Handle Background Checks Properly to Avoid Risk

Background checks can provide useful information to employers as part of the hiring process, such as avoiding negligent hiring claims; however, employers should be cautious of how this information is gathered and used since it carries legal risk if not done properly.

Employee background checks are considered “consumer reports” under the Fair Credit Reporting Act (FCRA). The FCRA regulates the accuracy, fairness and privacy of information in consumer reports used for credit, insurance or employment purposes. Failing to comply with the FCRA’s procedural requirements carries civil and statutory penalties. In addition, the FCRA allows job applicants to sue employers who fail to comply with any requirement under the law. Thus, employers can avoid risk by following certain procedures if they intend to revoke a job offer or fire an employee based on information found in the consumer report.

 A recent article posted on the Society for Human Resource Management covers these procedures in more detail:  https://www.shrm.org/resourcesandtools/hr-topics/talent-acquisition/pages/fcra-avoid-risky-background-checks.aspx

The article also reminds employers to be aware of state law where they employ and hire individuals. Certain states limit what information can be considered when reviewing criminal record history as part of the hiring process. Under Pennsylvania law, an employer may consider an applicant’s felony or misdemeanor convictions in the hiring process only if they relate to the applicant’s suitability for the job. If an employer decides not to hire someone based on his or her criminal record, the employer must so inform the applicant in writing, again following the procedural requirements under the FCRA. California not only prohibits inquiries about arrests that did not result in a conviction but also forbids employers from considering certain marijuana infractions and misdemeanor convictions older than two years.

Finally, employers should consider implications under the Equal Employment Opportunity Commission. Adopting a policy that excludes all applicants with an arrest record could result in a claim of disparate impact under federal non-discrimination law if the practice or policy disproportionately affects a protected class and the employer cannot show the practice or policy is job related and of business necessity.

While background checks can help employers avoid legal claims, such as those for negligent hiring, gathering and using this information carries legal risk if not handled properly.


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