that employers have an affirmative duty to ensure that employees are not harassed because of their religion or national origin. Managers and supervisors should be trained to recognize ethnic and religious harassment, and to take immediate corrective action to stop it. It is also important to confirm that an employer's harassment policies do not only cover sexual harassment, but also provide a mechanism for promptly reporting harassment based on ethnicity, religion, national origin, and other protected categories under Title VII and the California Fair Employment and Housing Act. The EEOC further restated its position that employers must work with employees to find appropriate, reasonable accommodations that meet employees' religious needs, as long as these accommodations do not impose an undue hardship. Whether an accommodation imposes an undue hardship to an employer will be determined on a case-by-case basis. Specific accommodations for Muslim employees may include time off for religious holidays or exceptions to dress and grooming codes. Finally, the EEOC asserts that while employers may require the same pre-employment security checks that apply to other applicants for the same position, employers may not perform "special" background investigations or other screening procedures against Muslim, Arab, or other religious or ethnic groups in a discriminatory manner. While the new EEOC guidance does not change current employment law, it reaffirms and highlights that employers need to be sensitive to workplace discrimination and harassment based on religion, ethnicity, or national origin. Thus, maintaining anti-discrimination and harassment policies and conducting regular training on personnel issues makes good business sense. If there is a complaint of discrimination or harassment, an employer should conduct a thorough and impartial investigation and make good faith efforts to take immediate corrective action. Employers should also familiarize themselves with potential reasonable religious accommodations, such as providing employees leave for religious observances, a time and/or place to pray, and the flexibility to wear religious attire. While the obligation to accommodate an individual's religious beliefs is less than the obligation to accommodate disabilities, it is important not to overlook the requirement of investigating and evaluating potential accommodations. Age Can Decide Benefits The California Supreme Court has ruled that employers may give older employees fewer benefits than younger ones. Although employers may not discriminate against older employees when it comes to hiring and firing, or being demoted or suspended, in Esberg v. Union Oil, the Court found that state law allows employers to consider age when parceling out benefits. The case concerns Dan Esberg ("the Employee"), a former employee of Union Oil Company ("the Employer"). After working for the company for 14 years, the Employee decided to obtain a master's degree. The Employee claimed that the Employer paid for graduate education for younger workers, but told him he was too old to invest in. An Orange County jury sided with Esberg,
now 64, and awarded him $86,000 in damages. The high court's decision
reversed that award. The Court's ruling is limited to claims based on
FEHA. The federal Age Discrimination in Employment Act specifically prohibits
discrimination on the basis of age in regard to the "terms, conditions,
or privileges of employment." Moreover, although the Court held that
educational programs meet the definition of "terms, conditions, or
privileges of employment," the court did not provide guidance as
to what types of employee benefits are included. Blanket Policy Against Rehire of All Former Employees Who Violated "Company Policy" May be Discriminatory under the ADA The Ninth Circuit Court of Appeals held that an employer violated the Americans with Disabilities Act ("ADA") by refusing to re-employ a former employee who had previously "quit in lieu of discharge" after testing positive for cocaine. The court held that the employee was protected by the ADA because he demonstrated that he had successfully completed drug rehabilitation. In Hernandez v. Hughes Missile Systems, the plaintiff, a twenty-five year employee, resigned in lieu of termination after he tested positive for cocaine. Two years later, the plaintiff re-applied for employment and submitted two reference letters with his application stating that he regularly attended AA meetings and was committed to his sobriety. Hughes rejected his application based on its "unwritten" policy of not rehiring former employees whose employment ended due to termination or resignation in lieu of termination. Hughes argued that this policy was not discriminatory because it applied to all former employees and it did not single out employees with a drug problem. The court rejected Hughes' argument because, while the policy did not appear unlawful on its face, it violated the ADA as applied to former drug addicts. If the plaintiff was in fact no longer using drugs and had been successfully rehabilitated, then he could not be denied employment simply because of his past record of drug use, which is considered a "disability" under state and federal law. The court also held that the company could not hide behind a policy that shielded its employees from the knowledge that an employment decision may be illegal. The court reasoned that Hughes had a duty to ascertain the reason behind the plaintiff's termination and, if it was due to prior drug use, then it had an obligation to consider him for employment as long as he met the other job-related requirements for the position. Maintaining a blanket policy against rehire
of all former employees who violated company policy is not illegal per
se. However, if the policy discriminates on account of past disability
against employees with a record of addiction who have successfully rehabilitated,
then it may result in liability, as it did for Hughes. Employers should
be careful in evaluating applications from former employees. The argument
that the company was unaware of a "disability" when making a
hiring decision will not serve as a defense, because a court is likely
to hold that the employer had knowledge of the employee's prior drug addiction
if that was the reason for the prior termination. Pre-Employment Arbitration Agreements The Ninth Circuit Court of Appeals weighed in once again on the issue of mandatory arbitration agreements. In Circuit City Stores, Inc. v. Najd, a former Circuit City employee sued for racial discrimination in violation of California's Fair Employment and Housing Act ("FEHA"). Circuit City asked the court to require Najd to arbitrate his claims because he previously agreed to use an arbitration program as a condition of employment. Najd opposed arbitration based upon a prior Ninth Circuit case, Duffield v. Robertson Stephens & Co., which held that employers may not compel arbitration of federal discrimination claims under Title VII. The court, however, would not apply Duffield to Najd's case because he failed to allege a federal discrimination claim under Title VII ˆ his complaint was limited to a state FEHA claim. Thus, Najd was required to go to arbitration. Once again, the Ninth Circuit has expressed its general hostility toward mandatory arbitration agreements. Although Circuit City prevailed, the outcome of this case might have been different if the employee's attorney had been savvy enough to allege both FEHA and Title VII discrimination claims. Until the Ninth Circuit provides some clarification regarding how it will rule in such instances, employers utilizing mandatory arbitration agreements should be aware that their agreements may not cover even state law discrimination claims if they are accompanied by a claim under Title VII. If you would like to discuss these or any
other employment law matters, please do not hesitate to contact any member
of Klinedinst's Employment Law
Department.
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