Alerts and Updates
New Pennsylvania Employment Statutes Update
June 21, 2005
New Pennsylvania Reference Immunity Statute
Although well over half of the states in the U.S. have adopted some form of a reference immunity statute – thereby enhancing the legal rights of employers who respond to a job reference check – Pennsylvania, until June 15, 2005, was one of the few states that had not acted in this area.
With the signing of Senate Bill 69 by Governor Rendell on June 15, 2005, the law in Pennsylvania has now been changed. Senate Bill 69 adds to the judicial code a new section under which an employer who provides information about a former or current employee's job performance to a prospective employer "is immune from civil liability for such disclosure or its consequences" in any case brought by the employee, unless the employee can prove by "clear and convincing evidence" that the employer acted in bad faith. The statute specifically defines the four circumstances in which an employee may rebut the privilege, by adducing sufficient clear and convincing evidence that the employer: (1) disclosed information that it knew was false or should have known was false; (2) knowingly disclosed materially misleading information; (3) recklessly disclosed false information; or (4) disclosed information the disclosure of which was prohibited by law.
The most significant change to existing law by the enactment of this statute is the imposition of a "clear and convincing evidence" standard on an employee who attempts to prove bad faith on the part of the prior employer. According to the Pennsylvania Supreme Court, the "clear and convincing evidence" standard "typically" requires evidence that "is 'so clear, direct, weighty, and convincing as to enable the [trier of fact] to come to a clear conviction, without hesitancy, of the truth of the precise facts [in] issue.'" Therefore, to rebut the statutory immunity, employees will need to produce clear, direct, weighty and convincing evidence that would allow a clear conviction, without any hesitancy, that an employer had provided false information in response to a reference check, and had done so intentionally, recklessly or negligently, or had disclosed information which the employer was required by law to keep confidential.
By adopting a clear and convincing evidence standard, the Pennsylvania legislature clearly expressed a policy choice to favor the free exchange of information in the job-search context. While other states have adopted a "preponderance of the evidence" standard for rebutting the immunity, Pennsylvania's adoption of a "clear and convincing evidence" standard reflects a different policy choice and one that should allow for the early disposition of many defamation cases arising out of reference situations. Enhancing the ability of employers to freely exchange information should have the beneficial effects of both reducing the costs that poorly performing employees impose on a business and lessening the risk that a subsequent employer would place an applicant who has a record of being a danger to others in a position where the applicant could cause additional harm.
Further, the statute also bars any civil actions against persons acting on behalf of employers by defining employers to include "any person acting on behalf of the business enterprise." The immunity, therefore, when applicable and unrebutted, would bar any civil action against any individual - such as a human resources director - who provided information in response to a reference check.
There are three important limitations on the statute's applicability. First, the statute does not privilege an employer to disclose any type of information whatsoever in response to a reference check. Instead, the statute allows an employer only to disclose information about a former employee's "job performance." Second, because the new statute is a state law, the application of the immunity is unlikely to apply to any federal claims arising out of a reference check situation. Finally, the Pennsylvania statute allows the employee to show "bad faith" on the part of the employer, even if the employer acted with the best of intentions, by showing that the employer "should have known" that it was providing false information. Put another way, the statute does not allow an employer to carelessly disclose false information to others and to then claim the protections of the statutory immunity.
Employers May Again Be Represented by Non-Attorneys in UC Hearings
Pennsylvania employers will benefit from a bill signed into law by Governor Rendell on June 15, 2005. The bill amends Pennsylvania's Unemployment Compensation (UC) Law and thereby restores UC appeals procedures that existed prior to a February 2005 Commonwealth Court ruling, Harkness v. Unemployment Compensation Board of Review.
In Harkness, the Court held that employers could not be represented by non-employee, non-attorney representatives at unemployment compensation hearings. Such representatives, the Court stated, by entering exhibits into evidence, giving closing statements and examining witnesses, would be engaging in the unauthorized practice of law. The reasoning behind the Court's decision was that a section of the UC law, found at 43 P.S. § 862, stated that any individual claiming compensation in any proceeding before the department, the Board, or a referee may be represented by counsel or "other duly authorized agent." This section did not state that an employer was entitled to representation by a non-attorney. Thus, the Court determined, the law only authorized representation by non-lawyers for individual claimants, not corporate entities.
Senate Bill 464, sponsored by state Senator Joseph Scarnati, corrects this oversight in the law. The bill adds a section to the UC law, which reads as follows:
Representation In Proceedings. Any party in any proceeding under this act before the department, a referee, or the Board may be represented by an attorney or other representative.The bill passed the state Senate unanimously in May by a 47-0 vote, with the House passing it with a 195-2 vote. This provision is effective immediately.
The bill also implements legislative changes required to bring Pennsylvania in compliance with the federal SUTA Dumping Prevention Act of 2004, which prohibits businesses from circumventing higher UC tax rates by shifting their workforce to another business entity. "SUTA Dumping" is a term that refers to employers who attempt to artificially reduce their UC tax rate by transferring their workforce to another entity - such as a shell corporation or an employee leasing company. The bill prevents state unemployment tax avoidance by preventing businesses from transferring all or part of their respective workforces for the purpose of evading a higher "experience rating" upon which its unemployment compensation tax rate is primarily based. Most of the SUTA provisions will become effective for the tax year beginning January 1, 2006.
For Further Information
If you have any questions or concerns regarding the application of Pennsylvania's new Reference Immunity Statute or desire assistance with the defense of any unemployment compensation proceedings, please do not hesitate to contact one of the attorneys in our Employment and Immigration practice group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.
