In the current litigious business environment, you face a broad range of potential liabilities, many of which are brought on by employees. These employee-based liabilities range from offenses such as workplace assaults and battery to statutory claims of discrimination and harassment to offenses against you and your business, such as theft, embezzlement and unfair competition, among many others.
As an employer, you are held responsible for the liabilities you create by intentional action and inaction, as well as for your negligence in discharging your duties as an employer (such as hiring, retention and supervision).
All these issues make it more critical for you to carefully screen and consider those you hire. Doing so will help protect you, your employees and others in your workplace.
To this end, you should adopt a comprehensive and well-framed set of background checking procedures tailored for your particular workplace and each job position. These procedures should be designed to ensure to the greatest extent possible that the individuals being hired or, in the case of promotions or transfers, brought into certain positions are honest, trustworthy, reliable, qualified and, perhaps most important, nonviolent and nonthreatening.
Such procedures also should be designed, as we will discuss, to ensure the checks are conducted lawfully and without invading the privacy of the individuals being checked (which can create a whole other set of potential liabilities).
What do you check?
There is a great deal of information that can be gathered as part of a background screening process. This includes an applicant's:
You also can obtain information concerning an applicant's general reputation and character, personal characteristics and lifestyle.
Making the best use of the information available requires you to think about why you are obtaining the information in the first place. If it merely is to ensure an individual has the necessary skills and work experience and does not have a history of violent crime or threatening behaviors, the information checked would be more limited than if you also want to ensure an individual does not pose a theft risk or other nonviolent risk to your business. You need to focus on the nature of the available position and what information will be useful when evaluating applicants.
Although no statutes expressly prohibit you from looking at all available information for all positions within the workplace, there are at least two reasons why taking this approach would not be wise.
First, such an approach would be unduly expensive and time-consuming. Agencies charge for each background check conducted, and the more information checked, the more a check generally costs. It would be costly, therefore, to screen every applicant for every position regarding every type of information.
Second, such an approach could risk violating various discrimination laws. Although there is no prohibition per se on checking all information for every applicant and position, such universal checking may result in members of certain protected classes being adversely affected.
For example, statistics indicate that, at least in certain parts of the U.S., African-American men are more likely to have been convicted of a crime and incarcerated than men of other races and/or women in general. Therefore, if you adopt a blanket rule of conducting background checks on all individuals for all positions without considering whether the information is relevant to the position, such a rule adversely could affect African-American men and subject you to discrimination claims.
According to the Equal Employment Opportunity Commission, which is the agency responsible for administering federal laws against discrimination, employers should not obtain background information about applicants unless the information is relevant to the job at hand. The information obtained must be tailored to the position for which a person is being considered.
For example, if a person is not being hired for a job in which he will be in a position to handle or have access to money, it does not matter that he filed for bankruptcy three years ago; the information should not be sought or considered. If, on the other hand, the information could be relevant in protecting you or your employees, such as if a person is being hired to work with clients in isolated situations, you can and should obtain background information regarding whether he has been convicted of violent crimes.
Similarly, investigate all applicants' criminal histories, provided you use any conviction information you receive (whether an offense was violent or nonviolent; when an offense occurred; whether the person will be working unsupervised, in stressful situations or among other temptations to revert to violence) in a circumspect and narrowly tailored way.
Many states prohibit employers from inquiring about and/or relying on arrests (as opposed to convictions) or convictions of a certain type (misdemeanors or marijuana-related offenses) or age (more than seven years old, more than 10 years old, etc.). Other states require employers to articulate a direct relation between criminal information and the job at hand.
The best approach is to use the myriad of background information available judiciously. Consider each position within your work force and the strictures of your state and local laws. Then, determine what information would be relevant and legally reliable when selecting an appropriate person for that position.
Regardless of what is checked, any information you obtain should be maintained in confidential files separate from ordinary personnel files and other records. The information should be retained for at least two years from the date it is obtained or for the duration of an individual's employment.
What should they provide?
The information you seek from applicants will depend on the types and level of checks you intend to run. Generally, you will compile some or all of the following information about an applicant:
Be careful sensitive information such as date of birth, Social Security number, alien identification number, dates of graduation and personal references are not part of an application. They only should be part of the reference check process. And if you decline employment after obtaining such information, be sure you clearly can trace your decision to something other than the applicant's age, national origin or citizenship, and/or personal associations so the person cannot claim you based your decision on those unlawful bases and subject you to a lawsuit.
You also should consider asking an applicant to self-disclose criminal history information, limiting the information sought to what you can request lawfully.
Be sure to clearly state the information you are not seeking (arrest information, information from expunged or sealed records, information about convictions of more than a certain age). You also should provide the individual an opportunity to explain the circumstances of any such criminal history and consider such explanation when evaluating the candidate.
In addition, ask an applicant to provide you with written consent to conduct a background check; generally, applicants are asked to sign a prepared consent statement. As we will discuss, the nature and extent of this consent will vary depending on who will conduct the background check.
Doing it yourself
If you plan to ask an employee to follow up on references and search public records to confirm details of an applicant's work and criminal histories, driving record, references and other such items, you will need the applicant to sign a statement consenting to such a check.
The statement can be a part of the application or on a separate sheet. It should state the applicant understands you will conduct a background check and/or verify the information provided on the application and in interviews; consents to background checking and verification; and understands he may not be hired or, if hired, may be terminated if any of the information provided turns out to be inaccurate, false or incomplete. (You also may need to have the applicant sign a statement required by one of the sources to whom you will look for information. Past employers, for example, may require written consent on a designated form, or a motor vehicle agency may require a signature on a form consent notice.)
If you conduct background checks yourself, be careful not to obtain any information from a third party that you could not obtain directly from the applicant. In other words, don't ask a former employer whether the applicant took disability leave or how many sick days he took. Because you can't lawfully obtain that information from an applicant absent violating the Americans With Disabilities Act, you can't lawfully obtain it from a third party.
The benefits of conducting a check yourself are that you can proceed with relatively little procedural brouhaha and control the information you receive and how much it costs to obtain (generally little). You also can hear and see firsthand the background information being provided, particularly by work references where inflection and conversational bonding may contribute a lot to the reference given.
But there are negative aspects of going it alone. Often, you don't know what you are looking for or at and don't have an efficient means of finding it. You may well overlook certain sources of information or the meanings of certain records.
If you obtain information you are not supposed to have (such as arrest information or "stale" conviction information), you will have a difficult time proving you did not consider the information when making your decision. You won't have a third party to buffer that information by providing a sterile report containing only legally reliable information. And even though it may be faster to do it yourself, it still takes time; you may not have the time or resources to conduct a check as efficiently and effectively as a third party trained to conduct such checks.
Hiring a third party
If you decide to go the third-party route, you will need to obtain the applicant's consent to have the check conducted by a third party. This requires you follow the notice and consent procedures dictated by the Fair Credit Reporting Act (FCRA).
Contrary to popular belief, FCRA does not pertain just to credit or financial checks; it pertains to all checks conducted by consumer reporting agencies, a category that includes most if not all third parties that perform background checks on applicants and employees for employment purposes. It also includes background screening agencies and attorneys; human-resources professionals and consultants (other than your regular employees) who conduct background screens for hire; and Internet-based entities that search public databases for you.
FCRA requires employers who use outside third parties to conduct background checks to do three things before a third party can conduct a background check.
First, you must tell an applicant clearly, conspicuously and in writing that a third party will be conducting the check. This written disclosure cannot be part of an employment application or other document provided to or completed by the applicant; it must be a separate, stand-alone document. Second, you must obtain the applicant's consent via his signature on the consent document. And third, you must certify to the third party that you have taken these steps and will comply with all provisions of FCRA. The third party cannot conduct the background check until each requirement is satisfied.
Once a report is obtained, FCRA imposes further requirements before you can take an adverse employment action against an applicant. Before taking any adverse action, you must provide the individual with a copy of the third party's report and summary of rights under FCRA (available on the Federal Trade Commission's Web site, www.ftc.gov). You then must wait about five days before taking the adverse employment action. This waiting period theoretically allows the individual to address any inaccurate information in the report.
Notably, you do not have to change your mind even if the individual identifies inaccuracies in the report or exonerating information; you simply must wait. However, it would be advisable to consider the information the individual provides vis-à-vis alleged inaccurate information.
Following the waiting period, you can take the adverse action, but you must provide the individual with yet another notice at that time. This notice must state:
This notice, similar to the other disclosure, consent and notice statements, must be provided. None of the statements can be waived by the individual, and there are few exceptions for those wishing to avoid FCRA's requirements.
If you want a third party to provide an investigative consumer report, the notice and consent requirements are slightly more detailed.
An investigative consumer report is a report that, in addition to reporting the facts and figures available about a person, also reports what that person's colleagues, friends and associates have to say about him and/or his reputation, character, work habits, morals and the like. To the extent you wish to obtain such a report, you must be sure you have the special forms—above and beyond those described previously—to satisfy the special notice and consent requirements for this type of report.
Most third parties in the business of conducting background checks have stock forms ready for use. Because various states may have laws that add to FCRA's requirements and it sometimes is difficult to tell the care with which the forms were prepared, it is not a bad idea to have the stock forms reviewed by an attorney to ensure they satisfy FCRA's requirements.
Making decisions
Whether you receive an applicant's background information on your own or via a third party, the information should not sit in a file somewhere or be compiled simply to go through the motions. As noted at the outset, conducting thorough background checks can go a long way toward protecting you and your employees.
Once you have the information, you simply need to be sure what you have was obtained legally and can be relied on legally in making your decision. You then can act on the information to decide whether to proceed with the hiring, promotion or transfer process. The time you spend on the front end making such informed decisions will pay great dividends on the back end by providing you with good and competent employees and/or by staving off potential harm and liabilities.
Victoria L. Donati and Jason C. Kim are partners in the labor and employment practice group with the Chicago-based law firm Neal, Gerber & Eisenberg LLP.
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