employee background checks: avoid the pitfalls

Download Employee Background Checks: Avoid the Pitfalls

Post on 18-Jan-2015




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Background checks can be helpful tools in guiding your hiring choices, as well as subsequent decisions. Once you've used them and won't need them again for awhile, it's easy to tuck these reports away in a file and forget them. But, like most aspects of business, the handling of background checks is subject to government rules.


  • 1. Toll Free: 877.880.4477 Phone: 281.880.6525 www.hrp.net Employee Background Checks Avoid the Pitfalls

2. www.hrp.net Background checks can be helpful tools in guiding your hiring choices, as well as subsequent decisions. Once you've used them and won't need them again for awhile, it's easy to tuck these reports away in a file and forget them. But, like most aspects of business, the handling of background checks is subject to government rules. In this case, two different agencies, the Equal Employment Opportunity Commission (EEOC) and the Federal Trade Commission (FTC) are in charge of how you use background checks and how you retain and dispose of them. The two agencies enforce different rules, but they have jointly issued a set of federal laws and regulations applicable to background checks, which you need to know. 3. www.hrp.net One of the recently released web-based documents consist of summaries of rules applicable to employers, and another one advises employees (and prospective employees) of their rights and obligations with respect to background checks. The Federal Trade Commission enforces the Fair Credit Reporting Act (FCRA), which spells out most of the rules governing background checks, and the EEOC polices the use of background checks if there is discrimination involved. We tend to think of background checks only as something we do when considering an applicant to hire. But they might also be very helpful if you are thinking about promoting or transferring an existing employee -- or even deciding whether to keep the individual on board. A lot can happen between the day an employee is hired, and when he or she is a candidate for more responsibility. The person's employment history, education, criminal record, financial history and social media usage are all fair game in a basic background check. You can also dig deeper. Just be sure you know how you are allowed to use these reports and what your responsibilities are. 4. Disposing of Background Checks What the EEOC says: Any personnel or employment records you make or keep (including all application forms, regardless of whether the applicant was hired, and other records related to hiring) must be preserved for one year after the records were made, or after a personnel action was taken, whichever comes later. (The EEOC extends this requirement to two years for educational institutions and for state and local governments. The Department of Labor also extends this requirement to two years for federal contractors that have at least 150 employees and a government contract of at least $150,000.) If the applicant or employee files a charge of discrimination, you must maintain the records until the case is concluded. What the FTC says: Once you've satisfied all applicable recordkeeping requirements, you may dispose of any background reports you received. However, the law requires that you dispose of the reports - and any information gathered from them - securely. That can include burning, pulverizing, or shredding paper documents and disposing of electronic information so that it can't be read or reconstructed. For more information, see: Disposing of Consumer Report Information? Rule Tells How. 5. Duty to Inform For employers, rule number one is: When you are planning to use a commercial background check provider, the employees and prospective employees you will be checking out must be informed of your plans. Moreover, you must tell them in a letter which only addresses this topic -- it cannot be buried in a long letter covering multiple subjects. The letter must also state the obvious, which is, you might use information gained from the research to make employment-related decisions. www.hrp.net 6. www.hrp.net You should also get their written consent. But... what if the employee refuses? In a job application, you can articulate a simple policy such as this: You will not consider any applicants who decline granting permission for a background check. An employee who wants to stay with your company would have to think long and hard about refusing to authorize you to conduct a background check after he has been on board for a number of years. Needless to say, if the employee refuses, this should raise some red flags. While the employee's refusal to permit a background check does not necessarily give you grounds to terminate him, you could respond by letting him know he cannot be considered for a promotion unless a background check is run. Note:The notification and permission requirements only pertain to investigations carried out by commercial background check companies.However, if you were to conduct the investigation on your own, you risk treading into areas that would give the subject grounds for accusing you of an invasion of privacy. 7. Investigative Reports A more thorough background check known as an "investigative report" also can be conducted, but you are obliged to share the results of this report upon the subject's request. The purpose of an investigative report is to try to learn more about a person's character, general reputation, personal characteristics and lifestyle. Naturally, such reports require personal interviews of people who know the candidate well, and as a result are considerably more expensive. As a general rule, you should avoid digging any deeper than you absolutely need to, based on the nature of the job involved. www.hrp.net 8. www.hrp.net The FCRA requires you to certify to the commercial background check service provider that: you notified the person of your plans to commission an investigation, you have complied with the FCRA and will not use the information to make any decisions which would violate federal anti-discrimination rules. Note:State laws often govern some aspects of background checks; be sure you comply with them as well. 9. www.hrp.net If you intend to decline to hire an applicant or terminate an employee based on information contained in the background check report, you have two obligations. You must: 1. Give the person a notice regarding your decision, along with a copy of the report, thereby providing him an opportunity to challenge or explain any negative statements in the report before you follow through with your plan, and 2. Furnish a copy of a document, generally supplied by the background check company, titled "A Summary of Your Rights Under the Fair Credit Reporting Act." If the person offers no defense, or at least not one which changes your mind, after you make your "adverse action" you need to tell the person several things. The list includes the basic fact of your decision and that it was based on the report, and that the person "has the right to dispute the accuracy or completeness of the report," according to the FTC. 10. What Constitutes Discrimination? As noted, the EEOC's focus is on whether you use background checks in a discriminatory manner. "It's illegal," the EEOC states, "to check the background of applicants and employees when that decision is based on a person's race, national origin, color, sex, religion, disability, genetic information (including family medical history), or age (40 or older). The next logical question is, what would constitute evidence of such discrimination? This is assuming you don't commit the obvious blunder of only conducting background checks for, let's say, job applicants who appear to have Hispanic family ancestry. www.hrp.net Here are two admonitions from the EEOC: First, "take special care" when basing employment decisions on background issues "that may be more common among people of a certain race, color, national origin, sex, or religion; among people who have a disability; or among people age 40 or older. 11. www.hrp.net The EEOC offers this illustration: Employers should not use a policy or practice "that excludes people with certain criminal records if the policy or practice significantly disadvantages individuals "that fall into one of the demographic categories listed above, when the criterion (in this case, a criminal record) "does not accurately predict who will be a responsible, reliable, or safe employee. Second, be flexible if it appears that an individual's disability might impact job performance. Before rejecting such an applicant out of hand, "allow the person to demonstrate his or her ability to do the job -- despite the negative background information -- unless doing so would cause significant financial or operational difficulty," instructs the EEOC. This link takes you to a page on the EEOC's website which addresses the subject broadly, and includes additional links to pages that allow you to get into the weeds. 12. 14550 Torrey Chase Blvd., Ste. 360 Houston, TX 77014 USA www.hrp.net E-mail : info@hrp.net Toll Free Phone Fax : : : 877.880.4477 281.880.6525 281.866.9426