Trathony Griffin and Michael Godwin, Appellants,v.Sirva, Inc. and Allied Van Lines, Inc., Respondents.BriefN.Y.March 28, 2017 CTQ-2016-00002 Court of Appeals of the State of New York TRATHONY GRIFFIN AND MICHAEL GODWIN, Plaintiffs - Appellants v. SIRVA, INC. AND ALLIED VAN LINES, INC., Defendants - Respondents On Certified Questions from the United States Court of Appeals for the Second Circuit, Docket No. 15-1307 BRIEF FOR AMICUS CURIAE NATIONAL ASSOCIATION OF PROFESSIONAL BACKGROUND SCREENERS IN SUPPORT OF DEFENDANTS-RESPONDENTS SEYFARTH SHAW LLP Attorneys for Amicus Curiae, National Association of Professional Background Screeners 620 Eighth Avenue, 32nd Floor New York, New York 10018 Tel: (212) 218-5500 Fax: (212) 218-5526 Dated: February 3, 2017 DISCLOSURE STATEMENT Pursuant to New York Court of Appeals Rule 500.1 (f), amicus curiae the National Association of Professional Background Screeners states that it is a not- for-profit trade association incorporated in the State of North Carolina. The National Association of Professional Background Screeners has no parent corporation, subsidiaries, or affiliates. Table of Contents Page CERTIFIED QUESTIONS ...................................................................................... .iv STATEMENT OF INTEREST .................................................................................. 1 SUMMARY OF ARGUMENT .............................................................................. 2 ARGUMENT ............................................................................................................. ? I. NEW YORK ARTICLE 23-A, AS ENFORCED THROUGH THE NYHRL, IS DIRECTED AT THOSE ENTITIES WITH A DIRECT AND PROXIMATE RELATIONSHIP WITH NEW YORK EMPLOYEES AND PROSPECTIVE EMPLOYEES .................................... 7 II. CONSUMER REPORTING AGENCIES PERFORM ONLY BACKGROUND CHECKS AND LIMITED ADMINISTRATIVE FUNCTIONS FOR NEW YORK EMPLOYERS .......................................... 9 III. FEDERAL LAW RECOGNIZES A CRA IS NOT LIABLE FOR ITS CUSTOMERS' ADVERSE ACTION DECISIONS .................................... 12 A. Summary of the Different Obligations Of Employers And CRA.s Under the FCRA and New York FCRA .................................. 12 B. Expanding the Definition of"Employer" to Potentially Encompass CRAs Would Run Counter to Federal and State Law ...................................................................................................... 13 IV. COMPELLING POLICY REASONS EXIST AGAINST ANY INTERPRETATION OF THE NYHRL THAT COULD POTENTIALLY SUBJECT CRAS TO LIABILITY FOR EMPLOYERS POTENTIAL VIOLATIONS OF ARTICLE 23-A ............ 17 CONCLUSION ....................................................................................................... 23 - 1 - Table of Authorities Page Cases Costa v. Family Dollar, No. 14-731,2016 WL 3919458 (E.D. Va. July 19, 2016) ... . ........ 15 Lagrassa v. Jack Gaughen, LLC, No. 09770, 2011 WL 1257371 (M.D. Pa. Mar. 30, 2011) ............................... 14 Muir v. Early Warning Services, LLC, No. 16-521,2016 WL 4967792 (D.N.J. Sept. 16, 2016) ................................. 15 Obabueki v. IBM, 145 F. Supp. 2d 371 (S.D.N.Y. 2001) ................................................................ 14 Williams v. First Advantage LNS Screening Solutions, Inc., 155 F. Supp. 3d 1233 (N.D. Fla. 2015) .............................................................. 15 Statutes 15 U.S.C. § 1681 a( f) .................................................................................................. 9 15 U.S.C. § 1681b(b)(1) .................................................................................... 13, 17 15 U.S.C. § 1681 b(b )(2-3) ....................................................................................... 13 15 u.s. c. § 1681 b(b )( 3) . 0 •••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• 11 ' 14 15 U.S.C. § 1681e(b) ............................................................................................... 12 N.Y. Corr. Law§ 750(2) ............................................................................................ 8 N.Y. Corr. Law§ 751 ............................................................................................... 7 N.Y. Corr. Law § 752 ........................................................................................ 7, 18 N.Y. Corr. Law§ 753 .......................................................................................... 8, 19 N.Y. Exec. Lavv' § 292(1) ........................................................................................... 8 N.Y. Exec. Law§ 292(5) ........................................................................................... 8 N.Y. Exec. Law§ 296(15) ......................................................................................... 8 - 11 - N.Y. Exec. Law§ 296(6) ........................................................................................... 9 N.Y. Gen. Bus. Law§ 380-a(e) ................................................................................. 9 N.Y. Gen. Bus. Law§ 380-B ................................................................................... 13 N.Y. Gen. Bus. Law§ 380-C ................................................................................... 13 N.Y. Gen. Bus. Law§ 380-I .................................................................................... 13 N.Y. Gen. Bus. Law§ 380-K .................................................................................. 12 Other Authorities https://ag.ny.gov/press-release/ag-schneiderman-announces- agreements-background-check-agencies-end-illegal-hiring ............................... 12 - 111- CERTIFIED QUESTIONS 1. Does Section 296( 15) of the New York State Human Rights Law, prohibiting discrimination in employment on the basis of criminal conviction, limit liability to an aggrieved party's "employer"? 2. If Section 296( 15) is limited to an aggrieved party's "employer," what is the scope of the term "employer" for these purposes, i.e., does it include an employer who is not the aggrieved party's "direct employer," but who through an agency relationship or other means, exercises a significant level of control over the discrimination policies and practices of the aggrieved party's "direct employer"? 3. Does Section 296( 6) of the New York State Human Rights Law providing for aiding and abetting liability, apply to Section 296(15) such that an out-of-state principal corporation that requires its New York State agent to discriminate in employment on the basis of criminal conviction may be held liable for the employer's violation of Section 296( 15)? -IV- STATEMENT OF INTEREST The National Association of Professional Background Screeners ("NAPBS") respectfully submits this brief as amicus curiae in support of the position of Defendants-Respondents. NAPBS is a trade association of over 850 large and small professional background screening firms that advances excellence in the screening profession and provides a unified voice in the development of national, state and local regulation of professional screening services. Its members, many of whom are regulated by the federal Fair Credit Reporting Act ("FCRA") (among other laws and regulations), provide criminal record, education, driving, and employment information from domestic and international sources in order to enable employers and other users of consumer reports to provide their customers (and the public at large) with safe places to live and work. NAPBS's membership primarily consists of small and mid-sized businesses, who perform screening services on behalf of employers throughout the United States, including in the State of New York. Accordingly, NAPBS members have a significant interest in the Court's potential expansion of Section 296( 15) of the New York State Human Rights Law ("NYHRL") to entities other than an applicant's direct employer. NAPBS members believe that an expanded application of the NYHRL could affect its members' business practices and their ability to continue to provide critical screening services in the State of New York. NAPBS has filed a motion for leave to file this brief. SUMMARY OF ARGUMENT The purpose of this amicus curiae brief is to provide the Court information regarding NAPBS's members and the background screening industry, the services and products offered to employers by consumer reporting agencies ("CRAs"), and to explain why it is critical that the Court's ruling on the certified questions be narrowly tailored and provide clear guidance to ensure that it cannot be misconstrued to potentially allow for NYHRL "employer" -based liability against third-party CRAs. As detailed below, third-party CRAs prepare background and other screening services for actual employers and are not themselves "employers" or "persons" under Article 23-A and the NYHRL as to those persons on whom they provide screening services. Accordingly, CRAs should not be subject to liability under the NYHRL. A ruling that potentially could be interpreted as encompassing CRAs as "employers" as to the people on whom they conduct background and other screens would significantly and detrimentally impact the ability of New York employers to obtain necessary screening services. Further, such a ruling potentially encompassing CRAs also could encompass and negatively impact a whole host of other service providers in the State of New York. As - 2- explained below, background and other screening services are vital in providing a safe working and living environment for all New York citizens. The three questions certified to this Court seek to define the scope of the term "'employer" under Section 296( 15) of the NYHRL. NAPBS submits that the term "employer" should be limited to an applicant's direct prospective or current employer, and not be defined in a manner that potentially could encompass CRAs or other NAPBS members in their role as third-party entities who prepare background checks on behalf of actual employers and where final employment decisions are in the complete discretion of the prospective employer. To that end, NAPBS submits that Question 1 -whether liability under the NYHRL should be limited to an aggrieved party's "employer" - should be answered in the affirmative. If Question 1 is answered in the affirmative, Question 2 asks the Court to define the scope of the term "employer" under the NYHRL; specifically, whether it includes entities who are not only the aggrieved party's "direct employer," but also those entities who through an agency relationship or other means exercise a significant level of control over the challenged policies and practices of the aggrieved party's ''direct employer." If the Court holds that the term "employer" potentially encompasses entities other than the "direct employer," NAPBS urges the Court to narrowly tailor its opinion by taking into account: ( 1) the limited nature of the screening services - 3 - provided by third-party CRAs, which demonstrate that they do not exercise a "significant level of control" over the decisions of the "direct employer;" (2) the relevant legal and regulatory authorities with respect to the different obligations of CRAs as compared to true "employers;" and (3) the potential harm and serious consequences to NAPBS members, New York employers, and New York citizens that could follow from a more expansive or unclear ruling, including the very likely cessation of all employment background checks in New Y ork.l NAPBS 's position is supported by existing federal case law and interpretive guidance promulgated by the Federal Trade Commission ("FTC"). As detailed below, applying an expansive interpretation of the term "employer" would disrupt the established dichotomy under the Fair Credit Reporting Act ("FCRA") and the New York FCRA with respect to the differing responsibilities of a CRA as compared to an employer. Consistent with the function of CRAs and their (at most) limited administrative role in the employment process, federal and state law and FTC interpretive guidance establishes that CRAs are not to be treated as "employers" in their role in providing background and other screening services. Indeed, apart from obtaining a promise from prospective employers that the employer will comply with equal employment opportunity laws, and the provision l Based on its reading of Question 3~ NAPBS does not believe this Question is pertinent to its members. To the extent Question 3 could be interpreted as implicating CRAs, NAPBS maintains that the Court's ruling should be applied in a manner not to inadvertently suggest that CRAs may be subject to potential liability under Section 296(15). -4- of certain limited administrative functions, CRAs have limited insight as to how their customers (prospective employers) conduct an individualized assessment in accordance with the provisions of Article 23-A. Under these circumstances, expanding the law in New Y ark so that CRAs would be encouraged to scrutinize their customer's hiring practices and employment decision-making in order to protect themselves from potential NYHRL liability would require an impossible and inappropriate level of oversight by the CRA - one unparalleled in any other part of the country. Should this Court interpret the definition of an "employer" to arguably encompass a broad class of other entities who are not the plaintiffs direct employer, such a ruling potentially would expose CRAs to numerous claims and lawsuits based on the sole conduct of their customers, the prospective employers. Such an expanded interpretation of the term "employer" would be antithetical to those authorities governing the relationship between CRAs and employers. NAPBS' s position also is supported by compelling policy considerations. Indeed, an expanded definition of "employer" would have disastrous consequences for CRAs doing business in New Y ark and, as a result, disastrous consequences for New Y ark employers and the public at large. In particular, an expansive interpretation would increase costs and place additional burdens and risks of liability on all CRAs choosing to continue to do business in the State of New York. - 5 - Although the CRA has no discretion over the prospective employer's ultimate decision, the CRA could still routinely be dragged to court and forced to incur significant costs and legal fees in defending NYHRL actions. This exposure to potential litigation would be unique to the State of New York and increase the cost of doing business in New York for CRAs exponentially, costs that either will be passed on to their customers (and eventually absorbed by consumers) or possibly cause a chilling effect which could cause CRAs to cease doing business in New York entirely. Such consequences would have the unintended consequence of not allowing New York employers to receive vital information to confirm education and employment information, driving information, driving records, and possible criminal history about applicants, all of which allows employers to determine whether an applicant is suitable for the position sought. Alternatively, some employers may try to conduct the screening services themselves, which is outside their expertise and could result in employers overlooking or omitting important protections for the consumer. Accordingly, NAPBS respectfully requests that in answering Questions 1 and 2, the Court narrowly tailor any allowance for liability beyond a "direct employer" and provide clear guidance that CRAs are not "employers" under the NYHRL and are not subject to "employer" -based liability. - 6- ARGUMENT I. NEW YORK ARTICLE 23-A, AS ENFORCED THROUGH THE NYHRL, IS DIRECTED AT THOSE ENTITIES WITH A DIRECT AND PROXIMATE RELATIONSHIP WITH NEW YORK EMPLOYEES AND PROSPECTIVE EMPLOYEES. New York Article 23-A prohibits any application for license or employment from being "denied or acted upon adversely by reason of the individual's having been previously convicted of one or more criminal offenses" unless: (I) There is a direct relationship between one or more of the previous criminal offenses and the specific license or employment sought or held by the individual; or (2) the issuance or continuation of the license or the granting or continuation of the employment would involve an unreasonable risk to property or to the safety or welfare of specific individuals or the general public. N.Y. Corr. Law § 752. Article 23-A applies to "any application by any person for a license or employment at any public or private employer, who has previously been convicted of one or more criminal offenses in this state or in any other jurisdiction .... " N.Y. Corr. Law§ 75 I. In determining whether one of the two exceptions set forth in Section 752 apply, "the public agency or private employer" is tasked with considering the following eight factors: (a) The public policy of this state, as expressed in this act, to encourage the licensure and employment of persons previously convicted of one or more criminal offenses. (b) The specific duties and responsibilities necessarily related to the license or employment sought or held by the person. (c) The bearing, if any, the criminal offense or offenses for which the person - 7- was previously convicted will have on his fitness or ability to perform one or more such duties or responsibilities. (d) The time which has elapsed since the occurrence of the criminal offense or offenses. (e) The age of the person at the time of occurrence of the criminal offense or offenses. (f) The seriousness of the offense or offenses. (g) Any information produced by the person, or produced on his behalf, in regard to his rehabilitation and good conduct. (h) The legitimate interest of the public agency or private employer in protecting property, and the safety and welfare of specific individuals or the general public. N.Y. Corr. Law§ 753. For the purposes of the statute, the term "private employer" is defined as "any person, company, corporation, labor organization or association which employs ten or more persons." N.Y. Corr. Law§ 750(2). Article 23-A does not establish a private cause of action. Rather, Section 296(15) of the NYHRL prohibits discrimination in violation of Article 23-A, as follows: It shall be an unlawful discriminatory practice for any person, agency, bureau, corporation or association, including the state and any political subdivision thereof, to deny any license or employment to any individual by reason of his or her having been convicted of one or more criminal offenses ... when such denial is in violation of the provisions of article twenty-three- A of the correction law. Further, there shall be a rebuttable presumption in favor of excluding from evidence the prior incarceration or conviction of any person, in a case alleging that the employer has been negligent in hiring or retaining an applicant or employee, or supervising a hiring manager, if after learning about an applicant or employee's past criminal conviction history, such employer has evaluated the factors set forth in section seven hundred fifty-two of the correction law, and made a reasonable, good faith determination that such factors militate in favor of hire or retention of that applicant or employee. - 8- N.Y. Exec. Law § 296(15). The term "employer" is separately defined by the NYHRL only in the negative, stating that it "does not include any employer with fewer than four persons in his or her employ." N.Y. Exec. Law § 292(5). "Person" is defined as "includ[ing] one or more individuals, partnerships, associations, corporations, legal representatives, trustees, trustees in bankruptcy, or receivers." N.Y. Exec. Law§ 292(1 ). New York Corrections Law Article 23-A does not contain an aiding and abetting provision. Rather, the NYHRL provides that "[i]t shall be an unlawful discriminatory practice for any person to aid, abet, incite, compel or coerce the doing of any of the acts forbidden under this article, or to attempt to do so." N.Y. Exec. Law§ 296(6). II. CONSUMER REPORTING AGENCIES PERFORM ONLY BACKGROUND CHECKS AND LIMITED ADMINISTRATIVE FUNCTIONS FOR NEW YORK EMPLOYERS. A significant percentage of NAPBS 's members are CRAs. As defined under the FCRA, a CRA is "any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties." 15 U.S.C. §168la(f); see also N.Y. Gen. Bus. Law § 380-a(e) (stating analogous definition). In other words, a CRA Is a business that contracts with other - 9- businesses to provide pre- or post-employment background and other screening services for those businesses' job applicants. Such services include preparing consumer reports (background checks) on job applicants. Consumer reports assist prospective employers in evaluating their applicants for employment in accordance with applicable law, including Article 23-A. CRAs do not make employment decisions on behalf of their customers, the prospective employers. To the contrary, as a condition of obtaining a consumer report on an applicant, a prospective employer must first certify in writing to the CRA that it will comply with applicable all equal employment opportunity laws, such as Article 23-A, v;hen utilizing the consumer report. Occasionally, some CRAs - at the prospective employer's request and direction offer administrative services that assist the employer in carrying out the prospective employer's pre-employment decisions and FCRA obligations. For example, prospective employers may request that the consumer report be marked with a preliminary grade based upon the type of criminal history contained in the report. If the employer elects to have the report assigned a preliminary grade, the employer provides specific criteria to the CRA, prepared solely by the employer, which describes in detail what preliminary grade to apply and under what circumstances to apply each specific grade. The use of a preliminary grade allows the employer to triage the review of the result to the appropriate staff. - 10- A preliminary grade may vary in terminology from "clear" or "eligible" (for reports with no criminal records or which include less serious crimes that the employer has determined are not job related) to "consider," "needs further review," or "pending review" (for reports that include crimes that the employer has determined to be more serious and which require the employer to perform an individualized assessment). The process of applying the prospective employer's preliminary grade to the consumer report is purely administrative and conducted in accordance with specific criteria provided only by the employer. It does not constitute adverse action and, at all times, the prospective employer controls whether or not to take adverse action based on the contents of the consumer report. See infra, p. 12 & n.2. After reviewing the consumer report, if the employer is considering adverse action, the employer may direct the CRA to mail or otherwise send the employer's FCRA-required pre-adverse action notice to the job applicant from and on behalf of the employer. See 15 U.S.C. § 1681b(b)(3). The same administrative service may be offered after the employer decides to take adverse action. !d. In exercising this administrative function, the CRA does not make or influence any employment decision, but simply sends the employer's FCRA-required notices at the direction of its employer customer. These services are entirely compatible with the NYHRL. On March 13, - 11 - 2014, the New York Attorney General of the State of New York announced an agreement with four of the nation's largest CRAs (all of whom are NAPBS's members), in which the CRAs agreed that: ( 1) they would not engage in automatic disqualification of New York applicants with criminal convictions, and (2) hiring decisions are deferred to and remain the responsibility of the employers, who must conduct an individualized consideration of candidates in accordance with New York State law.~ The agreement with the New York Attorney General permits these CRAs to perform the administrative functions associated with adverse action processing described above. Jd. Such practices are consistent with Article 23-A and the NYHRL because there is no automatic rejection of an applicant based on the consumer report. Instead, the prospective employer has the opportunity (and responsibility) to individually evaluate the consumer report and make an employment decision in accordance with the law. III. FEDERAL LAW RECOGNIZES A CRA IS NOT LIABLE FOR ITS CUSTOMERS' ADVERSE ACTION DECISIONS A. Summary of the Different Obligations of Employers and CRAs under the FCRA and New York FCRA. The FCRA and New York FCRA separate the obligations of a CRA from those of a true employer or "end user." CRAs, for example, are tasked primarily with fulfilling only those obligations unique to their business purpose (providing ~See https:!/ag.ny.gov/press-release/ag-schneiderman-announces-agreements- background-check -agencies-end-illegal-hiring. - 12- background reports), including ensuring that they have in place reasonable procedures to ensure the maximum possible accuracy of their reports and that reports are complete and up-to-date. See 15 U.S.C. § 1681e(b), k; N.Y. Gen. Bus. Law § 3 80-K. CRAs also are required to obtain a certification from the prospective employer that the employer has complied with its employer-specific obligations under the FCRA and will follow all applicable equal employment opportunity laws. 15 U.S.C. § 1681 b(b )(1 ). In contrast, employers, or "end users," are responsible for ensuring that they fulfill roles naturally associated with the job applicant's prospective employer, including: (a) having a permissible purpose to conduct the background check in the first place; (b) providing the appropriate disclosure to the applicant and obtaining the applicant's written authorization for the background check; (c) following the two-step adverse action process set forth in the FCRA and New York FCRA should they decide to take action based in whole or in part on the contents of the consumer report; and (d) certifying to the CRA that they will follow their responsibilities under the FCRA (including that they will not use information in violation of equal employment opportunity laws). 15 U.S.C. § 168lb(b)(2-3); N.Y. Gen. Bus. Law§§ 380-B & 380-C; N.Y. Gen. Bus. Law§ 380-1. B. Expanding the Definition of "Employer" to Potentially Encompass CRAs Would Run Counter to Federal and State Law. Expanding aiding and abetting liability under the NYHRL to entities such as - 13 - CRAs would in essence make CRAs responsible for their customer's compliance with the adverse action process. This runs directly counter to the law described above. The FCRA expressly and unambiguously separates the obligations of a CRA from those of an employer who utilizes the CRA to procure screening services. Indeed, the FCRA clearly states that it is the employer's responsibility not the CRA' s responsibility to follow the adverse action process. Section 1681 b(b )(3) of the FCRA provides, in relevant part, that "in using a consumer report for employment purposes, before taking any adverse action based in whole or in part on the report, the person intending to take such adverse action shall provide to the consumer to vvhom the report relates (i) a copy of the report; and (ii) a description in writing of the rights of the consumer." 15 U.S.C. § 1681 b(b )(3) (emphasis added). By its clear terms, Section 1681 b(b )(3) imposes adverse action notice obligations upon users of information in a consumer report, which are employers and prospective e1nployers, because they are the only entities that can actually take, and therefore intend to take, employment-related adverse action. See 15 U.S.C. § 1681 b(b )(3); Lagrassa v. Jack Gaughen, LLC, No. 09770, 2011 WL 1257371, at *2 (M.D. Pa. Mar. 30, 2011) ("Plaintiff cannot argue a violation of§ 1681 b(b )(2) because that provision applies only to users of a report, rather than agencies that furnish the report.") (emphasis in original); Obabueki v. IBM, 145 F. Supp. 2d 371,393 (S.D.N.Y. 2001) (Sections 1681b(b)(2) and (3) of - 14- FCRA apply only to "users" of consumer reports). Quite simply, a CRA is not, and cannot be, a "user" of its own consumer reports because it does not make employment decisions with respect to the consumers on whom it prepares consumer reports those decisions are made by consumers' actual "employers" and prospective "employers." In Williams v. First Advantage LNS Screening Solutions, Inc., 155 F. Supp. 3d 1233, 1242 (N.D. Fla. 20 15), for example, the court held that a "CRA acting as a CRA cannot also be a 'user"' under the law, as CRAs cannot take "adverse actions" against consumers on whom they prepare reports, as "the entire structure of the FCRA contemplates CRAs providing information to other entities who then may use that information to take adverse actions against consumers." !d. at 1243-44. The Williams court concluded that "as a legal matter ... § 1681 b(b )(3 )(A) does not impose any obligations on CRAs in their capacities as CRAs." See also Muir v. Early Warning Services, LLC, No. 16-521, 2016 WL 4967792, at *6 (D.N.J. Sept. 16, 2016) (holding that Section 1681 b(b )(2) and (3) do not apply to CRAs and a contrary "reading ignores the delineation of responsibilities" between CRAs and "employers" as specified in the FCRA and as interpreted by the FTC).J. J The weight of case law also holds that CRAs who perform the administrative function of providing a preliminary grade for their customers do not take adverse actions and are not "users" of consumer reports. See Costa v. Family Dollar, No. 14-731, 2016 WL 3919458, at *4 (E.D. Va. July 19, 2016) ("the act of coding an applicant as not recommended is not adverse action under the FCRA"); Williams, 155 F. Supp. 3d at 1247 ("Simply put, an adjudication cannot itselfbe an adverse action") (emphasis in original). - 15 - Consistent with this case law, FTC guidance confirms that Section 1681 b(b )(3) does not apply to CRAs. In particular, in the FTC's 2011 report reviewing its 40 years of FCRA experience, the FTC expressly stated that Section 1681 b(b )(3) "imposes a specific disclosure obligation on employers," and does not mention CRAs. ("40 Years of Experience with the Fair Credit Reporting Act: An FTC Staff Report with Summary of Interpretations," at 51.) Consistent with that interpretation, multiple FTC staff opinion letters state that employers, and not CRAs, are responsible for complying with the Section 1681 b(b )(3) of the FCRA. For example, a June 9, 1998 FTC opinion letter states: An employer or any other user of consumer report information obtained from a CRA may have the CRA fulfill the user's ministerial obligations under FCRA. For example, an employer may arrange for the CRA to provide any pre-adverse action disclosures required by [Section 1681 b(b )]. However, the employer or other user remains responsible for any duty imposed by FCRA and may be subject to liability if the duties are not performed by the CRA. (Advisory Opinion to Rosen," William Haynes, FTC, StaffOp. Ltr., at 1 (June 9, 1998) (emphasis added).) Another opinion letter advised a CRA representative that: [Y]our employer clients may arrange for you [the CRA] to make the [Section 1681 b(b )(2) and (3)] disclosures, obtain written permission, and provide the notices required by these provisions. If you assume these responsibilities, you should ensure that your procedures comply with the FCRA. Your employer clients, however, remain liable for any violations of the law that result from your actions. ("Advisory Opinion to Beaudette," William Haynes, FTC, Staff Op. Ltr., at 2 (June - 16- 9, 1998) (emphasis added).) As such, the FTC does not contemplate that CRAs could be liable under Sections 1681 b(b )(2) or b(b )(3), which, by their plain terms, are directed at employers. Moreover, the FCRA separately makes clear that, before providing a consumer report, a CRA must first obtain a certification from the prospective employer that "information from the consumer report will not be used in violation of any applicable Federal or State equal employment opportunity law or regulation," which would include the NYHRL and Article 23-A. See 15 U.S.C. § 1681 b(b )( 1 ). Consequently, the FCRA specifically requires the employer, not the CRA, to take responsibility for complying vvith state equal employment opportunity laws, including the NYHRL.1_ If NYHRL liability were expanded to arguably include CRAs as "employers," New York would stand alone as the only state to threaten such liability against CRAs. IV. COMPELLING POLICY REASONS EXIST AGAINST ANY INTERPRETATION OF THE NYHRL THAT COULD POTENTIALLY SUBJECT CRAS TO LIABILITY FOR EMPLOYERS' POTENTIAL VIOLATIONS OF ARTICLE 23-A. CRAs should not be subject to potential liability when their customers - prospective employers reject an applicant for employment based on the contents .1 Other sections of the FCRA further emphasize that CRAs do not make hiring decisions with respect to the applicants of their customer-employers. Section 1681 m( a )(3 ), for example, requires the person taking an adverse action (i.e., the employer) to provide the consumer with "a statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the consumer the specific reasons why the adverse action was taken." 15 U.S.C. § 1681m(a)(3)(B). - 17- of a criminal background check. An interpretation of the NYHRL that leaves open the possibility for CRA liability as an "employer" would expose CRAs to an instant barrage of lawsuits. In addition to compliance impossibilities and being unsupported by the law, such a result would require CRAs to consider whether the benefits of continuing to do business in New York outweigh the increased business costs, risks of liability, and costs of defending against such lawsuits. This, in tum, could impact the number of employment-related background checks available in the New York marketplace and affect the safety of New York places of employment. This is an unnecessary and unfortunate possible outcome given that (a) job applicants already have recourse for violations of the NYHRL (the ability to bring suit against their actual prospective or current employer); and (b) although it is not unlawful in New York to reject an applicant because he or she has a criminal history, the information to determine whether such a rejection is lawful belongs solely to the employer (and not the CRA who merely provides a background report). Specifically, under Article 23-A, the NYHRL requires that an employer conduct an individualized assessment for each candidate, specific to its business and the position sought, prior to taking adverse action. Under Article 23-A, an employer is permitted to take adverse action because of the applicant's criminal - 18- history if: (1) there is a direct relationship between the previous criminal offenses and the employment sought; or (2) employing the individual would involve an unreasonable risk to property or to the safety or welfare of specific individuals or the general public. See N.Y. Corr. Law§ 752. To determine whether one of these two conditions are met, the employer must consider eight specific factors: ( 1) public policy encouraging the employment of persons with criminal convictions; (2) the duties and responsibilities of the position; (3) the bearing, if any, of the criminal conviction on the applicant's fitness or ability to perform the duties and responsibilities of the position; (4) the time since the criminal offense; (5) the applicant's age at the time of the offense; ( 6) the seriousness of the offense; (7) any information regarding the applicant's rehabilitation and good conduct; and (8) the legitimate interests of the employer in protecting property, and the safety and welfare of specific individuals or the general public. See N.Y. Corr. Law§ 753. Article 23-A compliance can only be met by the applicant's actual employer( s) (i.e., the direct employer or contract etnployer ). Only the actual employer is in a position to analyze each of the required factors, including the duties and responsibilities of the position, the bearing of the criminal offense upon those duties, the applicant's evidence of rehabilitation, and the employer's interest in protecting its property and the safety and welfare of its employees or the general public. In stark contrast, a CRA who contracts with an employer to issue a - 19- consumer report lacks the knowledge required to assess these factors and ensure that each of its customers have properly analyzed and considered these factors in order to adequately complete the required employer-based individualized assessment. CRAs often have little to no contact with the consumer and may be asked only to perform one type of check so they do not have insight into the other required factors (i.e., employment history, evidence of rehabilitation and good conduct). Indeed, CRAs often do not know the specific job for which an applicant is applying, much less the specific laws, regulations or other considerations in a particular industry that would bar employers from hiring someone for a particular position. As such, it would be impossible for a CRA to perform such a function. Moreover, were a CRA exposed to possible liability for their customer's employment decisions, it would be incumbent on the CRA to examine and scrutinize each and every rejection of an applicant by its customers. This is simply impossible. A customer has no obligation to inform a CRA if and when it decides to reject an applicant for employment. Because it is the employer's responsibility to issue the appropriate adverse action notices, employers in many cases will simply proceed with notifying the applicant on their own. Consequently, a CRA is only even aware of an adverse action decision for those limited customers for whom it provides the ministerial service of mailing notices (a service not offered by every CRA). Regardless, however, a CRA is not privy to the individualized -20- assessment conducted by the employer, the thought process and analytics that went into the decision, nor the unique business reasons the employer may have for its decision. Nor is the CRA privy to the nuances of the position or the capability of the candidate to perform the position's requirements. An expansive interpretation of the term "employer" could result in potential liability to CRAs doing business in New York for actions that they cannot police, regulate, or in any way control. To broadly extend the aiding and abetting clause of the NYHRL would present an impossible conundrum for the CRA. If the CRA administers pre- adverse and adverse action notices for its customers or assigns a preliminary grade to a consumer report in accordance with the employer's express direction and instruction, a plaintiff conceivably could contend that the CRA aided and abetted the employer's adverse action decision. Plaintiffs likely would make such arguments to New York courts even though such administrative services are expressly permitted under federal law and precedent. Indeed, even by merely preparing the background check on which the employer bases its decision, a CRA could conceivably be named in any lawsuit challenging the employer's employment decision. All of these likely outcomes from a broad interpretation of "employer" would result in collateral damage to CRAs operating in New York and, as a further consequence, New York employers and citizens. This is a fundamentally unfair and unreasonable reading of the law and leads to the perverse - 21 - result of causing a third-party screening company to be exposed to "employer"- based lawsuits from consumers with whom no employment relationship exists simply because the CRA does business in the State of New York. These policy implications exist even if the Court defines the term "employer" narrowly, but leaves room for legal analysis as to whether a third-party corporation has sufficient "control" over the employer's hiring practices and policies. Even in those circumstances, CRAs would likely be repeatedly dragged to court and forced to demonstrate that they lack the requisite "control," that they do not make hiring decisions, and that hiring decisions and individualized assessments are solely the responsibility of their customers. Accordingly, NAPBS respectfully sub1nits that any ruling expanding NYHRL liability beyond "direct employers" should clarify that CRAs are not "employers" under the statute. Absent that clarity, the risk of recurrent litigation in New York will make the cost of doing business in the State too high for many CRAs. Consequently, New York businesses will have fewer ways to obtain background checks and other screening services on applicants, which serve the ultimate purpose of ensuring that the workplaces in this State are safer for the employers, the State's millions of employees, and the general members of the public that frequent such locations or receive services in their homes. -22- CONCLUSION For the foregoing reasons, NAPBS respectfully requests that this Court consider the role of third-party CRAs when it responds to Questions 1 and 2 to ensure that its decision cannot be interpreted in a manner that would extend aiding and abetting liability under the NYHRL to CRAs for their role in preparing and administering background check and other screening services. Dated: February 3, 2017 Respectfully submitted, SEYFARTH SHAW LLP By: Attorneys for Natz na , sof;iation of f I Professional BackgrouneJcreeners Courtney S. Stieber 620 Eighth Avenue, 32nd Fl. New York, NY 10018 (212) 218-5500 cstieber@seyfarth.com Pamela Q. Devata (on the brief) John W. Drury (on the brief) 131 S. Dearborn St., Ste. 2400 Chicago, IL 60603 (312) 460-5000 pdevata@seyfarth.com jdrury@seyfarth.com - 23- 36988274v.1 NEW YORK STATE COURT OF APPEALS CERTIFICATE OF COMPLIANCE I hereby certify, pursuant to Rule 500.1(j), that the foregoing brief was prepared on a computer using Microsoft Word. Type: A proportionally spaced typeface was used as follows: Name of Typeface: Times New Roman Point Size: 14 Line Spacing: Double Word Count: The total number of words in this Brief, inclusive of point headings and footnotes and exclusive of pages containing the table of contents, table of citations, proof of service, certificate of compliance, corporate disclosure statement, certified questions presented, or any authorized addendum containing statutes, rules, regulations, etc., is 5,463. Dated: New York, New York February 3, 2017 Courtney S. Stieber SEYFARTH SHAW LLP 620 Eighth Avenue, 32nd Fl. New York, New York 10018 Tel: (212) 218-5500 Fax: (212) 218-5526 cstieber@seyfarth.com Pamela Q. Devata (on the brief) 36988274v.1 John W. Drury (on the brief) SEYFARTH SHAW LLP 131 S. Dearborn St., Ste. 2400 Chicago, IL 60603 Tel: (312) 460-5000 pdevata@seyfarth.com jdrury@seyfarth.com Attorneys for the National Association of Professional Background Screeners