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Employers must exercise caution with background checks


Employers must navigate a careful course in conducting employee background checks.

Conducting background checks helps to protect firms' workers and customers and can shield companies from potential liability for negligence if a worker subsequently commits a crime.

But employers also must avoid the risk of violating federal and state laws that mandate background checks be conducted in a nondiscriminatory manner, protect against violating applicants' privacy and maintain workers' confidentiality.

The key is developing a well-crafted policy, say observers. "There's some hoops to jump through," but essentially, an employer must develop a narrowly tailored policy that is consistent with the job requirements and/or the public safety issues that must be addressed, said Larry R. Wood Jr., an attorney with Pepper Hamilton L.L.P. in Philadelphia.

Background checks are widely used. According to a 2004 survey by the Alexandria, Va.-based Society for Human Resource Management, 96% of respondents indicated their organizations conduct some form of background or reference check on job applicants.

"They're critical," said Courtney Larsen, human resources director for Phoenix-based Take Charge America Inc., a nonprofit credit counseling agency. She noted that the agency's counselors have access to clients' personal financial information. "We want to screen those folks as thoroughly and as carefully as possible," she said.

It is important, though, that the background check be done correctly, experts say. Negligently conducted background checks will leave the employer with as much exposure "as if they didn't do it at all," said Craig R. Annunziata, an employer attorney with Fisher & Phillips L.L.P. in Chicago.

There have been cases, for instance, where an employer failed to check all the counties where an applicant had lived, and did not learn the applicant was a registered sex offender. "You can imagine what a jury would do with that," he said.

Employers who are sued for negligent hiring have minimized their risks if they previously conducted a background check, said Kevin Klimas, president of Phoenix-based Clarifacts Inc., an employment screening firm. "They're going to have data showing they've done their due diligence."

Despite its somewhat misleading name, the federal Fair Credit Reporting Act, as well as parallel state laws, applies when employers conduct background checks through third parties. Under provisions of these laws, employers must notify applicants that a background check may be performed and obtain their written consent.

Furthermore, the applicant must be given an opportunity to respond if the background check reveals adverse information about the applicant that could lead to the withdrawal of a job offer. FCRA provisions also affect the disposal of background check information.

"We see a lot of issues arising on how to comply with the Fair Credit Reporting Act, and there are probably a number of employers out there who are still unaware that when they are paying a third-party service provider to do criminal background checks, they fall under the auspices of the FCRA," said John F. Lomax Jr., an employer attorney with Greenberg Traurig L.L.P. in Phoenix.

Employers also must be concerned about Equal Employment Opportunity Commission regulations, which provide that obtaining criminal records inconsistently, whether based on the race, color, religion, national origin or sex of the applicant, is unlawful under Title VII of the Civil Rights Act of 1964. For example, doing background checks only on Muslims is a violation of the law.

Generally, the factors that must be considered in making hiring decisions in cases where there is an arrest or conviction include the nature and gravity of the offense, the time since the conviction and/or completion of the sentence, and the nature of the job held or sought, according to the EEOC.

"If you're going to (reject an applicant), it has to be reasoned through and justified," said Carol Miaskoff, EEOC assistant legal counsel in Washington.

An employer may be willing to hire an office worker with a driving while intoxicated conviction, but not if the applicant is seeking a job as delivery service driver, said Mr. Annunziata.

"I always say to my clients, 'Don't automatically exclude someone from being employed just because they're a convicted criminal, unless it makes sense,"' said Mr. Annunziata.

"You don't want to exclude any group from going through the process, and you want standards that are applied consistently across the board," said Jenifer DeLoach, Nashville, Tenn.-based senior vp with risk consulting firm Kroll Inc., a subsidiary of Marsh & McLennan Cos. Inc.

Observers note, however, that employers still retain the right to reject or fire anyone who makes a false statement on a job application.

Privacy is a related issue. "There's definitely a fine line between making sure that you've done a proper background check" and invading privacy, said Mr. Klimas. "If you're screening an employee properly, then you're not going after information that is not public record," such as personal medical histories, he said.

"You're simply seeing what is available publicly," which could include criminal and driving records, said Mr. Klimas.

Furthermore, once the background check is complete, disclosing it within the firm should be only on a "need to know" basis, said Kim Kerr, vp of background screening solutions at the Boca Raton, Fla.-based LexisNexis Risk & Information Analytics Group.

"We recommend a team approach" to disclosing the information only to representatives from human resources, security, the legal department and line managers, he said. "You really need to go through the matrix of risk associated with that information and make sure everyone" in these areas agrees "this is a good hire," said Mr. Kerr.