Employment Law Daily Lack of statistical evidence doomed disparate impact claim by bank worker fired for prior fraud conviction
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Wednesday, August 15, 2018

Lack of statistical evidence doomed disparate impact claim by bank worker fired for prior fraud conviction

By Marjorie Johnson, J.D.

Wells Fargo did not violate the ADEA when it fired an employee after learning he had a prior conviction for a crime involving dishonesty or breach of trust, which disqualified him from employment with the FDIC-insured bank under a federal law known as “Section 19.” Though his widow argued that the bank’s policies of refusing to sponsor Section 19 waivers and failing to provide pre-screening notice of the opportunity to obtain waivers violated the ADEA since they had a disparate impact on older workers, she failed to provide any kind of statistical evidence to support this claim, and therefore was unable to establish a prima facie case as a matter of law. Accordingly, the Eighth Circuit affirmed dismissal on summary judgment (Eggers v. Wells Fargo Bank, N.A., August 13, 2018, Smith, L.).

The employee applied for a job at Wells Fargo in 2005, when he was 61 years old. On his application, he answered “no” when asked if he had ever been convicted of any crime involving dishonesty or breach of trust. After a name-based background check revealed no prior conviction, he was hired in Wells Fargo’s home mortgage division.

Conviction uncovered. When the bank switched to a more sophisticated FBI fingerprint-based background check process in 2010, it ordered the employee’s division to undergo rescreening. He again indicated that he had no prior convictions. However, this time the new background check uncovered that he was convicted of fraud in 1963 and served two days in jail.

Can’t work without statutory waiver. Since Wells Fargo is insured by the Federal Deposit Insurance Corporation, a federal law referred to as “Section 19″ barred it from hiring and employing individuals with prior convictions for a “criminal offense involving dishonesty or a breach of trust.” Individuals with disqualifying convictions may apply for employment waivers with the FDIC and banking institutions may sponsor waiver applications. However, a disqualified individual may not begin or continue employment prior to obtaining waiver and the statute provides stiff penalties for employer violators.

Discharged, rejects reinstatement. Upon learning of the employee’s prior conviction, Wells Fargo acted to comply with Section 19 by offering him leave time to obtain a waiver. He refused and was terminated. He then applied to the FDIC for a Section 19 waiver, which was granted. Wells Fargo then offered to reinstate him, but he refused and brought the instant action asserting that the bank violated the ADEA by refusing to sponsor Section 19 waivers and by failing to provide job applicants and employees with pre-screening notice of the opportunity to obtain waivers. These two practices, he argued, created a disparate impact against older workers.

Lower court grants SJ. The employee died while his lawsuit was pending, and his widow was substituted as the plaintiff. The court then dismissed the claims on summary judgment. The widow appealed, arguing the district court had conflated disparate treatment and disparate impact law and incorrectly concluded that Wells Fargo’s blanket refusal to sponsor waivers and to provide notice of opportunity for Section 19 waivers was a reasonable factor other than age.

Federal law triggered disqualification. The widow contended that the district court erred in concluding that she failed to establish a prima facie case of disparate impact discrimination under the ADEA since the employee was disqualified for his job due to federal law. In particular, she argued that the district court should have relied upon caselaw finding that an employer’s “sweeping disqualification” for criminal offenses violated Title VII, and that an employer may not institute a policy of treating a convection “as an absolute bar to employment.” However, those cases were not directly on point since they did not address a statutorily mandated employment disqualification. Here, federal law—not company policy—triggered disqualification from employment.

No statistical showing disparate impact. The employee’s widow also insisted that establishing an employee’s job qualification is never a requirement in an ADEA disparate impact case. However, even if the Section 19 disqualification did not bar the employee’s age discrimination claim, she failed to present any kind of statistical evidence suggesting that the two challenged policies created a disparate impact among Wells Fargo employees older than 40. Therefore, she failed to make out her prima facie case.

The Eighth Circuit squarely rejected her assertion that she was not required to produce statistical evidence since Wells Fargo did not raise the issue. Rather, to avoid summary judgment, she was required to sufficiently establish the existence of an element “essential” to her case because a complete failure of proof concerning an essential element of her case “necessarily renders all other facts immaterial.” Therefore, because she failed to present any statistical evidence of a disparate impact, summary judgment in favor of Wells Fargo was properly granted.

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