DATE: March 31, 1995
CASE NO. 93-EPP-9
IN THE MATTER OF
STATE EMPLOYEES CREDIT UNION,
RESPONDENT.
BEFORE: THE SECRETARY OF LABOR
DECISION AND ORDER
This matter is before me on the request of the Office of
Solicitor, counsel for the Administrator of the Wage and Hour
Division ("Administrator"), seeking to modify the decision and
order of the Administrative Law Judge ("ALJ") in the above
captioned case arising under the Employee Polygraph Protection
Act ("EPPA" or "Act"), 29 U.S.C. § 2001 et seq.
(1992). For the reasons given below, the request is denied.
BACKGROUND
Subject to expressly enumerated exceptions, the EPPA
prohibits any employer engaged in interstate commerce from using
lie detector tests for any employment purpose. Respondent, State
Employees Credit Union ("Respondent" or "credit union"), is a
North Carolina corporation providing banking services at
locations throughout the state of North Carolina. In conducting
its business, the credit union engages in interstate commerce and
is therefore subject to the requirements of the EPPA. The
Petitioner in this matter, the Administrator of the Wage and Hour
Division of the Department of Labor, is assigned the statutory
responsibility for investigating and assessing civil money
penalties for violations of the EPPA.
On July 29, 1991, the regional office of the Wage and Hour
Division in Atlanta, Georgia, informed the credit union that an
investigation of the credit union's use of polygraph tests had
revealed violations of the EPPA. The Wage and Hour Division,
pursuant to authority granted by 29 U.S.C. § 2005(a) and
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29 C.F.R. § 801.42 (1991), assessed a civil money penalty of
$2,000 for the improper polygraph test of one employee, Winona
Gause, and $13,000 for the improper polygraph test and discharge
of a second employee, Lora Howard. By letter of August 27, 1991,
the credit union filed a timely exception to the assessment of
civil money penalties.
Pursuant to 29 C.F.R. § 801.63, the Administrator
issued an Order of Reference, transmitting the matter to the
Chief Administrative Law Judge for the purpose of scheduling a
hearing. Prior to the hearing, the assessment was reduced to a
total of $14,000, representing $2,000 for each improper polygraph
test and $10,000 for the adverse employment action. The hearing
was held on November 3, 1993, and a Decision and Order ("D. &
O.") was issued on February 4, 1994.
The ALJ ordered that the penalty assessment be reduced. The
ALJ found that although Respondent was entitled to conduct a
polygraph test of these employees under the exemption in the Act
for ongoing investigations of economic loss, 29 U.S.C. §
2006(d), Respondent's failure to fully comply with the procedures
governing the administration of permitted polygraph tests
resulted in the loss of that entitlement. 29 U.S.C. § 2007.
The ALJ reduced the penalty assessment from $2,000 for each
violation to ,000 for each violation. The ALJ reasoned that
the assessment should be reduced to reflect the fact that --
contrary to the Administrator's contention -- Respondent had
established "reasonable suspicion" which would have entitled it
to conduct properly administered polygraph tests of these
employees.
With respect to alleged unlawful termination, the ALJ found
-- based on the evidence of record -- that Respondent did not
commit the violation. Therefore, the $10,000 penalty assessed by
the Administrator was set aside. On February 24, 1994, the
Administrator filed a "Petition for the Issuance of a Notice of
Intent to Modify or Vacate the ALJ's Decision and Order." The
petition was granted on March 4, 1994.
The essential facts of this case are largely undisputed.
Respondent does not contest the fact that it is a covered
employer. Nor does Respondent contest that it requested each of
the above mentioned employees to take a lie detector test. The
requests were a product of the credit union's investigation into
the loss of $300.00 from an automated teller machine ("ATM")
which, during the time of the loss, had been under the sole
control of these two employees. As a federally insured financial
institution, Respondent had a statutory obligation to investigate
instances of employee embezzlement or theft. The loss occurred
sometime between Monday, June 20, 1989, when Howard removed cash
from the bank vault and assumed responsibility for the cash, and
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Wednesday, June 29, 1989, when the loss was discovered. Howard
had sole access to the cash on June 20 until she turned over
control of the ATM to Gause later that day. Gause had sole
access to the cash in the ATM from June 20, 1989 to June 22,
1989, when the loss was discovered. When Howard transferred
control to Gause, they did not verify the amount of cash in the
machine as required by the credit union's balance verification
procedures. Howard also failed to comply with credit union
procedures by leaving the ATM key in an unlocked desk drawer.
On June 24, 1989, when Howard who was an on-call, part-time
employee returned to work, Jerry Harmon, a Senior Vice President
at the credit union, informed Howard of the loss and the two of
them discussed the possibility of taking a lie detector test.
Howard agreed to take the test. On the following Monday,
June 27, 1989, Harmon gave Howard a form indicating that she was
to be given a polygraph test on Wednesday, June 29, 1989. The
examiner summarized the result of Howard's polygraph test as
"inconclusive due to excessive movement."
It is undisputed that the credit union failed to fully
comply with the statutory safeguards of the EPPA governing
administration of polygraph tests. Specifically, the ALJ found
that the credit union satisfied all the requirements except for
the post-testing rights set forth at 29 U.S.C. § 2007(b).
The credit union failed to further interview the examinee
regarding the test results. Further, the credit union failed to
provide the examinee with a written copy of the test questions
and the examiner's opinion and conclusion regarding the
examination. The Administrator contends that the credit union
also violated certain pre-testing and actual testing
requirements.
On June 30 Harmon and Kenneth Brown, the branch manager, had
a further conversation with Howard regarding the loss. Following
this conversation, Howard was never called back for work. Two
days prior to this conversation with Howard -- the day before the
polygraph test -- Harmon requested that an additional full-time
teller be hired, removing the need for the part-time ATM position
occupied by Howard. The request was received and approved by the
credit union management on July 3, 1989. In support of his
request for the additional position, Harmon stated his opinion
that a full-time teller was needed to handle the extra workload
created by an extremely busy drive-in window.
DISCUSSION
ALJ's Discretion
The regulations governing administrative proceedings under
the EPPA are set forth at 29 C.F.R. Part 801, Subpart F. Those
regulations invest in the presiding Administrative Law Judge
authority to "affirm, deny, reverse or modify in whole or in part
the determination" of the Administrator. 29 C.F.R. §
801.67(f).
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The reason or reasons for such order shall be stated in the
decision of the ALJ. Id.
The ALJ's determination of the facts may only be vacated or
modified upon a finding that the determination was clearly
erroneous. 29 C.F.R. § 801.68(b). With respect to the
appropriateness of a particular civil money penalty, it is a
matter generally left to the discretion of the ALJ. The primary
reason the ALJ gave for reducing the penalty in this case was
that Respondent, contrary to the Administrator's contention, had
demonstrated that it had a "reasonable suspicion" that the
employees tested were involved in the loss. [1]
Reasonable Suspicion
In order to qualify under the EPPA's exemption for ongoing
investigations of economic loss or injury, an employer must
establish that it had a "reasonable suspicion that the employee
was involved in the incident or activity under investigation."
29 C.F.R. § 801.12(a)(3). Reasonable suspicion refers "to
an observable, articulable basis in fact that a particular
employee was involved in, or responsible for, an economic loss."
29 C.F.R. § 801.12(f)(1). Mere opportunity or access does
not give rise to a reasonable suspicion. Id.
The reasonable suspicion test is borrowed from the criminal
law. 56 FR 9064, Mar. 4, 1991. As set out by the Supreme Court
in Terry v. State of Ohio, 392 U.S. 1 (1968), a police
officer must have reasonable suspicion, that is an articulable
basis in fact, to justify the stopping and frisking of an
individual suspected of committing a crime. Although a less
demanding standard than probable cause, the reasonable suspicion
test still proceeds from an objective analysis of the facts.
United States v. Cortez, 449 U.S. 411, 418 (1981). It
does not come accompanied by a presumption in favor of the
government, nor -- in this case -- the employer. The reasonable
suspicion test does not insulate searches or investigations from
close review. Its purpose is to protect employees, rather than
to license employers.
Consequently, it is unfortunate that the ALJ chose to
characterize the "reasonable suspicion" test as "a far less
rigorous inquiry than assessing probable cause." D. & O. at 10.
The ALJ relied on this faulty analysis to conclude that "[t]he
purpose of this lesser standard is to avoid excessive and
unwarranted judicial entanglement with internal decision-making."
D. & O. at 10. There is no basis in the case law, nor in the
legislative or regulatory history of the EPPA, to arrive at this
conclusion. What follows from this misreading of the statutory
purpose is the ALJ's legal conclusion that employers are
"entitled to broad deference in interpreting this particular
provision of the Act." D. & O. at 11. The Administrator is
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fully justified in taking issue with this unnecessary and
unsupportable constriction of the employee protection provisions
of the EPPA.
The EPPA is an employee protection act and its exemptions
must be narrowly construed against the employer. Arnold v.
Kanowsky, 362 U.S. 388 (1960). To suggest that the
reasonable suspicion test should be liberally interpreted to
guard against the law becoming "an ex post facto trap for
employers seeking to use polygraphing as an investigatory tool,"
(D. & O. at 11), is to lose sight of the fundamental objective of
the statute. The EPPA is intended to severely restrict the use
of lie detector devices by employers. Unless an employer can
meet the strict requirements of one of the exemptions, it is
barred from using lie detector tests. The exemptions must be
narrowly construed to fulfill the purposes of the Act.
Properly interpreted, the "reasonable suspicion" test is an
objective test of reasonableness. The test is whether sufficient
and specific articulable facts are known to the employer to lead
an ordinary and prudent employer to conclude that an employee was
involved in, or responsible for, the loss. Application of the
test calls not for deference to employers, but calls upon the
common-sense of the factfinder. As the Supreme Court stated in
United States v. Cortez, 449 U.S. at 418:
The process does not deal with hard certainties, but
with probabilities. Long before the law of
probabilities was articulated as such, practical people
formulated certain common-sense conclusions about human
behavior: jurors as factfinders are permitted to do
the same - and so are law enforcement officers.
Application of the test requires a practical common-sense
assessment of the facts known to an employer, to determine
whether those facts justified casting suspicion on the particular
employees as probably being involved in, or responsible for, the
loss.
During the period in which Respondent's loss occurred,
access to the missing funds was limited to these two employees.
At the time that exclusive control was transferred from one
employee to the other, the credit union's balance verification
procedures required of these employees were ignored. It is true,
as the Administrator contends, that not every violation of
company policy gives rise to a finding of reasonable suspicion.
However, a violation of a company policy designed to protect
against the very type of loss that occurred, when coupled with
the exclusive access to the missing funds by the violators of the
policy, creates a reasonable suspicion that the employees
individually or jointly, were involved in, or responsible for,
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the loss.
Despite the ALJ's mischaracterization of the legal standard,
the facts of this case do support the conclusion that the
reasonable suspicion requirement of the statute and regulations
was satisfied. Therefore, the ALJ was justified in reducing the
penalty assessed because of the erroneous conclusion by the
Administrator that the reasonable suspicion test was not
satisfied.
Prima Facie case
The Administrator also seeks review of the ALJ's finding
that Howard was not terminated based upon the results of the
polygraph test. Review of this matter is complicated by the
ALJ's unnecessary conclusion that the Administrator failed to
establish a prima facie case of unlawful termination. The
Administrator is correct in directing our attention to Couty
v. Dole, 886 F.2d 147 (8th Cir. 1989), for guidance on the
elements of a prima facie case of improper discharge under
employee protection statutes. Drawing upon the analysis of
Couty, a prima facie case of wrongful termination
under the EPPA exists upon a showing that: (1) the employee
submitted to a polygraph examination; (2) the employer learned
the result of the test; (3) the employer took an adverse action
against the employee; and (4) evidence is presented sufficient to
raise the inference that the result of the test was the likely
reason for the adverse action. The last factor may be
established by the temporal proximity between the adverse action
and the result of the test. Once the Administrator establishes
these elements the burden shifts to the employer to produce
evidence that the adverse action was not based on the result of
the test.
In the present matter, contrary to the ALJ's conclusion, the
Administrator did establish a prima facie case of wrongful
termination. However, the ALJ went beyond this conclusion to
make addition factual findings. The ALJ found, based upon ample
support in the record, that the Respondent did not terminate
Howard due to the polygraph test. Prior to Howard even taking
the test, Harmon, the credit union's vice president, had already
requested of the credit union's management an additional full-
time teller. The addition of the teller satisfied extant
business needs and also made unnecessary the retention of Howard.
There was no evidence that the credit union management, in
approving the additional teller position, was motivated by, or
even aware of, the test result. Nor is there any reason to
believe that the credit union strayed from its normal procedures
in filling this position. Howard was trained as an ATM
custodian, not as a teller. The new teller position was filled
by an experienced teller already working for the credit union in
a different capacity. D. & O. at 15.
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As noted above, an ALJ's factual findings under the EPPA
are to be set aside only if clearly erroneous. 29 C.F.R.
§ 801.68(b). This test is well understood. As articulated
by the Supreme Court in United States v. United States Gypsum
Co., 333 U.S. 364, 395 (1948), a finding of fact is clearly
erroneous only if "the reviewing court on the entire evidence is
left with the definite and firm conviction that a mistake has
been committed." It is not the role of the reviewing body to
substitute its own impression of the facts for that of the trier
of fact. Horner v. Mary Institute, 613 F.2d 706 (8th Cir.
1980). Findings of fact are presumptively correct and due regard
shall be extended to the trier of fact to weigh the evidence and
to judge the credibility of witnesses. J.A. Jones
Constr. Co. v. Englert Engineering Co., 438 F.2d 3 (6th Cir.
1971). To upset a finding of fact, the proponent carries a heavy
burden to demonstrate that the finding was clearly erroneous.
Bellevue Gardens, Inc. v. Hill, 297 F.2d 185 (D.C. Cir.
1961).
I conclude that the Administrator has not met this burden.
The Administrator offers no compelling argument for reversing the
ALJ's findings of fact. The Administrator marshals no facts that
would lead me to a definite and firm conviction that a mistake
has been made. To the contrary, in light of all the evidence,
the ALJ's conclusion that Howard was not terminated based on the
result of the lie detector test is logical and well supported by
the record.
ORDER
For the foregoing reasons, the Decision and Order of the ALJ
is affirmed and the Administrator's request to modify is denied.
SO ORDERED.
Secretary of Labor
Washington, D.C.
[ENDNOTES]
[1]
The record is replete with other mitigating facts. It was a
first time offense under a new statute. The Respondent made an
effort to comply and there is no reason to believe that the
violations were knowing and willful.
