Bob E. Lype & Associates - Attorneys at Law in Chattanooga, Tennessee
Bob E. Lype - Attorney at Law in Chattnooga, Tennessee
Client-centered service in a general civil practice, with an emphasis in employment law matters, trial and appellate work, and general business advice.
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Background Checks for Job Applicants

In the changed world since September 11, employers should revisit their policies concerning background checks.

Many employers have long considered background checks for job applicants to be a waste of time, or they have engaged in only minimal efforts to learn any useful information about their new hires. The events of September 11 have changed the American workplace in many ways, and more employers are beginning to view background checks in a new light.

Employers have a general duty to provide a safe workplace and to take reasonable steps to prevent workplace violence. In addition, every employer wants honest, trustworthy employees. In many instances, background checks for applicants can help ensure that new hires "are who they say they are," that they truly have the skills or background you need, and that they have no record of violence, criminal activity, etc. But how can a useful background check be conducted, and what information can be collected? This article will discuss some of the basics of background checks.

Some reasons for background checks. As noted above, one of the main reasons for a background check of job applicants is the employer's duty to provide a safe workplace for coworkers, as well as for clients and customers. Health care employers may be subject to OSHA advisory guidelines pertaining to their industry, related to prevention and response to workplace violence threats, as are employers engaged in late-night retail establishments. But regardless of the business or industry, employers have a duty to take reasonable steps to provide a safe workplace. After all, employees are an employer's most valuable asset, and they are certainly worthy of protection.

In addition, employers can reduce their possible liabilities for negligent hiring and retention if they give proper attention to background checks. Most of us have heard the stories of the delivery man who was hired without ascertaining that he had multiple sex offense convictions, or the driver who was hired without learning that he had a horrible driving record, or the nursing home assistant who was hired without a check of the available abuse registry – all with devastating results. An employer's due diligence in the hiring process can provide a defense to liabilities for such claims.

Finally, it is generally understood that employers lose countless dollars each day as a result of dishonest, unqualified or unreliable employees. One industry source states that 30% of all applicants falsify information about their educational background. (Look at George O'Leary, short-term head football coach at the University of Notre Dame). Checking an applicant's employment or educational background, work experience, and the like can save an employer headaches, time and money down the road.

Risks and pitfalls – Discrimination laws and the Fair Credit Reporting Act. Of course, there can be no good rule of thumb in employment law unless there are a myriad of corresponding risks and pitfalls. Such is the case with background checks.

First, although an employer need not perform a background check on every applicant for every position, there should be legitimate business reasons for any differentiation. By all means, an employer should not selectively choose to perform background checks for only certain applicants for a given position. An employer may be held liable for discrimination, even if it did not intend to discriminate, if its investigation practices result in unequal treatment or impact to members of a given race, national origin, ethnic group, religion, sex, age, etc. If you have a legitimate reason, you can decide that background checks are necessary for one position but not another, but you should not differentiate between applicants for the same position.

An employer may conduct all or part of a background check itself, or it may seek reports from some third party database or consumer reporting agency (e.g., Equifax). To the extent an employer uses these outside sources, the employer must be careful to comply with the requirements of the Fair Credit Reporting Act (FCRA). The FCRA applies whenever "consumer reports" or "investigative consumer reports" provide information which is used, or may be used, for employment purposes. Once again, the FCRA only applies when the services or databases of outside agencies are used.

To comply with the FCRA, the employer must first provide a disclosure to the applicant (or the employee) that the report will be requested, which must be provided in a separate document which does not refer to other subjects. Therefore, the disclosure cannot be part of the job application, but should be a separate document provided as part of a packet for applicants. In addition, the employer must obtain written consent from the applicant to the collection of the report. The written consent need not be in a separate document, and therefore it can be part of a signed job application, if the consent language is made conspicuous.

Then, before obtaining the report, the employer must provide a certification to the consumer reporting agency. This is usually accomplished by a document signed by the employer when the report is requested.

When an employer has obtained a consumer report which influences the employer's decision not to hire an applicant (or to terminate or take any adverse action with respect to an existing employee), before making the final decision, the employer must provide the applicant a copy of the actual consumer report relied upon, as well as a summary of consumer rights prescribed by the Federal Trade Commission (FTC). There is no set rule about how long the employer must wait between providing these items to the applicant and making a final decision, but the FTC says that the employer must wait a "reasonable" amount of time.

Finally, after the items have been provided, the employer has waited a reasonable period of time, and a final decision has been made, the FCRA requires the employer to provide an "adverse action notice" to the applicant. The notice is not required to be written, but a written notice is clearly preferable. The notice must contain identifying information about the consumer reporting agency, a statement that the agency did not make the decision in question, a statement of the applicant's right to obtain an additional free copy of the report, and a statement of the applicant's right to dispute the accuracy of the report with the agency. The notice need not contain any explanation about what part of the report influenced the adverse decision.

If the employer fails to follow these requirements, then it can face a lawsuit to recover actual damages, fixed penalties, or both, even if the employer can conclusively show that the applicant would not have gotten the job, regardless of the contents of the report.

Whew! Those sound like some stringent requirements. And in a sense they are. However, compliance is really pretty simple, if a policy is adopted and followed, and if proper forms are used. Some reporting agencies will help by supplying some of the required forms. And while the FCRA imposes significant requirements upon employers obtaining consumer reports, in many cases the benefits of having the reports greatly outweigh any inconvenience.

What information should be checked? Once you have decided a background check is needed, you will also have to decide what information is needed. Sometimes obtaining a consumer report, as discussed above, is necessary, and other times it is not.

Even without a consumer report, an employer can obtain or verify certain critical information, either through its own investigation or through pointed interview questions. For example, the employer can check personal references given in an application, as well as prior employment and educational history. Employers should pay particular attention to any gaps in employment history. There may be legitimate explanations, such as school attendance, military service, or even taking time off "to get one's life in order." But questions need to be asked. Consider the applicant who explained a two-year gap in his employment history by saying that he had been taking computer courses. Only after asking several additional questions did the employer learn that these were courses offered in prison.

How much of a check is required will often depend upon the position applied for. If the position calls for handling money, for example, it may require a more thorough check that a forklift operator's position. Depending upon the circumstances, employers may check criminal records, driver's license and motor vehicle records, social security numbers, credit reports, employment history, employment references, personal references, educational background, professional license records, sex offender registries, nurses' aid registries, and other items. Costs for checks performed by others will vary, but a fairly thorough background check can usually be performed for $100-200, and basic criminal records checks can cost as little as $25.

Conclusion. Many employers are re-thinking their background check policies and procedures. The costs and aggravation of performing a check must be weighed against the potential costs of hiring the wrong person. Each employer, personnel manager or human resources manager should understand the basic requirements of the FCRA. Always make sure you get two forms of ID, as required by the INS in completing your I-9 forms (discussed further below). Always, always require applicants to complete job applications, with such information as employment history, personal references, and questions about criminal records. Compare job applications to any resumes the applicant provides. Ask pointed questions in the interview. And if a background report or a consumer report is created, actually read it. (Surprisingly, this is frequently overlooked).

Employers will never achieve true peace of mind when it comes to employee relations. However, gaining a sense that you know your new hire, and that you have hired the right person, can go a long way.

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