Human Resources: More Frequent Background Checks of Employees & Applicants

PHILADELPHIA – October 31, 2006 – More employers are conducting criminal background checks on prospective and current employees, and asking questions relating to prior arrests and convictions in the application process. This raises the need for companies to develop procedures and practices to avoid potential liability from discrimination complaints and other legal actions, according to Pepper Hamilton, a multi-practice law firm with 450 attorneys in Pennsylvania, New Jersey, Delaware, New York, Michigan, California, and Washington, D.C.

80 percent of employers performed criminal background checks in 2003, compared to 51 percent in 1996, according to a survey by the Society for Human Resource Management (SHRM). InfoLink Screening Services, an employment screening firm, found that 8.5 percent of the people they investigated in 2005 had criminal records. In addition, 33 percent of employers today perform credit checks, reflecting an increase of 55 percent over the last five years, according to a Harris Interactive poll conducted for Spherion, recruitment and staffing firm.

“Background checks can help companies reduce costs arising from employee thefts, embezzlement, violence, absenteeism, and turnover; minimize their exposure to negligent hiring claims; and encourage honesty among employees and applicants,”
said Hope Comisky, a partner with Pepper Hamilton LLP (www.pepperlaw.com).

“Background checks can also help employers determine whether applicants are qualified for employment, and identify job-seekers who provide incorrect personal and work histories. They can establish whether current employees are qualified for promotions or transfers, or are appropriate for positions involving confidential information,” added Comisky, who specializes in employment law counseling, training, and litigation.

However, companies must develop proper procedures and practices regarding background checks to avoid potential liability from complaints about discrimination, or stemming from the actions of improperly screened workers, according to Comisky. Employers should be aware of applicable state laws pertaining to background checks, as well as federal guidelines.

Many employers choose third-party vendors to conduct background checks due to their cost-effective expertise in pre-employment screening, and their ability to conduct a nationwide search to obtain an applicant’s most accurate and complete data and records Vendors are better able to detect attempts to use false identities, and to sort out cases of mistaken identities.

Background checks also should be conducted on temporary or outsourced workers by the corresponding staffing agencies. “Employers who fail to screen temporary workers are exposed to liability, which may offset any economic benefits they may realize from the use of temporary or outsourced workers,” said Comisky.

Included among the legal cautions employers should consider are:

· Actions must be job-related: “Employers who use background checks during the hiring process must, when faced with a challenge, be able to establish that the practice is job-related and consistent with the needs of the business,” said Comisky. Under Title VII of the federal Civil Rights Act of 1964, a “disparate impact” claim will be successful if the complainant demonstrates that a particular employment practice had an unequal impact on him or her because of his or her race, color, religion, sex, age, or national origin; and the employer cannot establish that it was job-related with respect to the position in question, and was consistent with business necessity.

· Governments may be liable for improperly screened workers: Individuals may sue certain government entities if their civil rights are violated by government employees who were not properly screened by a background check at the time they were hired, according to Comisky.

· Special situations apply to criminal arrest records: Employers who make decisions based on an employee’s or applicant’s criminal arrest record must examine the circumstances surrounding the arrest; provide an opportunity for the individual to explain it; and then conduct an additional investigation to assess the person’s credibility, according to guidelines established by the federal Equal Employment Opportunity Commission (EEOC). “The asserted conduct for which the applicant or employee was arrested must be job related and relatively recent,” Comisky said. “For example, an employer may closely scrutinize an applicant’s character and prior conduct for law enforcement-related positions, or those that would involve giving the employee easy access to the property of others, or involve responsibility for the safety of others.”

· Proper disclosure required for credit checks: Employers performing credit checks on employees or applicants must obtain their written authorization before seeking a report, as well as provide a clear and conspicuous disclosure stating that the employer may obtain a report for employment purposes. “If an employer takes an adverse action based on the report – such as terminating an employee, or not hiring an applicant – the employer must give a copy of the report received from the outside agency that performed the search and a written description of the rights of a consumer under the Fair Credit Reporting Act to the individual,” said Comisky.

About Pepper Hamilton
Pepper Hamilton LLP (www.pepperlaw.com) is a multi-practice law firm with 450 lawyers in seven states and the District of Columbia. The firm provides corporate, litigation and regulatory legal services to leading businesses, governmental entities, nonprofit organizations and individuals throughout the nation and the world. The firm was founded in 1890.