Legal Issues: Background Checks

September 1, 2015 | By George C. Hlavac, Esq., and Edward J. Easterly, Esq.

Legal Issues
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TAGS: candidate selection, journal,

NACE Journal, September 2015

Employers use background checks to determine if an individual is suitable for a position within the organization. Recently, however, employers have been running into significant roadblocks in the use and application of background checks, and some employers are now being challenged in the courts for conducting background checks on potential applicants.

In this regard, in 2013, transportation company J.B. Hunt entered into a settlement agreement with the Equal Employment Opportunity Commission (EEOC) pertaining to charges that a minority applicant was denied a position based on a criminal conviction that was unrelated to the duties of the position. The settlement agreement mandated that J.B. Hunt revise its policy, provide additional training to its employees, and provide monetary relief to the wrongfully excluded applicant. The EEOC has also filed lawsuits claiming that the use of criminal background checks by BMW and Dollar General have disproportionately screened out African-American applicants.

Similarly, a wave of class-action lawsuits claiming violations of the Fair Credit Reporting Act (FCRA) has been filed in recent years. In 2014 alone, the supermarket chain Publix and trucking company Swift Transportation settled class-action cases brought by former employees and job applicants alleging hyper-technical FCRA violations for $6.8 million and $4.4 million, respectively.

In addition, some states have enacted laws that restrict the use of background checks to exclude applicants. Many states and municipalities have recently adopted “ban the box” laws that prevent employers from inquiring into an applicant’s criminal background history until later in the hiring process. The EEOC and Federal Trade Commission (FTC) have also recently issued joint guidance documents on the use of background checks in employment decisions. These recent developments illustrate that employers and applicants should be aware of their rights prior to engaging in the application process.

Applicable Laws

Fair Credit Reporting Act: To understand which requirements apply to employers, an introduction into the applicable laws is necessary. Employers are generally governed by the FCRA: If an employer is using a third party to conduct a background check, the employer must comply with FCRA requirements. FCRA applies to all consumer reports on applicants/employees, not just those regarding credit histories; for example, criminal record reports are included. FCRA defines a consumer report as “any communication of information by a consumer reporting agency that bears on an individual’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living that is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the individual’s eligibility for employment purposes.”

Employers should follow these specific guidelines when obtaining background information on an applicant. FCRA states that a consumer reporting agency cannot provide background information, including credit information, for employment purposes without first:

  • Sending a clear and conspicuous written disclosure to the applicant before the report is ordered, indicating that a consumer report might be obtained for employment purposes, and
  • Receiving the written consent of the applicant to obtain the report.

In addition, the employer must state that information from the consumer report will not be used in violation of any applicable federal or state equal employment opportunity law or regulation. The employer must provide the applicant with a copy of any report obtained before taking any adverse action against the applicant, if the report is the reason for the adverse action. If the report is simply one factor in the adverse action, however, then the employer does not have to provide a copy of the report.

Employers must comply with any applicable state laws in addition to the FCRA. In fact, 11 states have passed laws that pertain specifically to an employer’s use of or inquiry into an applicant’s credit history. These laws provide more stringent requirements than those set forth in the FCRA. As more individuals have credit-related issues due to economic conditions, states have attempted to protect employment opportunities by adding hurdles for employers to clear before they can use negative credit information to exclude an applicant.

Furthermore, employers must be aware of state and local “ban the box” laws, which prevent employers from inquiring into an applicant’s criminal background until later stages of the hiring process. These laws, which attempt to increase the chances of applicants with convictions getting hired, are becoming increasingly more popular as of late. Fifteen states and more than 100 municipalities have adopted “ban the box” laws; more than 40 jurisdictions did so in 2014 alone.

Discrimination: In 2012, the EEOC published updated enforcement guidance on the use of criminal records in employment decisions. The guidance is titled Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964. Citing federal court cases that called into question the continuing validity of the EEOC’s prior guidance and advances in modern technology, the guidance is meant to serve employers when screening for criminal arrests and convictions. Employers can access a potential employee’s criminal history data through a variety of sources, including court records, law enforcement records, registries, watch lists, state record repositories, and FBI databases. While this information is increasingly available over the Internet, studies have found that these sources can contain incomplete and inaccurate criminal records, primarily through the failure of reporting the final disposition of a criminal case and/or by simple misspellings and clerical errors.

Title VII prohibits employment discrimination based on race, color, religion, sex, or national origin—not criminal conviction status. Having a criminal record is not a protected class under Title VII. The use of criminal records, however, may fall under a Title VII claim under one of two frameworks: disparate treatment and/or disparate impact. Both of these theories are premised on the fact that, statistically, incarceration and arrest rates in the United States are highest for African-American and Hispanic men. In turn, the use of criminal records in the employment process may involve disparate treatment or have a disparate impact upon certain races and national origins, which are protected classes.

The EEOC guidance permits employers to make decisions based upon conviction records, but not arrest records. Convictions usually provide enough evidence to show that the person engaged in the particular conduct. Such an exclusion from employment can be made, however, only where the conduct is job related and the exclusion is consistent with business necessity. Most importantly, the guidance sets forth a sweeping recommendation that employers not ask about criminal convictions on initial job applications and that if and when such inquiries are made, they are limited to convictions that are directly related to the job.

The EEOC included a list of employer best practices:

  • Eliminate policies or practices that exclude people from employment based on any criminal record.
  • Train managers, hiring officials, and decision-makers about Title VII and its prohibition on employment discrimination.
  • Develop a narrowly tailored written policy and procedure for screening applicants and employees for criminal conduct:
    • Identify essential job requirements and circumstances under which the jobs are performed.
    • Determine the specific criminal offenses that may demonstrate unfitness for performing such jobs.
    • Determine the duration of exclusion for criminal conduct, including individualized assessment.
    • Record the justification for the policy and procedures.
    • Record consultations and research considered in crafting the policy.
  • Train managers, hiring officials, and decision makers on how to implement the policy consistent with Title VII.
  • Limit inquiries to criminal records for which exclusion would be job related and consistent with business necessity.
  • Keep information about applicants’ and employees’ criminal records confidential.

The EEOC and FTC recently re-emphasized these practices in joint guidance documents on the use of background checks for employment purposes. These documents, which were issued in April 2014, are titled Background Checks: What Employers Need to Know and Background Checks: What Job Applicants and Employees Should Know.

While there is no guarantee that these best practices will eliminate all liability, following them will put employers on the right path to avoiding claims of discrimination. Conversely, if an applicant is placed in a situation where an employer has requested information illegally, he or she should be aware of applicable laws and his or her right to withhold information.

Selected Questions on Background Checks

Can an employer and/or career center request social media and/ or e-mail passwords from an applicant?
There are no federal laws that currently prohibit an employer from engaging in this activity. However, several states have passed laws that make it illegal for employers to ask applicants for passwords to social media sites. Employers and career centers must ensure that they are complying with any state laws prior to requesting such information.

Editor’s Note:
NACE has deemed this practice as unethical. See NACE Position Statement: Requiring Logins, Passwords Violates NACE Principles for Professional Practice at

Should employers and/or career centers conduct a “Google search” on an applicant?
Using the Internet to conduct an initial “screen” of applicants can be beneficial for employers, but it can also land them in hot water. If the search is conducted “in-house,” it is not covered by the FCRA. However, if a third party conducts the search, any information used that excludes an applicant must be disclosed. Information found through Google searches may include an individual’s race, religion, age, or other protected classification. Even if this information is not used to eliminate a candidate, there may be an inference of discrimination. Employers should not conduct a Google search until after the initial interview phase is completed.

Should career centers conduct background checks?
Unless the career center is required to do so regarding a specific contract with an employer or employment agency, it is not legally required to conduct background checks on applicants. The legal requirement to conduct a background check, and the headaches that go along with it, fall to the employer. The employer must be concerned with issues such as negligent hiring, verifying information, theft, workplace violence, harassment, and potential discipline problems. Additionally, in certain circumstances (e.g. the nursing field), the employer has a legal requirement to conduct a background check prior to hiring an employee. In addition, career centers are not obligated to inform employers of an applicant’s prior history. If a career center provides such information to an employer, the employer must notify the applicant that it has obtained the information from a third party. If the career center provides information to an employer and the information is inaccurate, the career center may be liable under state common law. Therefore, it should be left to the employer to obtain background information on its applicants.

There are always dangers associated with conducting background searches. However, in many cases, the benefits outweigh the burdens. If an employer fails to conduct a proper search, and hires an individual who is a danger to others or who should have been excluded according to state or federal laws, the employer may be subject to a cause of action for negligent hiring, and other civil or criminal penalties. Provided employers comply with the applicable state and federal laws, it is recommended that pertinent information be obtained prior to hiring any applicant. But proceed with caution: If the information is obtained or used wrongfully, the employer may land in court.

Copyright 2015 by the National Association of Colleges and Employers. All rights reserved.

blank default headshot of a user George C. Hlavac, Esquire, and Edward J. Easterly, Esquire, are attorneys in the Labor and Employment Law Department at Norris, McLaughlin & Marcus, P.A.