UPDATE: U.S. Supreme Court's Decision in NASA Case Could Have Significant Implications for Private Employers

NOTE: This entry updates our previous post on October 4, 2010.

Magnifying glass and bindersYesterday, the U.S. Supreme Court heard oral argument in a case challenging NASA’s background checks of “low risk” private contractors working at the agency’s Jet Propulsion Laboratory (JPL). At first blush, the case does not appear to be particularly relevant to private employers given that NASA is a public employer and, as the oral argument revealed, the appeal will turn principally on the Supreme Court’s interpretation of the federal constitutional right to information privacy applicable only to public employers. Deeper consideration suggests, however, that the Court’s decision could have significant implications for private sector employers.

The case arises from NASA’s decision to unilaterally amend its contract with the California Institute of Technology (“Caltech”) — which operates JPL for NASA — to require that all JPL employees working at JPL undergo broad background checks. After NASA rejected Caltech’s objections to the background check policy, Caltech adopted a policy — not required by NASA — that all JPL employees who did not successfully complete the background check process and receive a federal identification badge would be deemed to have voluntarily resigned their Caltech employment. JPL employees who work at JPL sought to enjoin implementation of NASA’s background check policy.

The U.S. Court of Appeals for the Ninth Circuit held (pdf) that NASA’s policy should be enjoined, pending further proceedings, because the JPL employees have a reasonable likelihood of demonstrating that the policy violates their federal constitutional right to information privacy. The appeals court found particularly objectionable questions in NASA’s background check forms that asked (a) JPL employees to disclose "any treatment or counseling received for their [illegal] drug problems,” (b) third parties to disclose "any adverse information" concerning "’financial integrity,’ ‘abuse of alcohol and/or drugs,’ ‘mental or emotional stability,’ ‘general behavior or conduct,’ and ‘other matters,’” and (c) asked the JPL employees to explain any adverse information disclosed by the third party. The court reasoned that these questions were not narrowly tailored to meet NASA’s legitimate objectives given that the JPL employees did not have access to classified information and, therefore, were classified as “low risk”.

Caltech sought to extricate itself from the litigation by arguing that it could not be held responsible for the apparently unconstitutional background checks because NASA had unilaterally imposed them on Caltech. While the Ninth Circuit expressed sympathy for Caltech’s position in light of its initial objections to NASA’s background check policy, the court ruled that Caltech also could be held responsible for NASA’s apparent constitutional violations because Caltech “established, on its own initiative, a policy that JPL employees who failed to obtain federal identification badges would not simply be denied access to JPL, they would be terminated entirely from Caltech's employment.”

While the oral argument swirled largely around whether a constitutional right to information privacy exists and, if so, what are its contours, several Justices, on more than one occasion, drew a comparison between employment screening by private employers and the questions that the Ninth Circuit had ruled as likely to be unconstitutional. Ironically, these remarks mistakenly suggested that private employers could ask those questions. For example, employers who inquire into an employee’s treatment for substance abuse run the risk of violating the Americans with Disabilities Act’s prohibition against disability-related inquiries where the question is phrased (like NASA’s) so as to require an employee to disclose that he is a recovering or recovered drug addict who does not currently use illegal drugs. In addition, a private employer who requires that an applicant or employee explain “adverse information” concerning that person’s “financial integrity,” “abuse of alcohol and/or drugs,” or “mental or emotional stability” could violate a range of federal and state laws, including the ADA; state laws restricting inquiries into criminal history, such as California’s law prohibiting inquiries into certain minor marijuana-related offenses; and laws recently enacted in Hawaii, Illinois, Oregon, and Washington restricting certain inquiries into an applicant’s credit history. After further analysis, the Court may address these restrictions on private employers in its published decision.

How else might the Supreme Court’s ruling impact private employers?

All Employers: Requests similar to NASA’s request for information about the JPL employees have become increasingly common in the private sector. Organizations seeking to protect their facilities, employees and information assets routinely ask a wide range of vendors to provide background information on the vendor’s employees before permitting them access to premises or sensitive information. Some organizations are conducting their own background checks of vendors just as NASA seeks to do with respect to the JPL employees. Further, like Caltech, vendors often must now confront the question whether to terminate an employee who is denied access to a customer’s site or to reassign that employee to another customer. The Court’s decision — albeit in the context of federal constitutional law — might provide guidance on how vendors should handle this difficult situation in a manner that reduces risk.

California Employers: California has a constitutional right to information privacy that private employees can enforce against private employers. While the federal and California constitutional rights to information privacy do not precisely mirror each other, they are sufficiently similar that, depending upon the outcome in the Supreme Court, California courts might look to the Supreme Court’s decision for guidance on claims where employers themselves have conducted overly intrusive background checks or have assisted their customers in doing so.

Federal Government Contractors: Other agencies of the federal government likely use the same background check forms as those used by NASA to regulate access to agency facilities by “low risk” employees. Federal contractors who, like Caltech, condition employment of “low risk” employees on the issuance of a federal identification badge could be put at risk of liability for violating their employees’ federal constitutional right to information privacy in the same way that Caltech is at risk of liability were the Supreme Court to affirm the Ninth Circuit’s decision.

This entry was written by Philip L. Gordon.

Photo credit: fotosipsak

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.