A blacklist seems dubious. I’d advise the founders to get counsel on their obligations under the FCRA, which they may be construed to be regulated by.
That said, I believe "Bad News" is an AI hallucination. The most similar company I can find historical news is "Peeple"[0], which was not funded by YC. YCombinator's only known association with a blacklist that I can find was a blacklist of VC's that were accused of harassing female founders[1].
yes, but i am not sure why this matters here. i am not aware of negative references, in general, being illegal under any of those definitions of illegal.
no one would say regular speech is illegal just because it can be subject to a defamation lawsuit. same logic.
but i agree, if it is a real business, it seems exceptionally risky.
It's more than just "subject to a defamation lawsuit" (including class action lawsuits). Although for me, even if it were "just that", I'd still call it "potentially illegal". Rather, they'd potentially face FTC penalties and CFPB enforcement actions under 15 U.S.C. section 1681d(a), (b).
This law would likely classify such a company as falling under laws pertaining to "investigative consumer reports" under FCRA. This is any report on someone's "character, general reputation, personal characteristics, and mode of living" used for the purposes of employment, loans, housing, etc.
> A consumer reporting agency shall not prepare or furnish an investigative consumer report on a consumer that contains information that is adverse to the interest of the consumer and that is obtained through a personal interview with a neighbor, friend, or associate of the consumer or with another person with whom the consumer is acquainted or who has knowledge of such item of information, unless—
> (A) the agency has followed reasonable procedures to obtain confirmation of the information, from an additional source that has independent and direct knowledge of the information; or
> (B) the person interviewed is the best possible source of the information.
They'd find themselves subject to legal penalties under:
FCRA Willful Noncompliance (15 U.S. Code § 1681n) (if they did not disclose their existence/use/content of reports to employment candidates)
FCRA Negligent Noncompliance (15 U.S. Code § 1681o) (if they made somewhat reasonable but insufficient efforts to comply with the FCRA)
or
Administrative Enforcement (15 U.S. Code § 1681s)
and be subject to fines up to $4,700 per violation plus actual damages, plus punitive damages, plus legal fees. State Attorneys General can also bring FCRA lawsuits on behalf of their constituents, not just the federal government. FTC / CFPB can name the founders individually in the lawsuits, not just their corporate entity, and ban[1][2] them from operating any similar businesses in the future.
That all said, to some extent, YCombinator partners are on the record[3] supporting the idea of their startups sometimes doing illegal things. Generally they'll frame this as challenging outdated regulations, but they acknowledge that the founders whose strategies they fully support sometimes come into office hours and discuss how they're worried that the strategy puts them at risk of going to jail.
0: https://www.law.cornell.edu/uscode/text/15/1681d
1: FTC v MyLife.com, Inc., and Jeffrey Tinsley (CEO): https://www.ftc.gov/news-events/news/press-releases/2021/12/...
2: https://www.ftc.gov/legal-library/browse/cases-proceedings/b...
i stand corrected in the hypothetical "bad reference aggregator company" scenario.
>YCombinator partners are on the record[3] supporting the idea of their startups sometimes doing illegal things.
interesting, thanks for surfacing that up! i wont pretend to be surprised, though.
"John is a bad person, and you shouldn't hire him" wouldn't be defamation.
from gov.uk:
>"If you think you’ve been given an unfair or misleading reference, you may be able to claim damages in court. Your previous employer must be able to back up the reference, such as by supplying examples of warning letters.
You must be able to show that:
- it’s misleading or inaccurate
-you ‘suffered a loss’ – for example, the withdrawal of a job offer"
which means, if the reference is not misleading and not inaccurate, a negative reference is ok. other uk-based law firms (from a quick google) agree with this interpretation.
in my comment, i was speaking more generally than i should have, and that (obviously, in hindsight) caused some confusion between the specific case of the hypothetical company, and the general case of an employer providing a negative reference. my bad -- and it is too late to edit to provide clarification.