Screening Using Background Checks

By Diane M. Calabrese / Published September 2021

Are background checks legal? Yes. Are they risk-free? No. 

     Should they be done? Perhaps. Know the goal and then decide. One thing to keep in mind: If background checks are done when hiring employees or when determining whether to promote them, the checks must be done on all employees.

     Any deviation from “all” could increase the liability inherent in doing a background check. Employees must be told a background check will be conducted and agree to it, but that does not prevent problems. Even a liability release, which a prospective employee signs to declare he or she will not take legal action if results of the check are erroneous and preclude a job, will not hold if a tough lawyer gets involved.

     Contractors have a few advantages over others in our industry. Most of their employees do not handle money or tie into accounting systems, which means worries about embezzlers or the like are not in the picture. Similarly, their employees have no access to significant inventory.

     True, contractors can lose machines to employees. A more direct concern though is the driving style of an employee; a contractor does not want a team member who is a risky driver behind the wheel of a company vehicle.

     A contractor who makes a list of priorities in hiring will be able to quickly determine whether a “formal” background check is necessary. Priorities might be a good driving record and specified certifications or licenses. If they are what matter most, a contractor may be able to skip the check. Instead, a prospective employee can be asked to present a copy of a driver’s license and copies of certifications. 

     Laws concerning background checks begin at the federal level (U.S. Equal Employment Opportunity Commission [EEOC] and Federal Trade Commission [FTC]), but there are state and local rules, too. In some jurisdictions, it is not legal to ask a prospective employee about a criminal record, for instance.

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     A contractor can enter his or her state in the search engine at USA.gov to quickly find rules that supplant or modify federal rules. In considering whether to do a background check, particularly when severe restrictions are imposed about using information retrieved, a contractor might consider a low-key (informal) approach to determining whether a prospective employee poses a security risk.

     Talk with the prospective hire about the nature of the work. Determine whether there is genuine interest. Discuss certifications and gauge the applicant’s interest in obtaining them. Try to get the information needed—is the person a good candidate—without the formal check. 

     But if going the route of a formal check, then know the law. The next section summarizes federal restraints on the employer, and the last section summarizes rights of applicants. Both summaries are based on EEOC guidance, which is available at EEOC.gov.

Employers

     Because discrimination is unlawful, an employer must never do a background check that is in some way tied to a person’s national origin, religion, age, and so on. If an employer chooses to use a company to do a background check, the rules of the Fair Credit Reporting Act (FCRA, FTC-enforced) come into play.

     Applicants and employees (below we use “applicants,” but rules encompass employees too) must be informed about an employer seeking a credit report or an employer asking past employers about an applicant’s work habits and reputation. (In fact, in most locales asking previous employers for information is a waste of time. HR departments are instructed to provide only the start and end dates of employment, and managers are instructed not to discuss any past employee. Liability is far too great.)

     To avoid issues with physical disabilities that preclude an individual from doing a job, an employer must take care to specify the physical capabilities required for the job in an advertisement. A contractor might include a statement about working conditions, such as outdoors in cold and hot weather, strength required (e.g., able to lift a machine of a certain weight), and so on.

     Suppose a contractor does take the path of hiring a firm to do background checks. If the report returns information that makes the applicant a poor choice in the employer’s appraisal, the employer must tell the applicant that rejection is being made because of information in the report. The employer must also provide the full contact information of the background check firm so that if the applicant wishes, he or she can dispute the information in the report. 

     The employer must also keep all records related to applicants for at least one year (EEOC minimum) or longer (e.g., two years through a Department of Labor extension for federal contractors). The records must be held indefinitely if a discrimination complaint is launched by an applicant, or until the case concludes. 

     There in a nugget are the rules for employers. They should give a contractor pause regarding the worth of a check. If they do not, the next section may.

     [Note: Should a contractor inadvertently hire an ax murderer who begins swinging on the job, there could be liability attached. But if the contractor had no way of learning the information—and it’s doubtful the individual would have a record and be on the job market—there’s little risk.]

Applicants (And Employees)

     If an applicant (or employee, although we use applicant throughout) is asked about background—employment history, education, etc.—the same questions must be asked of all applicants. An applicant who perceives he or she was asked about social media presence because of national origin, for example, could claim discrimination.

     Applicants must be treated the same without regard to race, national origin, religion, etc. Contractors, like all employers, are well versed in EEOC rules. 

     An applicant who is not hired because of a criminal record can claim discrimination if another applicant with a criminal record but of a different national origin was hired. That’s simply one example. 

     Now, here’s the tricky part: The component of anti-discrimination laws that is known as disparate impact means that if rejecting applicants with criminal records significantly disadvantages one race, ethnicity, religion, etc., applicants with criminal records cannot be rejected. 

     Irrespective of the type of negative information a report returns, if an employer uses it to reject a candidate, the applicant has to be given the opportunity—if he or she wishes—to explain it. In the explanation, the applicant can provide reasons why the background should not affect the applicant’s ability to do the job.

     If applicants learn that a background check has been done without their permission, they are expected to report the lapse to the FTC, which administers the FCRA. There are many provisions under which such applicant can sue the employer.

     Lawyers writing on the subject of litigation over claims of erroneous and unlawful (undisclosed) background checks remind employers that the lack of consistency (and clarity) in what the EEOC expects imperils employers. The federal government could supply a universal form for employers to use when asking applicants to agree to a background check. It does not, which invites confusion.

     As this section and the preceding one illustrate, the decision to do background checks on applicants should be weighed carefully, and probably with advice from a lawyer.