Background checks can create risk, in the form of employment law violations when they are performed or negligent hiring suits when they aren’t performed. The employer is always liable for this risk, even if the check is performed by a vendor. With these facts in mind here is a brief guide on navigating employer background checks.
The most common reason background checks are done is to ensure that new employees do not harm your company or the public. Employers are required to exercise reasonable care in confirming that their employees do not have a background which would indicate dangerous or untrustworthy character. If an employer hires an individual without exercising reasonable care and that employee causes damages to other employees or the public, the employer can be held liable for negligent hiring. The recommended steps to show that you exercised reasonable care are to search:
- Federal and state databases
- Records attached to social security numbers
- Databases for every county the applicant has lived in during the last seven (7) years
Many vendors offer cheap background checks, advertising that they fit any budget. A budget background check that does not meet the requirements for reasonable care is effectively as useful as not having done a background check; consequently, the employer can be held liable. It does not matter what the employer knows about its employees, but what the employer could have reasonably known.
While background checks can prevent liability from negligent hiring, they also can cause liability in the form of Fair Credit Reporting Act (FCRA) violations. The FCRA regulates the use of outside firms to perform background or investigative checks in many contexts, including employment. If a background check vendor doesn’t provide the right disclosures, obtain the right authorization, provide only the correct information to the employer, and reject disqualified applicants in the correct way, the employer can be held liable for FCRA violations.
FCRA violation litigation has increased every year for the past decade. This in part is due to serial litigators, such as a Green Bay man who from 2015-2016 applied to over 500 jobs and sued over 40 for FCRA violations, personally earning over $200,000. FCRA litigation often turns into a class action suit, where the “class” is every applicant who applied for the job in a given period of time, making FCRA violations a large risk that should be carefully managed.
Because you are liable even if the fault is with the background check vendor, you must ensure that your vendors understand FCRA compliance. One FCRA stipulation is that required documents do not contain superfluous language. Not only does this mean that needless words cannot be used on the form, but that each document be must be on its own piece of paper. Combining a disclosure document with an authorization form for convenience would be a violation of FCRA. Many FCRA documents also require specific information to be listed for compliance, so confirm that your vendor is knowledgeable of these details.
FCRA also regulates the kind of information you can receive and how you can reject an applicant from employment or promotion. You may obtain records of every conviction and make decisions based on any conviction relevant to the job in question. You can only receive non-conviction records, for example arrest records, from the last seven (7) years and cannot use a non-conviction alone to reject an applicant. You can use non-conviction records as partial evidence to determine that an applicant’s “underlying conduct” is inappropriate for the job but be prepared to defend your assessment.
If you receive records that might disqualify a candidate, you must conduct an analysis utilizing the GreenFactors to determine if the candidate should be disqualified. The Green Factors, from Green vs. Missouri Pacific Railroad, include analyzing:
- The nature and gravity of the offense or conduct
- The time that has passed since the offense, conduct and/or completion of the sentence
- The nature of the job held or sought
If a reasonable application of the Green Factors confirms that the applicant can be rejected, you may reject them through the process known as “adverse action”. The first step is to provide a pre-adverse action letter, including a copy of the report and a copy of the Summary of Rights, to the applicant. This letter can be delivered electronically or through mail but should be dated, and a dated copy should be retained. After five days, if you’ve received no response, you may send the letter of adverse action. These letters may be sent by the vendor, but only at your explicit instruction; furthermore, the vendor may not make the decision or even appear to be involved in the decision.
If an applicant disputes the information in the pre-adverse action letter, direct the applicant to the vendor. The vendor will have thirty days to confirm that the contents of the letter are accurate and apply to the applicant in question. Good vendors will take significantly less than thirty days. From the time that you are informed of the dispute to the time that it is resolved, the hiring process must pause. If you offer another applicant the job or promotion in the interim and the disputing applicant had a valid dispute, you would be liable for that action.
The Minnesota Access to Consumer Reports Act (MACRA) is a Minnesota law that matches and builds upon the FCRA. It modifies employer action beyond the FCRA by requiring a disclosure notice in any employer-provided application form (if applicable) and requiring a checkbox on the authorization form for the applicants to select if they wish to have a copy of the results, independently of adverse action.
This is not legal advice and it is recommended that you direct any legal questions to an employment attorney that you trust. Be careful when selecting your vendor for background checks. You will be liable for mistakes made by the vendor or for mistakes made with the information provided by the vendor. You can also be liable if you do not run background checks on your employees. With due diligence and an understanding of federal and state laws, however, liability can be drastically decreased. Terch & Associates is always available to perform background checks or provide guidance.