United States: Are Your Background Checks Legal?

Last Updated: October 13 2015
Article by Melody L. Rayl

Make sure your hiring process complies with federal rules.

Employees are the heart of every business, but their impact is most profound in small companies, where just one troublesome worker can shift the balance of safety or morale.

Not surprisingly, then, employers want to hire strong, baggage-free performers.

To boost their chances of selecting the right person, employers often rely on background checks in their hiring practices. But if they conduct those checks without adhering to Fair Credit Reporting Act rules, they risk legal action being taken against them.

Couple this with growing ban-the-box legislation and heightened Equal Employment Opportunity Commission scrutiny, and employers can find themselves at the receiving end of a lawsuit.

The Devil Is in the Technicalities

Attempting to follow the FCRA requirements as they understand them, employers often include a box on their application forms that asks job candidates to confirm that they consent to a third party, such as a credit reporting agency, conducting a consumer background check.

That little box doesn't comply with FCRA requirements, which say the employer has to use a free-standing document advising candidates what kind of checks will be conducted and by whom, and what information will be available to the employer as a result.

If something in the report then negatively affects the hiring decision, the employer must provide the report to the applicant before taking action not to hire, giving the candidate an opportunity to explain or correct the information.

Failure to comply with any step along the way can be considered a technical violation, which establishes grounds for a class action suit that could include every candidate who applied for a job under the company's defective process. Statutory damages run up to $1,000 per class member, in addition to legal costs and attorney's fees.

The statute applies to any background checks the company hires an outside third party to conduct. The FCRA doesn't preclude employers from conducting their own background checks, however, so employers can consider minimizing risk by going directly to original governmental sources, such as DMV or courthouse records, that provide similar background information.

Further, it's a good idea to have an employment law attorney audit your hiring procedures to make sure you're complying with the FCRA's technicalities.

Ban-the-Box Targets Criminal Background Checks

Eighteen states and more than 100 cities and counties have adopted ban-the-box regulations, which prevent employers from including a question about previous criminal convictions on their job applications. Ban-the-box stems from the thought that asking the criminal background question creates a disparate impact that may adversely affect minority applicants.

Although there's no statewide ban-the-box legislation yet in Kansas or Missouri, some local governments have adopted ban-the-box ordinances, and employers should check to see if any such regulations exist at the city or county level. Even in the absence of legislation, employers still could run afoul of the EEOC if they adopt blanket "we don't hire convicted felons" positions.

This leaves businesses, which have to provide a safe work environment and protect their property and their assets, in a tough place. Do they conduct criminal background checks and risk a claim being filed against them for disparate impact, or do they hire without getting background information and risk that the employee will be a problem?

Employers still can run criminal background checks, but it likely will become increasingly difficult to deny employment based on a one-size-fits-all background check policy.

Instead, employers can protect themselves somewhat by making hiring decisions on a position-by-position basis, depending on whether the specific criminal history at issue makes the candidate unsuitable for a particular job.

Companies may also want to consider limiting background checks to roles where the results are particularly important—for positions that require an employee to handle cash or enter customers' homes, for example—or conducting background checks only after making conditional job offers.

If a company denies employment based on a background check, the hiring manager should document why the applicant's background makes him unsuitable for the open position.

It's relatively easy for a bank to justify not hiring a teller candidate who has a past theft conviction, but harder for a construction company to deny a job to someone whose background check reveals a single DUI conviction.

This article originally appeared in Thinking Bigger

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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