Should You Be Running Background Checks?

Some background on background checks.

When looking to add to their workforces, it makes sense that employers want would want to know as much about potential applicants as possible.

How else are they supposed to make an informed employment decision?

While many employers rely on pre-employment background checks or questions on applications that ask applicants to provide information about their background as a practical measure to help provide them with a fuller picture of each applicant, there are some serious legal considerations about what an employer can and can’t inquire about at each stage of the hiring process.

With some exceptions, it’s not illegal for employers to ask questions about an applicant’s background or require a background check. (Exceptions include medical and/or genetic information.) What tends to get employers into trouble is using that background information to make employment decisions.

Background check basics

There are two federal agencies that regulate employment background checks: the Equal Employment Opportunity Commission (EEOC) and the Federal Trade Commission (FTC). The EEOC enforces federal laws that protect applicants and employees from discrimination, and the FTC enforces the Fair Credit Reporting Act (FCRA). Employers must comply with the regulations of both agencies as they apply to conducting background checks and the use of information about an employee’s background in personnel decisions.

First things first: it’s illegal for employers to check the background of either applicants or employees when the decision to do so is passed on one of the following protected classes: race, national origin, color, sex, religion, disability, genetic information, or age (40 years or older).

The FCRA also establishes additional requirements for employers using a company “in the business of compiling background information” (commonly known as consumer reporting agencies or CRAs) to get background information from applicants or employees:

• Employers are required to properly notify candidates and employees, in writing, that a consumer report may be used to determine eligibility for employment. This notification should also outline the scope of the investigation, as well as which reports are being requested.
• Employers must then receive written authorization from candidates prior to ordering the consumer report from a CRA.

Using background information

Even if an employer already has any of the information outlined above about an applicant or employee, it’s still illegal to use that information to make an employment decision.

When using background information to make an employment or personnel decision, employers should:

• Make sure to apply the same standards to everyone.
• Be very cautious about making employment decisions based on background issues that are more common amongst a particular group of any of the protected classes and do not accurately predict how an employee’s performance. This point has become even more prevalent in the wake of the ban-the-box movement.
• Be willing to make exceptions for problems that are the result of a disability and do not impact the applicant or employee’s ability to perform the requirements of the job.

Additional requirements apply when employers use background information obtained through a company in the business of compiling background information under the FCRA:

• Prior to taking any adverse action, however, employers must provide candidates with a pre-adverse action disclosure. This gives candidates a chance to discuss the report with the employer before a decision is made.
  • The pre-adverse action notification must include a copy of the individual’s consumer report, as well as information about the area of the report that raised concern. The FCRA also requires that employers provide candidates with a summary of their consumer rights.

• After an employer has taken an adverse action against a candidate or employee, they must provide the individual with an adverse action notice. This notice must include the following:
  • The contact information for the CRA that pulled the report;
  • A document stating that the CRA did not make the decision to take adverse action and has no information about why the adverse action was taken; and
  • A statement outlining the individual’s right to dispute the findings of the consumer report directly with the CRA, as well as the right to request a free copy of the report within 60 days.

So, should you be running background checks?

At the end of the day, the decision to run background checks is one every employer must make for itself. While there are certainly some compliance risks and pitfalls that could arise if the employer doesn't follow the requirements set by the EEOC or FTC, the risk of not knowing who you're hiring could come with consequences that are just a grave, if not graver.

Employers concerned about using background checks should ensure that their HR team or hiring managers are up to date on all federal, state and local employment laws governing background checks, or consider engaging outside employment counsel or human resources experts to review their HR policies and procedures.

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