Legal Issues in Checking the Background of Employees

Many employers are opting to run background and credit checks on potential employees. In some fields, such as those where applicants will be working with minors or working in environments where there is a great deal of confidential information is kept, background checks are required for safety and liability reasons; for example, a convicted bank robber would most likely not be hired to work at a bank.

Other times, employers will run background checks simply to verify the person has no criminal record or to verify past employers, and then match that information to that entered in the application or the resume.
Regardless of the reason for the background check, there are certain rules and regulations in place designed to protect applicants when background checks are being obtained about them.

The Fair Credit Reporting Act places limitations on background checks, also called employment screenings, but these laws only apply to checks done by outside agencies, such as Equifax. There are no laws concerning background checks conducted by the employer itself.

Laws differ from state to state regarding legal limitations in obtaining background checks, so it's best to check with the state's employment agency first to determine what the specific legal ramifications are. As a general rule, however, the following limitations apply to employers:
? Arrest information. While it is legal to obtain information about criminal convictions and then use it as a determining factor in hiring practices, it is not legal to obtain arrest information of an applicant. However, this rule does not apply to healthcare professionals, who can ask whether applicants have had drug or sex-related arrests.
? Criminal history. A person's criminal record in most states is not public record, and only certain employers have access to this information. The organizations that can access a person's criminal history and use it for hiring purposes include utilities, law enforcement, security firms, school systems, and child care centers.
In addition, when an employer is running a credit check on an applicant, bankruptcies after 10 years and paid tax liens and collections after seven years cannot be used against the applicant. If the bankruptcy has occurred less than 10 years before, employers cannot discriminate against applicants based on that.

Performing a Background Check Legally
In order for an employer to run a background check, certain laws require written permission from the potential employee. This must be a document separate from all other application documents. This document must also contain information stating that the employee may also request a copy of the report if he or she desires.

Should an employer decide not to hire a candidate based on information in the credit check, a lengthy process then takes place. The employer is required under federal law to inform the applicant of their decision via what is called a pre-adverse action disclosure, which is a copy of the report as well as a document that lists the applicant's rights in accordance with the Fair Credit Reporting Act.

Once the applicant has been given the pre-adverse action disclosure, he or she is then given an adverse action notice, which is required to contain the name and contact information of the credit reporting agency and a statement that the applicant has the right to dispute any information found in the report.

In order to avoid liability, employers should be aware of all the legal ramifications that are associated with conducting background checks on applicants.