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Credit and criminal background checks: Handle with care

NEW ORLEANS -- Employers should make sure that any background check they perform is job-related and consistent with business necessity, Stephen Woods, an attorney in Ogletree Deakins’ Greenville, S.C., office, told attendees at the firm’s 2013 Workplace Strategies seminar May 9-10. The Equal Employment Opportunity Commission (EEOC), worker advocacy groups and plaintiffs’ attorneys are now giving employee and applicant credit and criminal background checks particularly intense scrutiny, he said.

To avoid EEOC charges of disparate treatment or disparate impact based on a background check, an employer should follow four essential steps: 1) Determine whether it can request a background check. 2) Find out how it may request a check. 3) Determine how it may consider and use the information obtained through a background check. 4) Learn how to communicate a notice of an adverse employment action based on a- background check.

These steps involve the interplay of federal law -- Title VII and the federal Fair Credit Reporting Act (FCRA) -- and state mini-FCRAs.

When an employer may request a background check

According to the EEOC, employers must ensure that there is a direct connection between the type of background check performed and the individual applicant’s or employee’s job duties and that a particular type of background check is done for all applicants and employees in certain positions -- not just certain applicants or employees -- if there isn’t an individualized, specific reason for the background check.

The starting place is the job title. For example, while there would be a strong business justification to run a credit check on a CFO, there would not be one for a janitor, Woods said. The next step is to consider the nature of the job -- whether it involves activities like data entry or just lifting boxes -- and the circumstances in which the job is performed. Consider the level of supervision involved and whether there is interaction with vulnerable adults, he noted. Finally, take into account the location where the position is performed.

Requesting a background check requires the employee or applicant to sign a disclosure and authorization form that is separate from other documents, such as the employment application. “List and describe the background-check information being requested and reviewed,” advised Woods, but don’t include a release from liability, as “that invalidates the consent.”

If the employer receives negative information about the applicant or employee, the FCRA requires that a pre-adverse-action letter be sent to the individual if there is potential for an adverse employment action. Title VII requires the employer to conduct an individualized assessment and send an action letter.

The individualized-assessment process must give the applicant or employee an opportunity to provide additional facts or context to explain why the background check’s findings should not be applied in his or her case.  

“Ask for the response in writing,” Woods recommended. “It shows the seriousness of your position and establishes a record.” If the individual does not respond, the employer may make the employment decision without the extra information. 

Criminal checks

Woods cautioned that employers generally should not use arrest information in making employment decisions. “Don’t ask about arrests,” he said; “rather, ask yourself if you would exclude the applicant if there was a conviction.”

With regard to convictions, EEOC’s 2012 guidance on Title VII and background checks strongly recommends that employers use a targeted screening process that takes into account the nature and gravity of the offense or conduct; the time that has passed since the offense, conduct and/or completion of the sentence; and the nature of the job held or sought.

The EEOC does not provide guidance on the time period to cover when looking into criminal records. Many employers use a seven-year period, but Woods noted that a longer time frame may be more appropriate.

State law

Several states have mini-FCRAs that restrict employers from requesting certain types of background checks. Currently, 11 states (California, Connecticut, Hawaii, Illinois, Maryland, New Jersey, Ohio, Oregon, Pennsylvania, Vermont and Washington) limit an employer’s ability to run credit background checks. Similar legislation is pending in 13 other states in 2013.

In addition, 12 states have state-specific disclosures that must be included on the disclosure and authorization form, Woods said, and some states require an employer to customize its form by position or type of check being run. In California, for example, employers must identify the specific state statutory basis authorizing them to request and use a credit report.

There are no state law restrictions on requesting criminal checks, Woods added.

Susan R. Heylman, J.D., is a freelance legal writer and an editor based in the Washington, D.C., area.

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