Background Checks: When do they Cross the Line?

Employers have become well-attuned to the importance of selecting job candidates that are qualified and will fit well with the organization’s culture.  Prior to extending an offer of employment to a viable candidate, best practices in conducting a background check are to use a variety of methods to assess skills, verify professional experience, and to check in with a candidate’s references.

Some employers opt to use a third-party consumer reporting services to assist with reference checking and securing consumer reports, such as criminal background checks, education verification checks, and motor vehicle reports.  This practice is compliant with the Fair Credit Reporting Act (FCRA) as long as the employer discloses to the applicant, in writing, that the report may be obtained for employment-related purposes. Such a disclosure must be made on a consent form that is separate from the employment application.  Once the applicant’s consent is obtained in writing, the employer may obtain this report.

Should an organization opt to disqualify a candidate based on the results of a consumer report, the employer is required to follow an “adverse action procedure,” which includes sending the candidate a pre-adverse action notice, a copy of the consumer report, a final adverse action notice and a summary of rights under the FCRA.

The EEOC has established guidance for employers with respect to the use of criminal history information.  The guidance disallows employers from basing hiring decisions on an applicant’s arrest record; rather, the conviction record is the only criteria that may be used in this regard.

The EEOC further requires that all background checks be “job-related” and “consistent with business necessity.” For example, it is reasonable for a financial sector employer to conduct a credit history check on a job candidate. There are generally three factors that an employer may take into consideration when determining if the criminal conviction meets this burden:

  • Nature and gravity of the offense
  • Time elapsed since the conviction or completion of a sentence
  • Nature of the position sought

Employers must use extreme caution when basing an employment decision on an employee’s credit score or history.  While the federal law allows employers to use an applicant’s credit history in the employment application process as long as doing so is job-related and consistent with business necessity, ten states currently have adapted limitations on the use of credit information for employment selection purposes:

  • California
  • Colorado
  • Connecticut
  • Hawaii
  • Illinois
  • Maryland
  • Nevada
  • Oregon
  • Vermont
  • Washington

Federal law does not prohibit employers from inquiring about criminal convictions on an employment application.  However, ten states have passed legislation disallowing employers from asking about criminal convictions on job applications; also known as “ban the box”:

  • California
  • Hawaii
  • New Jersey
  • Colorado
  • Connecticut
  • Massachusetts
  • Maryland
  • Minnesota
  • New Mexico
  • Rhode Island

Ultimately, an employer should assess the specific role for which it is hiring and the relevance of an individual’s criminal or credit history information in making its employment selections. This will aid in determining the necessity for conducting the background checks on specific roles that are engaged in working with the public, with vulnerable populations or with sensitive, proprietary information. Specifically, employers in the banking and financial services industry as well as those who work with young children, the elderly or individuals with disabilities are strongly urged to implement a background check in their hiring process.  Offers of employment should be contingent to the results of background checks; thus, if any disqualifying information appears on a candidate’s background check, the employer will easily be able to negate the preliminary offer of employment. The candidate will have the right to dispute the accuracy of the background check information by directly contacting the consumer agency; this right should be communicated to a candidate in order to ensure that employment background checks comply with the FCRA.

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