If You Do Background Checks, You Need This Info

It’s becoming increasingly common for employers to run back- ground checks on new hires or existing employees. Background checks provide a measure of security, or at least a display of security, and are becoming another ritual that we all expect in this era of ubiquitous metal detectors, pat-downs, and I.D. checks. If one of your employees goes bad, you want to be able to say that you had no way of knowing what was going to happen, as you wave his “clean” background check in righteous indignation.

But what do you do when a back- ground check is “dirty,” or a little smudged? Your first instinct may be to comb your hair into the best Donald Trump impression you can muster and shout, “You’re fired!” Your quick action, however, may buy your company a lawsuit under the Fair Credit Reporting Act, as well as some other laws.

The FCRA doesn’t just protect consumers from erroneous credit scores. It may surprise you to learn that a criminal background check is considered a “consumer report” under the FCRA, even if the report does not include the employee’s credit history. The FCRA dictates how you obtain consumer reports, including background checks for employment purposes, and what you do with them.

Before you can order a background check, the FCRA requires that you let the person know, in writing, that you are going to do so for employment purposes. You cannot simply insert this disclosure in the middle of an employment application or employee handbook. Rather, the FCRA requires that the disclosure be in a separate document that contains nothing else. The person must consent to the background check in writing.

Next, you need to consider what to do with the report once you receive it. The FCRA is silent on what crimes and other “dirt” are grounds for denying a person employment, but some states – not Virginia – have laws prohibiting employers from using misdemeanors or old convictions. Generally speaking, you should not consider arrests that did not result in conviction.

The Equal Employment Opportunity Commission takes the position that a blanket policy to deny employment based on a criminal record is discriminatory because it disparately impacts certain minority groups. According to the EEOC, an employer should consider the nature and gravity of the criminal offense, the time that has passed since the conviction or completion of the sentence, and the nature of the job held or sought. Although this EEOC position is not law, because the EEOC has had some success in pressing it in court, it is best to go through the EEOC’s recommended analysis before taking any action based on criminal history.

Even if an applicant’s background check reads like “The Girl with the Dragon Tattoo,” the FCRA does not allow you to just say no. This is where many employers stumble. The FCRA requires that before taking any adverse employment action based in whole or in part on a background check, the employer must give the applicant or employee a copy of the report and a written description of his or her rights under the FCRA. In the transportation industry, the employer may be required to make additional disclosures to applicants, depending on how the applicant applied for the position.

If you violate the FCRA, you can be sued for damages, including statutory and punitive damages, as well as attorneys’ fees. The damages in any individual case are generally small. The real danger for employers is the risk of a class action, where a group of rejected applicants and/or terminated employees join together to sue. Plaintiffs’ attorneys know that if an employer has made mistakes with one background check, it probably made mistakes with others. An FCRA class action can be lucrative for the plaintiffs and devastating for the employer. Recently, a federal court in Illinois approved a $5.9 million class settlement in an FCRA case. To avoid this fate, you should review your procedures relating to the use of background checks and seek legal guidance.