What Employers Should Know About Background Checks

By R. Kevin Davis, Esq.

Most all employers conduct some kind of background check on job applicants.  In the most basic sense a background check is any conduct on the part of an employer that seeks to discover information about a person’s identity, work experience, educational history, affiliations, etc.  If you think about it, asking a job applicant to complete a job application listing their name, address, previous employment, and educational degrees is an attempt to learn about a person’s background.

This type of information gathering is generally inherent in the hiring process.  It would be extremely rare in my opinion, and not an exercise of good business judgment, to offer someone a job and know nothing about them.  I imagine there are some circumstances where that might occur – for instance if someone is giving a friend of a friend a job, or something like that.

The point being is that in the basic sense, employment hiring processes usually involve some level of background check.  The purpose of this article is to provide some basic information on the legal obligations of employers who choose to turn to the services of a third party to get a background report on an applicant or employee.  This is by no means an exhaustive recitation.

Are Background Checks Illegal?

Except for certain restrictions related to medical and genetic information, it is not illegal for an employer to ask questions about an applicant or employee’s background, or to require a background check.  Nevertheless, employers must ensure that their conduct in getting a background check is EEO compliant[1] in terms of not discriminating against applicants or employees in regard to Title VII of the 1964 Civil Rights Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act, or the Genetic Information Nondiscrimination Act.  For example, an employer can’t decide to do background checks on all African-American applicants and not do them on all white applicants.

The Fair Credit Reporting Act.

Aside from the issue of EEO compliance when conducting background checks through third party vendors, employers must be aware of the requirements of the Fair Credit Reporting Act (the “FCRA”)(15 U.S.C. § 1681 et seq.).  Under the FCRA background check reports are called “consumer reports”.  This includes any written, oral or other communication of information from a consumer reporting agency that bears on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living and which is used as a factor for establishing eligibility for credit, employment purposes, or other authorized purposed.  The provisions of the FCRA are enforced by the United States Federal Trade Commission (the “FTC”).

Before an employer requests a background check report it must disclose in writing to the job applicant or employee that it will seek the report and it must get the job applicant’s or employee’s written consent to get the report.  The notice to the applicant or employee must be conspicuous and cannot simply be included in the job application.  Though the person’s consent is required to get the report, an employer can refuse to hire a job applicant or can terminate an existing employee if they refuse to give written consent for a background check.

Once the employer gives notice that it will seek the report and gets written consent to obtain the background report, it must certify to the reporting agency that it gave the notice and got the person’s permission, it complied with all FCRA requirements, and that it will not discriminate against the applicant or employee or misuse the information.  Job applicants and employees can be required to pay the costs of the background check.  However, employers should be mindful of the minimum wage requirements of the Fair Labor Standards Act and their state (if any) before deducting such costs from an employee’s wages.  Deductions that would drop an employee’s earnings below the minimum wage are not permitted.

Before taking adverse action on the basis of a background report an employer must give the person a copy of the report, a notice of their rights under the FCRA, and provide them an opportunity to explain the information.  If the explanation is unpersuasive and the employer takes adverse action, such as not hiring the person, the employer must then give the person even more information.  First, it must provide the applicant or employee with the name, address, and phone number of the company that supplied the background report.  Second, it must advise the person that the reporting agency did not make the employment decision and can’t give reasons for the decision.  Third, it must give the person notice of their right to dispute the accuracy of the information the reporting agency provided and their right to a free copy of the report.  All of this information can be provided by the employer either orally, electronically, or in writing.  Employers do not have a duty to reconsider information corrected by the reporting agency after a dispute.

EEO Compliance and Disparate Impact.

As previously mentioned, employers must ensure EEO compliance as well as compliance with the FCRA when getting background check reports.  Some employers may feel that they are EEO compliant if they simply treat all applicants or employees equally.  However, as counterintuitive as it might seem, equal treatment doesn’t always equate to EEO compliance.  This strange phenomenon occurs in the eyes of the law when an otherwise facially non-discriminatory action negatively impacts one group of persons more than others.  This is called “disparate impact” and it is a potential trap for the unwary.

For instance, an employer runs the risk of a discrimination lawsuit if it has a blanket policy against hiring applicants whose background reports come back showing a criminal history.  On its face such a policy may seem to be non-discriminatory because the employer would apply it to anyone whether they are male, female, white, African-American, Muslim, Christian, etc.  However, because it can be statistically shown that African-Americans (as a group) in the United States are more likely than white Americans (as a group) to have a criminal history, an employer’s policy of excluding all convicted criminals from employment will likely exclude more African-Americans from employment than white Americans.  Thus, the policy has a disparate impact.

The Equal Employment Opportunity Commission will scrutinize such employment policies (i.e., rejecting applicants with criminal convictions) to determine whether the policy is “job related” and “consistent with business necessity.”  Therefore, if an employer intends to disqualify someone because of a criminal conviction it should be prepared to explain how the particular criminal conduct may relate to the job and how excluding that person is consistent with business necessity.  For instance, a bus company probably doesn’t want to hire drivers that have a history of DUI convictions.

Employers should be aware that it is even more precarious to use someone’s arrest record against them as opposed to their record of convictions.  That’s because an arrest does not equal conviction and does not mean that the person actually violated the law.  The EEOC’s position is that excluding someone from employment because they have been arrested is not job related or consistent with business necessity.  (However, to muddy the water even further, the conduct underlying the arrest may be considered if it is relevant and makes the person unfit for the position at issue.  Recall the DUI example. The conduct resulting in the arrest for DUI (i.e. drinking and driving) may be relevant to the bus driver position even if the person was not over the legal limit – and therefore, not convicted of DUI.)

As you can probably tell, it is not always easy to determine if you are complying with the law when getting a background check report on a job applicant or employee.  You may think your policy is neutral and non-discriminatory but in reality it could be against the law because of its disparate impact.  When in doubt you should seek the advice of an attorney that can guide you through the process.  Remember, an ounce of prevention is worth a pound of cure.

[1] EEO refers to Equal Employment Opportunity and is used herein as a brief way of referring to the various federal and state statutes that generally apply to the employment relationship of most employees or applicants.

This article was written by R. Kevin Davis, Esq.  If you have any questions or comments about this article please feel free to contact Kevin via e-mail at kdavis@scookassociates.com