P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)

JAMES KNIGHT, Complainant


ERD Case No. 9153411

An administrative law judge (ALJ) for the Equal Rights Division of the Department of Industry, Labor and Human Relations issued a decision in this matter. A timely petition for review was filed.

The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on its review, the commission agrees with the decision of the ALJ, and it adopts the findings and conclusion in that decision as its own, except that it makes the following modification:

In paragraph 4 of the Findings of Fact, delete "National Association of Insurance Dealers" and substitute "National Association of Securities Dealers, Inc.".


The decision of the administrative law judge (copy attached), as modified, is affirmed.

Dated and mailed October 31, 1995
knighja.rmd : 101 :  9

/s/ Pamela I. Anderson, Chairman

/s/ Richard T. Kreul, Commissioner

/s/ David B. Falstad, Commissioner


In his reply brief, the complainant disputes the administrative law judge’s finding that the complainant failed to show he was qualified for the district agent position. If the complainant were not qualified for the position, he would fail to make his prima facie case of employment discrimination. In that event, his complaint could be dismissed without further inquiry.

The commission is satisfied that the administrative law judge correctly concluded that the complainant was not qualified for the district agent position. The record establishes that a significant portion of the duties of the position for which the complainant applied involved the sale of certain securities. The respondent’s witness credibly testified to that effect, and the respondent also established that the individual who obtained the job would have to be registered for membership with the National Association of Securities Dealers, Inc., (NASD) pursuant to federal law. The requirement of registration was also set out in the agreement between the respondent and the labor union representing its agents. The administrative law judge considered, but properly gave little weight to, an outdated position description which indicated that registration was only "desirable."

An individual seeking registration as a member with NASD begins by filing a uniform application on form U-4. Ordinarily, NASD will act on the individual’s form U-4 application alone. However, under the federal securities law in effect at the time relevant to this case, a person is subject to a "statutory disqualification" from membership in a self-regulatory agency (such as NASD) if he or she has been convicted of any felony within ten years of applying for membership. 15 USC, sec. 78c (26) and (39). NASD will not register a statutorily-disqualified individual based only on the form U-4 application.

A statutorily-disqualified person may still become registered with NASD if his or her employing firm submits a special application on form MC-400, along with a $1,000 processing fee, to both NASD and the Securities and Exchange Commission (SEC) for approval. On the MC-400 form, the employing firm must explain how it will supervise the statutorily-disqualified individual and what steps it took to investigate him or her. The employing firm must also promise to do everything in its power to supervise the statutorily-disqualified individual, and to not change his or her duties or the supervision over him or her without approval from NASD. In addition, an employing firm is subject to increased penalties for failing to supervise adequately an individual registered under the form MC-400 application process.

In this case, the administrative law judge’s conclusion that the complainant failed to meet his burden of establishing he was "qualified" for the district agent position is well supported. First, of course, the complainant was subject to a "statutory disqualification" from registration with NASD under the normal procedures by virtue of his felony convictions. In addition, registration under the MC-400 application process would have required the respondent to take additional steps and promise to act or limit its action in a manner not required for individuals who are not statutorily-disqualified.

The complainant argues that the record does not establish that the NASD would have, upon receipt of the MC-400 application, done anything other than approve the complainant’s registration immediately and without reservation. The complainant also cites the deposition testimony of Mr. Kenneth Hojnacki to the effect that persons with drug-related felony convictions have been licensed by the state of Wisconsin to sell securities. Of course, Mr. Hojnacki also admitted on several occasions that he could not speak for either NASD or the SEC.

The commission agrees that what NASD would have done upon receipt of the MC-400 is a matter for speculation. However, the complainant has the burden of proving he was qualified for the district agent position, so the commission is not inclined to simply infer the registration would have been granted without reservation. In addition, the commission must wonder why federal law would expressly disqualify the complainant, or why the NASD would require completion of the MC-400 form with the respondent’s certification described above, if NASD simply intended to approve his registration without reservation.

Moreover, even if NASD would have simply approved the application without reservation, the fact remains that it would only do so after the respondent made the representations in the MC-400 and agreed to be liable for potentially higher sanctions for inadequate supervision. In effect, the complainant needed the respondent to act so he would be qualified for the job. Necessarily, therefore, he was not qualified for the job when he applied or when the respondent ended the interview process.

The complainant argues that he was not absolutely barred from being registered with NASD. Being "not absolutely barred" from registration, though, is not the same as being qualified. True, the complainant may well have been registered by the NASD if the respondent had taken these steps described above. However, the commission sees nothing in the Wisconsin fair employment laws which allows a complainant to establish a prima facie case by showing that the respondent could, in effect, qualify the complainant for a job by taking some extraordinary steps in his behalf.

Such a requirement might be viewed as an accommodation (1)   The Wisconsin fair employment law may require employer accommodation in cases involving discrimination on the basis of handicap or religion. However, as the administrative law judge pointed out, the law does not require accommodation of an individual’s felony conviction record. Nor can the commission conclude that the precedent upon which the administrative law judge relied, American Motors Corp. v. ILHR Dept., 101 Wis. 2d 337 (1981), has been repudiated by the legislature as the complainant suggests. The court itself recognized that an effort to provide for accommodation of religious practices was under way in the legislature at the very time the case was decided. Id., at 101 Wis. 2d 351-352. The subsequent enactment of sec. 111.37, Stats., does not overrule the broader holding in American Motors Corp., that neither the department nor the commission may create a duty to accommodate where none is provided by statute.

The complainant asserts that it would be contrary to the policy of the fair employment laws to "find no duty on the part of the respondent to make some effort in order to avoid violating the act." However, the complainant does not ask the respondent to avoid violating the Wisconsin fair employment laws, but rather to help make him qualified for employment. Again, it is federal law, not the respondent’s policy, that makes the complainant a "statutorily-disqualified" individual who may only be registered to sell securities under special conditions which require affirmative action by the respondent. Whether considered an "accommodation" or simply affirmative action necessary to help the complainant meet his burden of proving he was qualified for employment, the respondent here had no duty to assume the financial and other burdens associated with filing the MC-400.

Moreover, the administrative law judge correctly found that the complainant’s felony conviction for knowingly permitting a motor vehicle to be used for delivery of a controlled substance "substantially relates" to the circumstances of the district agent position within the meaning of sec. 111.335 (1)(c)1, Stats. Her finding on this point provides an independent basis for dismissing the complaint, regardless of the resolution of the "qualification" and "accommodation" issues. The commission has little to add to the administrative law judge’s thorough discussion of this issue, except to address two of the complainant’s arguments.

First, the complainant challenges the administrative law judge’s observation that, where federal law automatically disqualifies convicted felons from a NASD registration necessary to sell securities, one must conclude that the circumstances of his or her felony offense substantially relate to the job of selling securities within the meaning of sec. 111.335 (1)(c)1, Stats. The complainant counters that, despite the federal "statutory disqualification," he is still qualified for the district agent position. The commission rejected that argument above, however, and does so again. On this point, the commission finds the administrative law judge’s observation reasonable even where, as here, the disqualification may not be an "absolute bar."

The complainant next argues that his circumstances poorly fit the facts in Black v. Warner Cable, (LIRC 7/10/95), which the administrative judge law judge cited as a second and alternative basis for her finding on the issue of "substantial relation." The complainant contends that occupation of door-to-door salesman in Black is easily distinguishable from that of a district agent who might sell securities or insurance products in the home, but would not go "door-to-door." The commission is simply unable to accept this as a distinction that makes a difference.

Second, the complainant argues that he was not convicted for actually delivering a controlled substance and that nothing about his conviction indicates he intended to profit from the sale of controlled substances or in any way possess them. On this basis, he asserts that nothing about his conviction distinguishes him from any other person who owns or possesses a car.

Again, the commission has difficulty with this proposition. Most other persons who own or possess cars do not use them for illegal drug transactions. Here, the complainant testified he unknowingly gave his roommate a ride in the roommate’s own car to the site of a drug transaction. Against this, of course, is the fact that he was nonetheless convicted for permitting a motor vehicle to be used for delivery of a controlled substance.

Under these circumstances, the commission rejects the complainant’s contention that knowledge of or intent to profit from the illegal transaction may not be inferred in this case. Consequently, the commission concludes that Black applies and that the complainant’s felony conviction is "substantially related" within the meaning of sec. 111.335 (1)(c)1, Stats. The commission notes that this alternative conclusion results in dismissal, regardless of whether the complainant were somehow viewed as qualified for the district agent job despite the statutory disqualification under federal law or whether the respondent could be somehow required to change the job so that registration with NASD were not needed.


Appealed to Circuit Court; affirmed February 28, 1997.  Aff'd. by Court of Appeals sub nom. James Knight v. LIRC, DILHR, The Prudential Ins. Co. of America, 220 Wis. 2d 137, 582 N.W.2d 448 (Ct. App. 1998).

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(1)( Back ) However, since the special action required of the employer goes to complainant’s qualification for the necessary registration to sell securities, this might be better viewed as a qualification issue rather than an accommodation issue.