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Employee Background Checks—A Good Idea with Potentially Bad Consequences

Author: Haley Paul


Many employers have—wisely—implemented policies of conducting pre-employment background checks on job candidates in order to avoid negligent hiring lawsuits and other negative situations such as workplace theft. This is a great idea in theory and, if done correctly, can save employers a lot of money and time down the road. However, the method and execution of a background check, as well as act of running the background check itself, can open employers up to unanticipated liability. It is important that you are following applicable laws and using best practices when running and considering background checks during the hiring process.


“Fair Credit Reporting Act” Considerations

If you use an outside company in the business of compiling background information to run pre-employment background checks, you must comply with the multifaceted procedures and restrictions imposed by the Fair Credit Reporting Act (“FCRA”). Although you are relying on an outside company to conduct your background checks, as the employer, you are legally responsible for ensuring that these procedures are strictly followed.

In particular, the FCRA requires that employers provide notice to the job applicant or employee that you might use information obtained from the background check report in making employment-related decisions. Note that this notice must be in writing and in a stand-alone format. You may not include the notice in the employment application. You must also get written permission from the job applicant or employee to run the background check. (The permission form may be included as part of the notice document.) Once you have obtained written consent, you must certify compliance to the company performing the background check.

If you receive the results of the background check and decide to take an adverse employment action (ex. reject the job applicate, rescind a job offer, terminate an employee, etc.), you must give that individual notice of the adverse employment action you intend to take, including a copy of the report you relied upon to make your decision, and provide the individual with a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act.” This gives the job applicant or employee the opportunity to explain or contest anything included in the report.

Assuming the job applicant or employee does not offer an acceptable explanation for the negative outcomes in the background check report and you take an adverse action, you must then provide an additional notice (oral or in writing) of the adverse employment action, including the fact that the adverse action was taken because of information in the report. In addition, you must provide the name, address, and phone number of the outside company that issued the report; inform the individual that the outside company did not make the decision concerning the adverse action and cannot provide the reasons for the adverse decision; and disclose that the individual has a right to dispute the accuracy or completeness of the report and obtain an additional free report from the outside company within sixty days.


Avoiding Discrimination Claims

If you use background checks to make employment-related decisions, there are some important things to keep in mind with respect to equal opportunity laws. First, and most importantly, be sure that you are applying the same standards to all job candidates and employees, regardless of background, including (but not limited to) race, ethnicity, sex, religion, or age. Be consistent with respect to running background checks—the best practice is to have a written policy outlining exactly which positions require background checks—and considering the results. If you determine that a particular outcome on the background report results in automatic disqualification, you should apply that policy uniformly.

Be cautious, however, because certain outcomes on background reports may be more common among people of a particular common background—such as race, national origin, sex, religion, disability, age, etc. For example, certain criminal convictions are more common among individuals of a particular race or ethnic group. If your policies negatively impact a particular class of individuals, your policy or practice has a “disparate impact” and may be considered a form of discrimination.

If you are concerned about your pre-employment background check policies and procedures, it is a good idea to run them by one of our employment law attorneys to avoid any unintended and unanticipated discrimination claims.


“Ban the Box”

It is worth noting that there is a trend around the nation to remove the “have you ever been convicted” box from job applications and to, more generally, encourage employers to choose candidates based on their skills and qualifications without regard to their past convictions. Several states, including California and New York, have passed “Ban the Box” legislation which prohibit employers from including on job applications questions that require disclosure of one’s conviction history and restrict the extent to which criminal background checks may be considered during the job application process.

It is important to ensure that your hiring procedures do not run afoul of any state or local “Ban the Box” laws. If you are unsure about the requirements in any city or state where your employees are located, please contact us.