Settling an often pondered question in Wisconsin employment law, the Labor and Industry Review Commission (“LIRC”) recently ruled, in Lovejoy v. AutoWares Wisconsin, Inc., that employers who terminate employment based on an employee’s guilty plea or deny employment based on an expunged guilty plea, even on a substantially related crime, without more, run afoul of Wisconsin’s arrest record discrimination law.

As a 17 year old, Cody Lovejoy was arrested and prosecuted for possession of a stolen moped.  Lovejoy entered into a plea agreement with the state whereby he plead guilty to “Receiving Stolen Property,” a class A misdemeanor, in exchange for entering into a first offender’s program.  Under this program, although Lovejoy would plead guilty to the charge, the court would defer entering a “conviction” at the time of that plea. If Lovejoy successfully completed the requirements of the first offender’s program, the charge would be dismissed, and the court would never enter the conviction.  Lovejoy successfully completed his program; hence, in 2006, the court dismissed the charge and never entered a conviction. 

In September 2007, Lovejoy applied for a “picker” position at Auto-Wares’ warehouse. Prior to extending Lovejoy an offer, Auto-Wares checked Lovejoy’s criminal background on Wisconsin’s Circuit Court Access (“WCCAP”), a limited on-line history of Wisconsin civil and criminal court records, and learned of Lovejoy’s guilty plea. On that basis alone, Auto-Wares denied Lovejoy the job. Auto-Wares’ warehouse housed approximately eight million dollars worth of parts, and given Lovejoy’s criminal history of receiving stolen property, Auto-Wares did not trust him. 

Lovejoy sued Auto-Wares for discrimination based on his arrest record. In its defense, Auto-Wares argued that it did not make its decision based on Lovejoy’s arrest record, but independently concluded (based on the guilty plea) that he had knowingly received stolen property. This is the so-called "Onalaska defense," articulated inCity of Onalaska v. LIRC, 120 Wis. 2d 363 (Ct. App. 1984), in which the court held that it is not arrest record discrimination for an employer to decide not to hire an applicant because it concludes from its own investigation and questioning of the individual that he or she has committed an offense. However, LIRC concluded that theOnalaska defense was not applicable in this case as relying on a guilty plea was equivalent to relying on an arrest record. “In this case, the respondent decided not to hire the complainant because he pleaded guilty to a charge of having received stolen property, notwithstanding the fact that the charge was dismissed and no conviction ever resulted.”   

Deferred prosecution agreements, which generally require affirmance of guilt of an underlying claim with the possibility of expungement, seem to be increasingly common, and employers have struggled to deal with them. It would seem that employers should be able to consider a guilty plea as an admission of guilt to the underlying elements of a criminal charge. What else could it be? Although LIRC does not squarely address that argument in Lovejoy, it nevertheless provides clear-cut guidance that solely relying on a guilty plea will get employers into trouble.

While LIRC’s reasoning seems difficult to understand, LIRC explained similar reasoning in Betters v. Kimberly Area Schools (LIRC, 11/28/07). In Betters, the employer obtained information that the employee had confessed to a crime. The information about the confession came from a police report, however; and LIRC (reversing prior contrary decisions) held that if an employer learns from law enforcement sources (such as an arrest report) that an employee confessed to a crime, that knowledge does not meet the Onalaska standard for an employer conducting its “own investigation.” To LIRC, basing a decision on information obtained from law enforcement authorities is basically the same as basing a decision on the fact of an arrest. It will be cold comfort to employers that the reasoning of Lovejoy is at least consistent with the earlier reasoning in Betters.

Lovejoy v. Auto-Wares provides the following take-aways for employers:

1.) A guilty plea does not equal a conviction under Wisconsin’s Fair Employment Law. It will be treated as an arrest record. This means that employers may not terminate employment as the result of a guilty plea or deny employment based on an expunged guilty plea. However, because a guilty plea is viewed as an arrest record, employers may deny an application for employment or suspend employment if the underlying charge is substantially related to the job duties at issue. 

As a consequence, employers may be put in the position of holding an employee on suspension for years, knowing the employee may need to return when and if he completes the requirements of the deferred prosecution.

2.) The idea behind Onalaska is that the Wisconsin Fair Employment Act protects employees against employers acting based on the stigma of the employee’s connection to law enforcement only – not from employers evaluating and making decisions based on employees’ underlying actions.  However, underLovejoy, an employee’s guilty plea, in and of itself, will not be viewed as an admission of an underlying act, but rather as information from law enforcement.  Therefore, under Lovejoy and Betters, an employer cannot base a termination decision solely on a guilty plea or deny employment based solely on an expunged guilty plea, or any other information obtained from law enforcement authorities, with the plan of taking advantage of the Onalaskadefense.  However, an employer may consider conducting an independent investigation in order to take advantage of the Onalaska defense.  In order to do so, however, employers should question the individual and consider independently gathering additional information (from sources beyond law enforcement) in determining whether it has a basis to terminate or refuse employment.