Employer Background Checks Dos and Don’ts

There are certainly advantages to using background checks in the hiring process to mitigate exposure to legal claims such as negligent hiring, supervision, and retention; liability for acts/omissions by employees under the doctrine of respondeat superior; and even damages caused by acts of workplace violence. Employers, however, should ensure their hiring managers understand what type of background check information they should be requesting and using. For example, some industries in Oklahoma are heavily regulated regarding employing individuals who have criminal convictions for controlled substances. In these industries, a waiver must be obtained from the applicable state agency or the employer could be fined. In other industries, an employer may review the applicant’s credit history if the position involves financial responsibility. Regardless of the background check information used, put simply, employers must be aware of the laws that prohibit the use of requesting and using certain personal information.

Oklahoma law permits employers to obtain consumer reports (for example, credit scores, credit history, criminal background checks, driving records, etc.) in the hiring process. Prior to obtaining the report, the employer must provide the applicant a written notice that the consumer report will be used, and that the applicant may obtain a free copy of the report. The federal Fair Credit Reporting Act (FCRA), which does not prohibit employers from inquiring about or making an employment decision based on an individual’s credit score or other credit history, has some additional requirements. If an employer uses a third-party provider (referred to as a credit reporting agency (CRA)) to obtain background information on an applicant or existing employee, the employer is subject to the FCRA. The FCRA imposes some limitations on the contents of consumer reports. When employers request consumer reports for employment purposes related to jobs that pay less than $75,000 annually, information that must be excluded includes: (i) Chapter 11 bankruptcies more than ten years old; (ii) civil lawsuits, civil judgments, and arrest records more than seven years old (or until the statute of limitations expires if that time period is longer); (iii) paid tax liens more than seven years old; (iv) delinquent accounts more than seven years old (except for government-sponsored student loans, which are subject to longer periods); and (v) other adverse information (other than criminal convictions) more than seven years old.

Just as is required under Oklahoma law, the employer must give notice and obtain consent prior to obtaining a consumer report. This notice disclosure must contain the FCRA notice only and must not address any other topics. For example, including the notice disclosure in a job advertisement or job application does not meet the requirements of the FCRA. The employer must also obtain written consent from the applicant or existing employee before obtaining the consumer report. Employers should be cautious of obtaining consent for background checks using clickwrap agreements in online job applications as some courts have found this practice to be a violation of the FCRA. Investigative consumer reports (for example, interviews with neighbors or other people knowledgeable about the applicant or existing employee) are considered more invasive and trigger additional requirements under the FCRA beyond the scope of this advisory.

If an employer intends to take adverse action based on the consumer report, the employer must provide the investigated individual with a copy of the consumer report and a written summary of consumer rights before taking action. While no time limit is imposed under the FCRA before an adverse action can be taken, the employer should wait a reasonable period of time to allow the individual to respond to the consumer report. After taking action, the FCRA has additional disclosure requirements that must be followed. Specifically, after the employer takes an adverse employment action, the employer must tell the applicant or existing employee (orally, in writing, or electronically): (i) that he or she was rejected because of information in the report; (ii) the name, address, and phone number of the company that sold the report; (iii) that the company selling the report didn’t make the hiring decision, and can’t give specific reasons for it; and (iv) that he or she has a right to dispute the accuracy or completeness of the report, and to get an additional free report from the reporting company within sixty days.

If an employer isn’t using a third-party provider to conduct background checks and uses internal resources for background checks, the FCRA does not apply.  However, it is still a best practice to obtain written consent from the employee in order to mitigate a potential invasion of privacy claim.

Additionally, a growing number of states have enacted “ban-the-box” laws (also known as fair chance laws) that restrict an employer from inquiring into an applicant’s criminal history at various stages of the hiring process. Oklahoma has yet to follow this trend but does require criminal background checks for private prison contractors, childcare providers, healthcare workers, applicants for employment with a school, community service providers, and Medicaid personal care providers. The EEOC, however, has taken the position that employers should not inquire into an applicant’s criminal history because of its disparate impact on racial minorities. Specifically, the EEOC has stated that, “[a]s a best practice, and consistent with applicable laws, the [EEOC] recommends that employers not ask about convictions on job applications.” But, the EEOC clarifies that if such an inquiry is made, “the inquiries be limited to convictions for which exclusion would be job related for the position in question and consistent with business necessity.”

All to say, even in this age of instant information, the use of blanket background checks and criminal history inquiries should be used with caution and on a position-by-position basis. And, when questions arise about their use, it’s always a good idea to talk visit with your employment law attorney.

If you have questions regarding your business’s policy on background checks, please contact Evan Way or another member of the firm’s Labor & Employment Practice Group.

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Associated People:

Evan Way

Practice Area:

Labor & Employment