Dorsey’s Analysis of Quirky Question # 191: Pre-Employment Background Checks for Temporary Employees
Readers: Quirky Question # 191 was posed to our colleagues, Ed Magarian and Jillian Kornblatt, the authors of QQ # 189, also addressing the complicated issues that sometimes arise with respect to pre-employment background checks. If you have any questions regarding the analysis below, don’t hesitate to contact Ed at firstname.lastname@example.org or by phone at 612.340.7873, or Jillian at email@example.com or by phone at 612.492.6156. We hope you find their analysis of value.
Quirky Question # 191:
I read with interest your analysis of pre-employment background checks in Quirky Question # 189. I’ve got a slightly different inquiry touching on the same issue.
I’m a Human Resources Executive at a national retail company. During several parts of the year, we need to hire additional cashiers. For many years, we have successfully used a temporary staffing agency to fill these seasonal positions. The temporary workers are employed by the staffing agency, but work at our company. Read more
Readers: Quirky Question # 189 was a question posed to our colleagues Ed Magarian and Jillian Kornblatt. We hope you find their analysis helpful. Additional information regarding Ed is available at: http://www.dorsey.com/magarian_edward/. Ed can be reached via email at firstname.lastname@example.org, or by phone at 612.340.7873. Additional information regarding Jillian is available at: http://www.dorsey.com/Kornblatt_Jillian/. Jillian can be reached via email at email@example.com, or by phone at 612.492.6156. Please don’t hesitate to contact Ed or Jillian if you have any questions regarding their analysis below.
Quirky Question # 189:
I am the Human Resources Director at a mid-size company, with employees in eight states. We’ve recently read about the U.S. Equal Employment Opportunity Commission (“EEOC”) bringing suit against employers based on pre-employment background checks, as well as some states prohibiting pre-employment credit checks. We certainly don’t want to create potential liability for ourselves based on our pre-employment screening, but feel that criminal and credit checks are a valuable part of our recruiting process. We are beginning to feel that no matter how we proceed, we face potential liability in one way or another. Do you have any advice? Read more
Quirky Question # 98:
We hired another company (we’ll call it Company ABC) to provide our firm with contract employees. Company ABC performs background checks on its employee pool, utilizing publicly available sources of information.
We typically use a third-party vendor to perform background checks on the employees we hire, but we do not do so for the contract employees provided to us by Company ABC. A contract employee we hired through Company ABC recently stole our property. It turns out the employee had multiple arrests for similar crimes, which were not revealed by Company ABC’s background check. We are confident that this information would have been revealed had we used our normal third-party vendor.
We have decided that in the future, we would prefer to use our own third-party vendor to perform background checks on the contract employees provided to us by Company ABC. Is there any reason we cannot do so?
[Readers: Quirky Question # 98 was posed to my colleagues in our Seattle office. Sarah Jung Evans was kind enough to provide the analysis below. If you would like to follow up with Sarah, don't hesitate to contact her at 206.903.2396, or via email at firstname.lastname@example.org. More information on Sarah's background is available at: http://www.dorsey.com/evans_sarah/. Regards, Roy]
This scenario is more common than you might think, often arising when a company like yours uses an agency to find temporary or permanent employees and the subsequent hires prove problematic, or even worse, criminally dishonest. In this situation, your company (and other similarly situated employers) need to ensure that it does not experience this business loss again. The question is how this goal can be accomplished without terminating your firm’s relationship with the hiring agency, which you have described as “Company ABC.”
You have two options. First, you can ensure that the contract with Company ABC contains terms requiring it to utilize a reputable third-party vendor to conduct appropriate background checks. The likely reason Company ABC is not doing so already is to avoid the costs associated with complying with the notification and other requirements of the Fair Credit Reporting Act (FRCA), which are triggered when one does not perform the background check internally.
Second, and the preferred option in my view, is for your company to take the reins on obtaining the records and screen the recommended employees yourself. Especially when you are hiring employees (whether temporary or permanent) who will have job responsibilities that you consider sensitive, conducting an appropriate background check can be crucial. For example, if the employees were going to be given access to customers’ credit card information, you will want to have complete confidence in the personal integrity of the employees you retain. Similarly, if you were hiring an engineer whom you planned to assign to a highly confidential software or hardware project, the disclosure of which would have great value to your competition, your company will want to ensure you are retaining honest and loyal individuals.
If your firm elects to screen the recommended employees (or use your standard vendor to do so), you will need to ensure that Company ABC, which is providing you the potential candidates, furnishes those prospective employees with the proper notices and authorizations for your company, or your vendor, to conduct the background check you deem necessary. After proper notice and authorization is provided to the potential hires, your company would be free to conduct systematic checks.
The main drawback to this second approach is the cost your firm will incur. The main benefit is that you will exercise substantially greater control of the screening process.
A standard credit check, often an important part of evaluating a candidate’s fitness for a position, implicates significant legal requirements to which you need to be attuned.
First, the Washington Fair Credit Reporting Act (WFCRA) prohibits an employer from obtaining a consumer report bearing on an employee’s creditworthiness unless the information is substantially job-related, or required by law. RCW § 19.182.020. If such information is substantially job-related, an employer may obtain it only after the reasons for the use of such information are disclosed to the employee in writing. Id.
Second, the FCRA imposes certain requirements related to “consumer reports,” a term that includes credit reports. Before obtaining a credit report, an employer must: (a) inform an applicant or employee in a written disclosure statement that a report may be obtained for employment purposes; and (b) obtain the individual’s written authorization to obtain the report. 15 U.S.C. 11681b(b)(2). The employer also is obligated to certify to the consumer reporting agency that it has complied with all disclosure requirements. 15 U.S.C. § 1681d(a)(2). It is not entirely clear whether a vendor relationship would be considered to meet the “for employment purposes” prong of this requirement. However, to be safe, we recommend that your company comply with both the FCRA and WFRCA.
Third, the WFCRA imposes additional requirements. For current employees, the disclosure must notify the employee that the consumer report may be used for employment purposes. RCW § 19.182.020(2)(b). A statement to this effect contained in an employee manual will suffice. Id.
Fourth, both the FCRA and the WFCRA require certain disclosures before taking an adverse employment action, if such action is based in whole or in part on the information contained in the consumer report. The FCRA requires that after the report is completed, but before taking any adverse action, an employer must provide the individual with: (a) an unedited copy of the report; and (b) a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act.” 15 U.S.C. § 1691d(a)(1).
After taking adverse action based, even partially, on information in the report, the employer must orally or in writing: (1) give notice of the adverse action to the person; (2) provide the name, address and telephone number of the consumer reporting agency making the report; (3) state that the consumer reporting agency did not take the adverse action and is unable to give specific reasons for the action; and (4) provide notice of the person’s right to obtain a free copy of the consumer report from the consumer reporting agency within sixty days and the right to dispute the accuracy of any information in the report. 15 U.S.C. § 1681m(a).
The WFCRA requires the employer to provide to the employee written notice of the adverse action, plus: (1) the name, address and telephone number of the consumer reporting agency; (2) a description of the consumer’s rights under the Washington Act; and (3) a reasonable opportunity to respond to any information in the report that is disputed by the employee. RCW § 19.182.020(2)(c); RCW 19.182.110(2).
With regard to a criminal background check, you should keep in mind that such checks can be found to violate Title VII due to the disparate impact they have on minorities. To minimize the risk of such a claim, you must be able to show a business necessity to justify the exclusion of an applicant on the basis of prior criminal convictions.
Generally, an employer cannot use a prior felony as an absolute bar to employment in all situations, and a blanket policy of excluding all applicants with conviction records is likely to constitute unlawful discrimination. Such pre-employment inquiries should be accompanied by a statement that convictions will not disqualify the applicant automatically, and that you will consider the particular circumstances of each case when deciding whether employment of that particular person for the particular job is manifestly inconsistent with the safe and efficient operations of the employer.
Despite the seemingly onerous requirements associated with both the FCRA and the WFCRA, by conducting careful background checks either directly or using your own vendor, your company will gain greater control over the hiring process for your independent contractors/temporary employees. This should enable your firm to avoid the repetition of the problems you recently experienced when relying on another company to evaluate the backgrounds of these individuals. Finally, as your company becomes more familiar with the FCRA and the WFCRA, and your company works with these statutory schemes more routinely, you likely will find that compliance with these statutes is less burdensome than you might anticipate.
Quirky Question # 72:
I am the HR Manager for a Minnesota-based defense contractor. A few weeks ago, I received a general e-mail inquiry regarding employment opportunities with our company, along with an attached resume, from a person I will call Joe Hunter. Normally, I would simply delete such an e-mail, as my company does not accept or respond to employment inquiries made outside of our job posting system. However, 25 years ago I graduated high school with someone named Joe Hunter and I was curious whether this might be the same person.
I also happened to have a couple of open positions at the moment, so I figured there was a business reason, beyond just my personal curiosity, to open the attached resume. Unfortunately, the resume did not list high school, but it did suggest that Mr. Hunter might actually be qualified for one of our job openings. I was still curious, though, whether this was my former high school classmate. So, I decided to run “Joe Hunter” through a popular Internet search engine.
The search results lead me to a personal page on a popular social networking site for Joe Hunter, including personal data, pictures, and extensive blog entries. I discovered that Joe Hunter was a younger-looking, African-American man, not the same Joe Hunter I knew in high school. I also noticed that one of Mr. Hunter’s blog entries described how he was detained by police following a recent anti-war protest.
Since this was not the Joe Hunter I knew from high school and since our company policy does not accept unsolicited resumes anyway, I simply deleted the e-mail I had received from Joe Hunter. It also occurred to me that we run background checks on all candidates after they receive a contingent offer of employment as part of our normal hiring process. It is unlikely that Mr. Hunter would be able to pass such a check given his arrest record, and, in any event, I questioned why someone who participates in anti-war protests would be interested in a position with our company.
I know from various surveys I’ve seen that as many as 25-50 percent of companies use the Internet as a source of information in the hiring process. But I recently attended a conference on the Fair Credit Reporting Act and am concerned that I should have gotten some sort of release from Mr. Hunter before I reviewed information about him from an external source. What are your thoughts?
[Readers: Last week's Quirky Question was submitted to and has been analyzed by my partner, Mike Iwan. Mike is a 1992 graduate of Stanford University and a 1998 graduate from the University of Minnesota Law School. Mike can be reached at 612.340.5613 or by email at Iwan.Michael@dorsey.com. If you have any questions or comments about Mike's analysis, don't hesitate to contact him. Regards, Roy]
The good news is that you have not implicated the employment background checking provisions of the federal Fair Credit Reporting Act by conducting your own Internet search. The bad news is that you have implicated a number of other practical and legal issues by deviating from your normal procedure for handling employment inquiries. Many of these, in and of themselves, do not automatically create legal liability, but they do highlight a set of facts that could be difficult to explain if this candidate felt he was unlawfully passed over for employment and sought to take further action.
One perhaps less obvious issue has to do with your company’s federal contractor status. While typically you would be entitled to disregard an unsolicited e-mail inquiry that goes outside of your normal job posting process, if you undertake any qualitative assessment of the unsolicited candidate, you most likely have converted Mr. Hunter into an applicant for employment under the OFCCP’s traditional definition of an applicant or more recent definition of an “Internet applicant.” If so, you must record this individual in your applicant flow data and include him in any statistical analysis you might be required to do in support of an affirmative action program.
Several other issues relate to the inherent unreliability of information, with the possible exception of public records, accessible via the Internet. While it is true that (depending on the survey) as many as 60 percent of companies utilize Internet searching at some point in the hiring process and with respect to at least some positions, your situation demonstrates precisely why such information must be viewed with caution, particularly as it relates to social networking sites, personal blogs, and the like. First of all, there is no way to verify whether the “Joe Hunter” whose blog you stumbled upon happens to be the same “Joe Hunter” who e-mailed you the employment inquiry, or, if he is, whether any of the information he reported about himself is true. In short, while running an Internet search may yield some possible additional information about a candidate for employment, I would only engage in such a search pursuant to an established policy that applies equally to all candidates who reach a certain stage of the hiring process and/or with respect to certain positions. Moreover, you are much better off spending your time contacting employment references and, when the time is right and according to your established process, conducting formal background checks. Internet searches should never be a substitute for these procedures.
As suggested above, the most significant legal concern I would have about your situation, is that by deviating from your established procedure, you have, almost by definition, engaged in differential treatment with respect to this applicant for employment. And to further complicate matters, you have discovered (or at least think you have discovered) attributes about this individual that you typically would not have in your possession at this stage of your process with respect to other candidates. For example, you believe that Hunter is “younger” (which could be a protected class under Minn. Stat. § 181.81) and African-American (which is a protected class under Title VII and virtually every state’s human rights statute). While it is not per se unlawful to possess or (with the exception of pre-employment medical inquiries) even ask for such information in your hiring process, you run the risk of later having to demonstrate that such information did not factor into your decision-making process (i.e., proving the negative), or that, even if it did, the individual still was not the most qualified applicant (potentially leading to a mixed-motives analysis).
Your question suggests that at least some of the additional information you discovered did, in fact, influence your decision to pass over this individual as a candidate for employment – most notably, your suspicion that Hunter has an arrest record. Even if true, the EEOC and most courts view consideration of arrest records as leading to disparate impact in the hiring process, due to the disproportionately higher rates at which certain racial or ethnic groups are arrested. Conviction records are viewed less skeptically (although the EEOC continues to maintain that the conviction must be recent, serious, and job related for it to be a valid criteria in the hiring process), and while certain conviction records are available through public records sites, many of these sites ask you to agree to certain limitations on use that you should review carefully before running any queries.
Separate from the arrest record issue, if you were able to confirm through your normal interviewing and hiring process that Hunter was an outspoken anti-war protestor, you could consider that factor when evaluating whether he was the most-qualified candidate for a position with your company. As a private employer, you are not precluded from factoring in Mr. Hunter’s self-avowed public policy views under some sort of “free speech” argument. Nor is there any argument that information posted by Hunter on a personal blog is protected by any right to privacy. In fact, even if Hunter only expected the blog to be viewed by family and friends, the information could not be any more public than by posting it on a site accessible through a general Internet search engine. Accordingly, should you have questions about information you discovered via a legitimately conducted Internet search, you should feel free to present such information to the candidate, even if just to confirm whether the person referenced is the same.
In sum, decide first whether an Internet search would be a useful addition to your company’s hiring process. If you conclude that it would be a valuable addition to your hiring process, develop a policy to insure that such searches are run for all candidates at a specified point in the hiring process and/or for certain positions. This would suggest reserving Internet searching for a later stage of the hiring process, after you have winnowed down the candidates through traditional criteria. Your policy should include a standard set of searches to be run for each candidate and a requirement to document the results of such searches. Finally, you should approach such results with a healthy dose of skepticism, at the very least giving candidates a chance to respond to Internet search results if they are likely to influence the hiring decision. Do not use Internet search results as a substitute for verifying employment references and running a formal background check. Employers have been found liable for a “bad hire” when they failed to check references or run a traditional background check. No employer has (yet) been found liable for failing to run an Internet search prior to hiring.