Criminal Background Checks-General

Is the person you’re hiring really someone you can trust?

Many employers are turning to background checks to find out. But checks have their own set of rules, and if they aren’t followed, an employer can find itself in a good amount of trouble.

Sue Bendavid-Arbiv, the national chairwoman of the labor and employment practice group of Arter & Hadden in Woodland Hills, California, offers guidelines. Though state laws vary, California’s legislation is considered a bellwether, so Bendavid-Arbiv gives it extra prominence here.

What should a background-check policy cover?

Employers should give employees advance notice that the employer reserves the right to conduct a background check-and investigate matters like an individual’s prior employment history, personal references, educational background, and other relevant information. If HR wants to go further and ask for credit reports and criminal-background checks, that should also be included in the policy.

How should the policy be distributed?

I’d include the policy in at least two places: on the job application and in the employee handbook. Obviously, the job application is for individuals who are not yet employed by the company. It notifies them that their consent to undergo a background check is a condition of employment. The handbook applies to existing employees. If someone is up for a promotion, and one of the conditions of a promotion is to undergo a background investigation, having it in the handbook reserves the employer’s right to do so.

What else should the policy include?

Also in the policy should be information that the employer will comply with federal and state laws. There are several bodies of law covering background checks. The federal law is the Fair Credit Reporting Act. There are two sources of California state laws: one is called the Investigative Consumer Reporting Agencies Act, and the second is the Consumer Credit Reporting Agencies Act. The laws all significantly affect how a background check is performed procedurally and what information an employer can obtain, and how far back. They also include the steps the employer must follow if in fact the company plans to use that information in making a [negative] employment-related decision.

What should employers know about these acts?

This year the California legislature amended the Investigative Consumer Reporting Agencies Act. Even before 9/11, there’s been real concern about identity theft. California lawmakers stated that if consumers-and employees are, in fact, consumers-are given early notice that someone is looking into their background, they’ll be able to more quickly verify whether their identity has been stolen. California’s laws changed so employers have to automatically give a person a copy of the report.

What are the trouble areas for HR in doing background checks?

First, if employers are using a background-investigation company to perform the checks, they should first make sure the agency knows about the laws and changes in the laws, and provides them with forms to be used in order to obtain the individual’s consent. It’s got to be a separate form that the employee is signing; it can’t just be within the handbook or the job application. Further, the agency should not provide information it is not entitled to disclose. There’s lots of [information] agencies can’t disclose, like bankruptcies that are over 10 years old, tax liens that are more than seven years old, etc. So that’s the first problem area.

What’s the other trouble spot?

The second major stumbling block is: What do you do when you obtain information that the employer is not entitled to use in making employment-related decisions? Some information, if used, may result in claimed violations of equal employment opportunity laws. As an example: The background check reveals the applicant or employee had a conviction for drunk driving. You may take this into consideration only if the conviction is somehow related to the job. For instance, the person is applying to be a driver. Then there’s a legitimate business reason for not considering that person-a concern the person may drink and drive again while working for you. But if the conviction has nothing to do with the job, and you use it anyway in your decision not to hire, then it may result in an argument that the use of that information resulted in a disparate impact on the basis of race or national origin.

What other information should an employer not use?

Generally speaking, under California law, employers are prohibited from seeking, receiving, or using as a factor in determining employment any information relating to a person’s arrest that did not result in his conviction. So while you may have received some information related to an arrest while doing an investigation, you can’t use that information. Sometimes an employer may find out an applicant has been arrested for embezzlement. You may not want to hire that person, but the California labor code says you can’t use that information in making your decision.

If HR discovers that a person has served time for a violent crime, and hires the person anyway, does that make the company liable if the employee becomes violent in the workplace?
An employer is not required by law to do an investigation into an applicant’s criminal background. But if you’ve done one and found this out and hired that person anyway, then the question is: Are you guilty of negligent hiring? Were you reasonable, under the circumstances, in hiring this person?

Would an employer be blamed for not conducting a background check if the employee had a history of violence?

If the employee had a sensitive position or one requiring significant public contact, like working with children, in those situations the question is: How reasonable was it for you, the employer, given all the circumstances, to not conduct a background check?

If HR decides to do background checks, must all applicants be checked, or can HR decide on an individual basis?

An employer doesn’t have to perform the same type of background investigation on every applicant or employee, on one condition: that any differentiation the employer makes is based on legitimate business interests. If you have a fleet of drivers to drive trucks on the road, you may want to conduct background checks on all of them to verify their driving records and see if they had any criminal convictions for DUIs. That would be a legitimate business interest-and a policy of conducting background checks only on drivers would be reasonably calculated to further that business interest.

If a background check leads a company to decide not to hire an applicant, should HR tell the person?

The federal Fair Credit Reporting Act talks about providing notice to the employee of any adverse employment action. When adverse action is taken, the employer must provide the applicant with the following: notice of the adverse action, the name and phone number of the agency that furnished the report, and a statement that the consumer reporting agency did not make the adverse action and is unable to provide the specific reason for the adverse action.

Is there anything else HR should know?

A new California code covers employers that conduct their own investigations. Now any person who collects information in lieu of using one of these agencies still must provide the consumer with a copy of the report at the time of the meeting or interview, or within seven days of receiving the information-whichever is earlier. Now the question becomes: What about reference checks? What happens if HR calls a prior employer to confirm that the person worked there. They say the employee was a bad employee. Does the new potential employer have to turn around and give that information to the candidate? That’s how the act reads. But it’s not how it was intended. The California legislature is now revising that wording to accurately reflect that it does not apply to this situation. Here’s what it does apply to: Let’s say you obtain a Social Security number and you’re able to discover through public information the person’s amount of debt and whether they defaulted and whether they’ve had lawsuits. That’s what the law was designed to cover.