Employee Background Check

In follow-up to our prior post regarding certain additional liability protections afforded to employers who conduct background checks, in this post we explore additional considerations employers should keep in mind when conducting background checks.

Time Limitations

In Texas, criminal background checks are generally limited to a seven (7) year review period. However, Texas Business and Commerce Code § 20.05 provides an exception if an applicant is applying to a job with an annual salary that exceeds or should reasonably be expected to exceed $75,000 per year. For such positions, there is no limitation placed on a review period for criminal background checks (i.e., all criminal convictions after the applicant reaches adulthood at age eighteen (18) may be reviewed and considered). This limitation may become important if your company uses an out-of-state background search vendor, as such vendors will frequently provide information beyond the applicable time period.

Compliance With The Fair Credit Reporting Act

If a prospective employer intends to run an employee background check through a third-party credit vendor, it must comply with the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681, et seq. Strict compliance with the FCRA is required; otherwise, employers face potential liability. An employer who fails to comply with the FCRA may be subject to a lawsuit in federal court for certain set penalties. Further, an employee or prospective employee may also recover her attorneys’ fees and costs incurred to prosecute an action under the FCRA. Below is a brief summary of how employers should seek, at a minimum, to comply with the requirements under the FCRA.

1. Written Notice And Authorization

Before an employer can obtain a report from a background check company for employment purposes, the employer must provide the applicant with written notice that a background check may be used as part of an employment decision (i.e., whether to hire the prospective applicant). The document providing such notice must consist solely of written notice that the background search may be used as part of the employment process. Further, the individual must provide written authorization for a prospective employer to run a background search for purposes of evaluating potential employment.

2. Use of Background Information

If a prospective employer relies on a consumer report as part of taking an “adverse action” (i.e., denying a job), the employer must meet the following requirements:

Before taking the “adverse action” resulting from a credit check, the employer must provide the job applicant with a pre-adverse action disclosure that includes a copy of the applicable background search ordered from a sanctioned third-party vendor, and a copy of certain documentation prepared by the Federal Trade Commission summarizing an individual’s rights under the FCRA; andAfter taking the “adverse action,” the employer must give the effected individual notice of such action. This notice must include:

i. the name, address and phone number of the credit report agency that supplied the report to the employer;

ii. a statement that the credit reporting agency that supplied the report did not make the decision to take the applicable adverse action and cannot give specific reasons why the adverse action was taken;

iii. notice of the individual’s right to dispute the accuracy or completeness of any information contained in the report; and

iv. notice that the individual has the right to an additional free consumer report from the credit reporting agency if requested within 60 days.

3. FCRA Applies To Prospective And Current Employees

Please note, while background checks are most commonly used when evaluating prospective employees, the same rules under the FCRA apply to background checks run on current employees when evaluating such employees for reassignment, promotion and/or termination.

Potential Liability For Use Of “Blanket Conviction” Policies

Employers should be careful if they have a strict policy of refusing to hire someone with a criminal conviction. The Equal Employment Opportunity Commission (“EEOC”) has issued guidance indicating that such policies may subject employers to liability. The EEOC noted that certain segments of the population statistically have a higher rate of criminal conviction. Therefore, a policy against hiring anyone with a criminal conviction may discriminate against such portions of society. The EEOC stated that employers should not employ criminal record exclusions that may “operate to disproportionately and unjustifiably exclude people of a particular race or national origin” because such a policy serves to have a disparate impact on protected classes. If an employer fails to show that such an exclusion is “job related and consistent with business necessity” for the position in question, the exclusion is unlawful under Title VII of the Civil Rights Act of 1964.

Final Practical Considerations

Obtain Permission: Always obtain written consent from a job applicant to conduct a background search even if you intend to conduct the search in-house and not through a third-party vendor. Many third-parties will refuse to release information without authorization from the job application (e.g., the military, educational institutions and prior employers).

Scope: Determine the appropriate scope of the background search. Background searches can include searches of an applicant’s education history, military background, driving record, history of litigation/filing for bankruptcy, credit checks, drug tests, running internet searches and reviewing social media websites.Do Not Discriminate When Determining Who “Warrants” A Background Check: It is important to make sure your company is consistent in how it runs background searches. It is best to run the same background searches for comparable positions and/or areas within the company. It is illegal to run a background search when the decision to do so is based on the person’s race, national origin, color, sex, religion, disability, genetic information or age (40 or older).EEOC Guidance: Here is a link to guidance on the use of background checks provided by the EEOC-http://www.eeoc.gov/eeoc/publications/background_checks_employers.cfm.