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Summer 2001 In The Background

Checking Job Applicants

You’ve got a couple of promising applicants. They look great on paper, but how do you know if the resume is legit? Or that the last job was everything they said it was? Or that they’re the upstanding citizens they say they are?

Employers are relying on references and pre-employment background checks more and more these days. And that’s not a bad thing: it can save you from making the costly error of hiring a bad apple. But it’s not a simple thing, either. If you’re too diligent, you run the risk of breaking the law or being sued for discrimination. If you’re too casual, you might be sued for “negligent hiring.”

“You can be sued if there was something in a new hire’s background that created a risk to your workplace, and you didn’t bother to try to find out that information,” says Daniel Cohen, an employment attorney with Charfoos, Reiter, Peterson, Holmquist and Pilchak (Farmington Hills, MI).

And then there’s something called “negligent referral”—when a previous employer makes inaccurate or otherwise damaging statements about the applicant. If you’ve ever called to check someone’s references, it’s likely you’ve encountered former employers who are reluctant to say anything beyond verifying dates of employment. Many companies have made it a policy to do this in order to minimize their legal exposure. In other words, they don’t want former employees to sue them for negligent referral.

All this raises a practical question: How do you check out an applicant’s background without getting into trouble? What’s the secret to walking the fine line between prudent investigation and illegal intrusion? The short answer: know what the law requires.

The legal landscape

The first law you need to know is one that applies to everyone. It’s a federal law that applies not just to prospective employers like you, but to the screening services and websites that provide this kind of information to clients like you. In addition, there are state laws that may apply to you, too. And every state has its own, of course. So before you start looking for screening companies or for information about an applicant, here’s a brief look at the legal landscape.

The Fair Credit Reporting Act.

Your number-one risk in gathering information about a prospective employee is falling afoul of the Fair Credit Reporting Act (FCRA). This federal law was amended in September 1997 to require that job applicants are informed of all background checks made on them. “This is a major issue that many employers don’t know about,” says Kevin Prendergast, VP and general counsel at Research Associates, Inc. (Cleveland, OH), a pre-employment background checking firm. “If you run a background check, you must comply with this law” in certain circumstances.

The law requires you to notify the applicant by means of certain formal written communications. These FCRA notification requirements kick in whenever you obtain information about a job applicant from third parties—including employee-screening services on the Web. It appplies to even seemingly minor background checks, such as scanning public records for driving violations or past residential addresses. Not complying with this law can mean costly penalties, as well as the potential for being sued by the job applicant.

You can learn more about the FCRA on the Federal Trade Commission’s website at ( Look for an article titled “What Employers Need to Know” in the business publications section.

Once you understand what the FCRA requires, fulfilling its requirements is straightforward. “The FCRA requirements are not much of a problem,” says Cohen. And an applicant who refuses to authorize the report can apply for a job somewhere else.

By the way, you don’t have to worry about any of this if you access the information directly—that is, if you look for information yourself instead of hiring a screening or investigative service. “The FCRA is triggered when you retain a third party to perform the investigation,” Cohen says. So if you go to the courthouse and look up public records yourself, you don’t have to disclose the investigation to the job applicant.

Employment discrimination.

It seems fairly simple: You run background checks and comply with the federal law… identify applicants who don’t have clean slates… and throw their applications away. Right? Not so fast.

Here’s another way you might break a law or end up in a lawsuit without realizing it: Many states prohibit you from making employment decisions based on information you get from specific records. New York, for example, limits your decision-making that’s based on incarceration records. Michigan prohibits you from accessing or relying on criminal arrests that didn’t result in convictions: even just looking at arrest records is considered discriminatory.

Complicating the picture is that Web-based employee screening services are national in scope; and state laws, which they as well as you must comply with, vary from state to state. Some of the information they get may be legally accessed in some states but not in others. And you’re the one on the hook.

The solution? Tie all of your hiring criteria solely to the requirements of the job. “If you say, ‘I won’t hire anyone with a criminal conviction, no matter what its nature, ‘ you’re being too aggressive,” says Cleveland. “It’s wiser to ask, ‘What does the criminal conviction have to do with the particular job?’” Suppose you’re hiring someone for a job that involves handling money—as the majority of retail jobs do. If the applicant had been convicted of theft, that criminal record would be relevant. But would conviction for driving under the influence be pertinent? “Maybe not,” says Cleveland. “To successfully defend against a discrimination charge, go beyond compliance with the letter of the law. Make sure you’re able to defend your decision on a rational basis.”

Invasion of privacy.

To protect yourself on this score, mum’s the word. Keep all information about people you hire—and don’t hire—confidential, says Cleveland. If you share details with the wrong people and it gets out (grapevines and e-mail being what they are), the applicant can sue you for invasion of privacy. Instead, once you get the information you need about an applicant, lock it up.

To protect former employers from invasion of privacy and other issues, more than 24 states have laws to shield them when giving references to prospective employers like you. These laws give immunity to “the employer who gives a reference in good faith and has backup documentation in the personnel files,” says Prendergast. However, there are steps you can take to loosen their grip. “Have all job applicants sign forms authorizing your business to get [their] employment history, and releasing former employers from liability,” says Cohen. “If you fax that form… and invite [the former employer] to show it to their labor counsel, they’ll be much more comfortable sharing information with you.”

Despite the potential legal pitfalls, background checks are useful, even essential. One bad apple can poison a company, says Prendergast. “You can’t afford not to check the backgrounds of people you hire.”

A growing number of employee-screening services are on the Web. For a fee, they provide background checks that include credit history, criminal conviction records, Workers’ Compensation records, court judgments, lawsuits, personal address histories and many other types of factual information. Depending on what you’re looking for, fees range from $10 to $200. That can be cheap insurance against the cost of hiring the wrong person.

Used properly, screening services can save you from hiring someone with a bogus resume or a dubious or even dangerous background. But used improperly, they can lead to costly lawsuits for violation of federal law, employment discrimination, or invasion of privacy.

“Generally speaking, one has the right to access and rely on information obtained in background checks,” says Michael G. Cleveland, an employment attorney with Vedder Price Kaufman & Kammholz (Chicago). “But there are risks that lurk out there for the uninitiated. Some information is protected by law, [but] in some cases, use of information can result in unlawful discriminatory decision-making.”

Check with your attorney for guidance on complying with state laws and the Fair Credit Reporting Act.

On the Web

A list of sites is available. You can also find similar businesses by keying in phrases like “employee screening” or “background check” into Google. Here are a few to get you started:

  • Includes credit history, criminal records, driving records, Workers’ Compensation claims, employment history, residential address histories, professional licenses, education, personal references. Cost: $10-$30. Response time: Immediately to 3 days.
  • Gets information from publicly available legal records. (Advertises itself as “a courthouse on the web.”) Includes liens, lawsuits, judgments, bankruptcies, assets, fictitious business names and dba’s, residential address histories. Costs: $5-$25.
  • Claims access to “billions of records”: residential address histories, DMV records, property searches, others. Users must register and give credentials as professional or corporate Human Resources. Costs: as low as $10; extra charges for more detailed reports.
  • A special-order service: fill out a form and they bill you according to the extent of the search. Includes criminal convictions, civil lawsuits, residential address histories, bankruptcies, Workers’ Comp records, credit reports and more. Same-day service is available for an extra fee.

Web-based services have their limitations, though. They may have access to publicly available records, but they can’t provide insight into someone’s character or work habits or employment-related problems. In addition, there’s a good deal of factual information that doesn’t show up in public records, says Prendergast. “Many times, employees with workplace problems are handled quietly, and the person is allowed to resign with no record.” For that kind of information, you might want to retain an investigative agency, not just a screening service.

Finding Ms. or Mr. Right

The right person for the job has the experience, training and traits you require. The right person is someone you can trust—not just with your business’s money and merchandise, but with your customers and your reputation as a specialty retail business. Finding the right person for the job isn’t always easy. But you’ll know you have the right person and can hire with confidence if you do the checking, and do it right.

Linda Saracino

Saracino has been a freelance writer and editor for 18+ years.

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