Overview of Blacklisting Laws
To simply put, blacklisting is the action of refusing to hire a former employee due to the prior employer’s negative evaluation of their performance. A common form of blacklisting comes when an employer provides a negative reference for a former employee, which can lead to that employee’s inability to secure subsequent employment. Examples of negative references include comments on an employee’s attendance issues, skills, abilities and demeanor.
Negative references became so commonplace in the United States that legislation was enacted to reduce the use of negative references, known as blacklisting laws. The primary purpose of these laws is to protect former employees from being blacklisted and to protect employers by providing immunity to them when providing references for former employees.
Until recently, when an employer provided a reference on a former employee, the employer did so at their own willingness and risk. However , some states have passed legislation that protects employers from liability when they provide a reference on a former employee. Texas has adopted blacklisting laws which provide immunity to employers from civil liability and/or criminal liability if they provide a statement about a former employee’s job performance if the statement is given in good faith without malice to another party. At times, blacklisting laws may be considered exception to at-will employment laws. At-will employment laws allow an employer to unilaterally terminate employment relationships without providing cause within the bounds of federal anti-discrimination laws. However, a former employee subjected to blacklisting may be protected under public policy provisions within certain blacklisting laws, which prevent employers from retaliating against a former employee who files a complaint or participates in a legal investigation.
Blacklisting: Federal vs. State Regulations
The breadth of blacklisting laws at the federal level is quite limited. In fact, the main legislation that addresses this issue, the Walsh-Healey Act of 1936, only applies to suppliers and contractors that receive $10,000 or more from the federal government. This law prohibits these recipients from discharging, disciplining, demoting or discriminating against any employee for filing a claim or testimony or refusing to testify in a covered action. The above definition of a covered action appears quite limited, but it further defines a refusal to testify as someone who refuses to testify, who refuses to disclose any matter, or object to examination by reason of privilege. The Act further requires employers to make the position of any terminated employee available for at least 30 days, during which, they must be offered employment at a wage not less than the one at which such employee was employed immediately prior to termination. Blacklisting laws at the state level are often very different from even the interpretation of the Act. For example, in California, while the law is similar to the above by preventing an exact act as discrimination for a file or refusal to participate in an action, the law also protects any employee who files a claim. The California law also specifically precludes termination from any employment agency (broadly defined by the law) held as the employer. The fine in California is also greater than under the federal law, making it $1,000 per occurrence.
A State-by-State Guide: Blacklisting Laws in America
Web-Based Screening Is A Practice That Can Help Employers Avoid Violations Of The State-Law Blacklisting Prohibitions and Will Help The State AGs (and Class Action attorneys) In Suing You. So How Does That Work?
As with many things in labor and employment law, the blacklisting law landscape is already quite varied and most likely to become even more so. In some states there are no clear blacklisting laws, while in others there is a complex patchwork of related statutes.
In Wisconsin, for instance, blacklisting is prohibited, but only if done in bad faith or with malice. See Wis. Stat. § 893.13. Under the statute, "the name of an employee may not be introduced into evidence in any action for damages on the basis of breach of a contract of employment unless the complaint is verified and the plaintiff files an affidavit that the employee was not blacklisted." Id. § 893.13(1). Bad faith is defined as "malicious or wantonly reckless indifference to the rights of others." Id. § 893.13(2). So if an employer sends out a big negative letter that keeps employees from getting jobs, even if the ex-employee was kind of a jerk, it may still be a violation.
Pennsylvania has the same law, prohibiting blacklisting, defined in part as publishing or posting in any place, print or electronically, of the name of any person who left employment without specifying the cause of their leaving work. See 43 Pa. Stat. § 142. Section 142 merely states that "any action brought under this section shall be by civil action for damages." It does not state any party is entitled to attorney’s fees for a violation – but Pennsylvania law’s awarding of attorney’s fees to employees seems to be growing, thus this statute may have increasing importance.
California’s blacklisting law is slightly different. It provides, in part, that "no person, employer or employment agency shall publish or post in any place, print or electronically, the name of any employee who has left employment without specifying the cause thereof." Cal. Lab. Code § 1057. And it provides that any person, employer or agency who "refers such applicant to a prospective employer shall be liable for any loss or damage sustained by the applicant by reason of such refusal or restriction." Id. Thus, if the person was denied a job because the person listed the unemployed person as a reference, the employer may have liability.
State-law blacklisting laws are quite rare, and of the handful that exist, states apply them quite differently.
Employee Rights and Protections
In evaluating Blacklist Laws, some jurisdictions prohibit employer retaliation such as blacklisting as part of their public policy and therefore, furnish a remedy in tort for blacklisting. Other jurisdictions statutorily prohibit blacklisting in specific employment contexts (e.g. wrongful discharge in the federal government; employment of licensed professionals; and public employees), but ignore blacklisting in other employment contexts or under a general statute of prohibited types of employee retaliation.
Although in most states and the District of Columbia, there is no form of retaliation against employees generally that is prohibited by statute or common law, some states have restricted blacklisting to specific areas such as civil service, employment of public officials (both those holding an elected or appointed position), those working on federal contracts, and employment of certain licensed professionals. Rarely has a court recognized a tort. In a few jurisdictions, blacklisting has been considered a tort against public policy, and the plaintiff-employee has brought a claim under a general wrongful discharge or retaliatory discharge tort (but the courts have rarely said why). To establish a blacklisting tort under the general public policy exception generally requires that the discharged employee prove the following four elements: (1) that the employee was discharged; (2) that the employer had violated some explicit, well defined public policy that was the basis for such a discharge; (3) that there was a clear link between the facts of the case and the claimed public policy that was violated; and (4) that discharging the employee would jeopardize that policy. Where the Blacklisting tort is recognized, the employee may obtain an injunction against future blacklisting, reinstatement and back pay. In addition, the employee may recover damages such as emotional distress, lost wages, and attorney fees. It is possible that punitive (monies actually paid to the plaintiff as punitive damages) and aggravated (monies paid to the plaintiff who was required to overcome obstacles or added expenses to obtain justice) damages might also be available.
Employee Rights and Employer Consequences
Employers found in violation of blacklisting laws, either by failing to remove inactive employees or by providing false information to state agencies, may be assessed fines, required to pay restitution, and face suits for economic damages. For example, based on California Assembly Bill 746, employees "who are aggrieved by a violation of [the bill] may bring a civil action for injunctive relief, or other equitable relief, and recover special and general damages pursuant to Section 12965." Violation of California Labor Code section 1050 also exposes employers to a $100 fine for each violation. In New York State, employers "who violate the provisions of [Labor Law § 191] shall be subject to a civil penalty of not more than five hundred dollars for any such violation." Civ. Pract. Act, 2012 N.Y. Laws Ch. 395 (S. 8238). Under the New Jersey Unemployment Compensation Law, violations include a fine up to $1,600, and violations of the New Jersey Consumer Fraud Act may result in triple damages . Civil Practice Act, 2009 N.J. Laws 3rd Spec. Sess. (L. 2009, Ch. 60 (A. 2818)) (New Jersey is in the process of changing to shared-risk plans, also known as "PERS" plans, which would allow employers to post terminate inactive employees from the plans). "Depending on the jurisdiction, whether an employer violates the law by failing to remove an inactive employee may result in fines, penalties and/or liability if an unqualified person, such as an injured worker, attempts to make a claim against such an inactive employee. An employee who is injured by an inactive employee may attempt to recover workers’ compensation benefits under the theory that maintaining a defunct account evidences the absence of a legitimate employment relationship even though the employer terminated the employee under circumstances permitted by the plan," wrote Nate Burrell, former Director of Employee Benefits with the New Jersey Division of Pensions and Benefits.
Recent Trends and Court Cases in Blacklisting Law
Recent trends in blacklisting laws indicate a strengthening of protections for employees, and a deepening understanding of the nuances of those laws. In recent years, every state that has blacklisting laws has either expanded the definition of "blacklisting," or has affirmed that damages are available for the tort of blacklisting.
The Illinois Whistleblower Protection Act was amended in August of 2012 to expand the definition of "blacklisting" to include not only recommendations or references, but also any notice, discipline, demotion, lay-off, discharge, suspension, or other action. 745 ILCS 74/5(c). In other words, this amendment changes the word "action" into a much broader concept, which at the least expands the scope of the tort of blacklisting.
In a similar fashion, New York amended its Labor Law Section 594 to extend protections to employees when they have "reason to believe" that the employee’s information relates to improper employee conduct. The New York Court of Appeals has affirmed that blacklisting torts are available not only when an employer "cuts off an employee’s economic windpipe," but also when the employer "causes [the employee] to suffer public humiliation." Sass v. MTA Long Island Rail Road Company, 2021 WL 7748813 (N.Y., 2021) at 5 (Sass II). Further, in Sass II, the Court of Appeals has stated that an employee may recover both emotional distress damages and loss of reputation damages for proven violations of New York Labor Law Section 594. This is significant because blacklisting cases are often challenging because the employee experiences non-economic and non-quantifiable losses that are outside the scope of traditional employment torts, for example, loss of reputation and emotional distress.
In addition to the expansion of these laws, we have also seen a rise in blacklisting claims entering either state or federal court. In Sass II, the New York Court of Appeals affirmed that a sub-contractor’s alleged refusal to recommend a person as a possible road supervisor to a third party because the person had raised alleged safety violations against the sub-contractor was sufficient to deny summary judgment under NY Law Section 740, and that the sub-contractor could not use a defense of "qualified privilege." 2021 WL 7748813 (N.Y., 2021) at 10. (Sass II). The Bays v. Salt Lake City Corp. case out of Utah currently pending in the Federal District Court for the District of Utah also illustrates the continued trend for blacklisting cases to be filed in federal court. 132 F.Supp.3d 1203 (D.Utah 2015). In that case, the plaintiff alleged that the City, through an employee it had allowed to testify at trial, divulged information that it obtained during the course of a separate investigation to a federal agency, who then used that information to make a false inclusion on a sex offender registry, thereby blacklisting the plaintiff. This situation was compounded when, during a subsequent civil suit, that employee gave a deposition that contained information that the plaintiff would later allege was privileged by attorney client privilege. As is becoming typical, the City removed the case from Utah State Court to the Federal District Court.
Tips to Avoid Blacklisting Issues and Potential Liabilities
Employers can take several measures to ensure compliance with federal and state blacklisting laws, and to avoid inadvertent liability. While these laws generally do not prohibit or constrain the same activities that are protected by the National Labor Relations Act, the blacklisting statutes can subject employers to liability for conduct that is not otherwise considered an unfair labor practice. For example, under federal blacklisting laws, the relevant protected activity is any "communicating" of information. This could include verbal speech, as well as more subtle forms of communication. Simply enabling a third-party to communicate some information to a government agency could be enough to trigger liability.
To avoid liability, employers can implement the following compliance measures: Employers should also ensure their employment documents do not run afoul of blacklisting laws. For example, employers may decide to take disciplinary action against employees who violate policies intended to protect trade secrets , such as confidentiality agreements. Employers may also decide whether to pursue legal action against employees who violate the terms of their non-compete agreements. However, employers should be careful not to mistake the breach of such provisions with the type of acts that might constitute employee whistleblowing or organizational criticism under the blacklisting laws. If such a determination were made, the employer’s failure to investigate and remedy the employee’s improper conduct could amount to retaliation or coercion under Section 8(a)(1) even if that conduct would otherwise be a legitimate and lawful discharge of its rights. In doing so, employers may mistakenly subject themselves to liability under the blacklisting acts for something that would otherwise be legal. Employers must exercise extreme caution in handling these matters and ensure they have not crossed the line where the conduct is no longer organizational criticism or whistleblowing, but becomes something of a hostile or abusive work environment.