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By Gillian Flynn
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Many employers are turning to background checks to find out. But
checks have their own set of rules, and if they aren’t followed,
an employer can find itself in a good amount of trouble.
Sue Bendavid-Arbiv, the national chairwoman of the
labor and employment practice group of Arter & Hadden in Woodland
Hills, California, offers guidelines. Though state laws vary, California’s
legislation is considered a bellwether, so Bendavid-Arbiv gives
it extra prominence here.
What should a background-check policy cover?
Employers should give employees advance notice that the employer
reserves the right to conduct a background check—and investigate
matters like an individual’s prior employment history, personal
references, educational background, and other relevant information.
If HR wants to go further and ask for credit reports and criminal-background
checks, that should also be included in the policy.
How should the policy be distributed?
I’d include the policy in at least two places: on the job application
and in the employee handbook. Obviously, the job application is
for individuals who are not yet employed by the company. It notifies
them that their consent to undergo a background check is a condition
of employment. The handbook applies to existing employees. If someone
is up for a promotion, and one of the conditions of a promotion
is to undergo a background investigation, having it in the handbook
reserves the employer’s right to do so.
What else should the policy include?
Also in the policy should be information that the employer will
comply with federal and state laws. There are several bodies of
law covering background checks. The federal law is the Fair Credit
Reporting Act. There are two sources of California state laws: one
is called the Investigative Consumer Reporting Agencies Act, and
the second is the Consumer Credit Reporting Agencies Act. The laws
all significantly affect how a background check is performed procedurally
and what information an employer can obtain, and how far back. They
also include the steps the employer must follow if in fact the company
plans to use that information in making a [negative] employment-related
decision.
What should employers know about these acts?
This year the California legislature amended the Investigative Consumer
Reporting Agencies Act. Even before 9/11, there’s been real
concern about identity theft. California lawmakers stated that if
consumers—and employees are, in fact, consumers—are given
early notice that someone is looking into their background, they’ll
be able to more quickly verify whether their identity has been stolen.
California’s laws changed so employers have to automatically
give a person a copy of the report.
What are the trouble areas for HR in doing background
checks?
First, if employers are using a background-investigation company
to perform the checks, they should first make sure the agency knows
about the laws and changes in the laws, and provides them with forms
to be used in order to obtain the individual’s consent. It’s
got to be a separate form that the employee is signing; it can’t
just be within the handbook or the job application. Further, the
agency should not provide information it is not entitled to disclose.
There’s lots of [information] agencies can’t disclose,
like bankruptcies that are over 10 years old, tax liens that are
more than seven years old, etc. So that’s the first problem
area.
What’s the other trouble spot?
The second major stumbling block is: What do you do when you obtain
information that the employer is not entitled to use in making employment-related
decisions? Some information, if used, may result in claimed violations
of equal employment opportunity laws. As an example: The background
check reveals the applicant or employee had a conviction for drunk
driving. You may take this into consideration only if the conviction
is somehow related to the job. For instance, the person is applying
to be a driver. Then there’s a legitimate business reason for
not considering that person—a concern the person may drink
and drive again while working for you. But if the conviction has
nothing to do with the job, and you use it anyway in your decision
not to hire, then it may result in an argument that the use of that
information resulted in a disparate impact on the basis of race
or national origin.
What other information should an employer not use?
Generally speaking, under California law, employers are prohibited
from seeking, receiving, or using as a factor in determining employment
any information relating to a person’s arrest that did not
result in his conviction. So while you may have received some information
related to an arrest while doing an investigation, you can’t
use that information. Sometimes an employer may find out an applicant
has been arrested for embezzlement. You may not want to hire that
person, but the California labor code says you can’t use that
information in making your decision.
If HR discovers that a person has served time for
a violent crime, and hires the person anyway, does that make the
company liable if the employee becomes violent in the workplace?
An employer is not required by law to do an investigation into an
applicant’s criminal background. But if you’ve done one
and found this out and hired that person anyway, then the question
is: Are you guilty of negligent hiring? Were you reasonable, under
the circumstances, in hiring this person?
Would an employer be blamed for not conducting
a background check if the employee had a history of violence?
If the employee had a sensitive position or one requiring significant
public contact, like working with children, in those situations
the question is: How reasonable was it for you, the employer, given
all the circumstances, to not conduct a background check?
If HR decides to do background checks, must all
applicants be checked, or can HR decide on an individual basis?
An employer doesn’t have to perform the same type of background
investigation on every applicant or employee, on one condition:
that any differentiation the employer makes is based on legitimate
business interests. If you have a fleet of drivers to drive trucks
on the road, you may want to conduct background checks on all of
them to verify their driving records and see if they had any criminal
convictions for DUIs. That would be a legitimate business interest—and
a policy of conducting background checks only on drivers would be
reasonably calculated to further that business interest.
If a background check leads a company to decide
not to hire an applicant, should HR tell the person?
The federal Fair Credit Reporting Act talks about providing notice
to the employee of any adverse employment action. When adverse action
is taken, the employer must provide the applicant with the following:
notice of the adverse action, the name and phone number of the agency
that furnished the report, and a statement that the consumer reporting
agency did not make the adverse action and is unable to provide
the specific reason for the adverse action.
Is there anything else HR should know?
A new California code covers employers that conduct their own investigations.
Now any person who collects information in lieu of using one of
these agencies still must provide the consumer with a copy of the
report at the time of the meeting or interview, or within seven
days of receiving the information—whichever is earlier. Now
the question becomes: What about reference checks? What happens
if HR calls a prior employer to confirm that the person worked there.
They say the employee was a bad employee. Does the new potential
employer have to turn around and give that information to the candidate?
That’s how the act reads. But it’s not how it was intended.
The California legislature is now revising that wording to accurately
reflect that it does not apply to this situation. Here’s what
it does apply to: Let’s say you obtain a Social Security number
and you’re able to discover through public information the
person’s amount of debt and whether they defaulted and whether
they’ve had lawsuits. That’s what the law was designed
to cover.
The information contained in this article is intended
to provide useful information on the topic covered, but should not
be construed as legal advice or a legal opinion. Also remember that
state laws may differ from the federal law.
Workforce, September 2002, pp. 96-97. Reprinted
from workforce.com
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©2003 TABIC. All rights reserved.
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