Background checks are an important tool employers can utilize to protect their customers, employees, and business. Conducting a thorough background check can also help employers mitigate the risk of negligent hiring claims. A negligent hiring claim is one that a victim brings against an employer when an employee caused harm to the victim. Stated simply, the employer is held liable for the employee’s actions if the employer knew – or should have known had the employer exercised reasonable care (e.g., by conducting a background check) – that the employee posed a risk and hired the individual anyway.

However, employers must follow the law when conducting a background check. If they don’t comply with the Fair Credit Reporting Act (FCRA) and the Equal Employment Opportunity Commission’s (EEOC) guidance on using background check information, they risk the applicant suing them for discrimination.

Below are steps on how to properly conduct a background check and what to do if the employer finds information they believe disqualifies the individual from employment.

1. Know When to Ask About Criminal Convictions

   Many states and local governments have passed “Ban-the-Box” laws restricting when an employer can ask about criminal convictions. These laws prohibit employers from asking about criminal convictions on job applications and in interviews before a conditional offer of employment has been made. However, even if you’re not subject to a state or local ban-the-box law, know the EEOC recommends as a best practice that employers do not ask about criminal convictions on job applications. To see what state laws apply to them, clients can review our Ban-the-Box Chart.

2. Be Consistent in Conducting Background Checks

   Employers cannot pick and choose on whom they run background checks. As with all HR matters, employers must be consistent, or risk a discrimination claim. If they are going to conduct background checks after extending an offer of employment, then they need to conduct them on all applicants.

   If they believe only some positions for which they are hiring require a background check, this is fine as long as (1) they are consistent in conducting a background check on every applicant to that position who receives an offer of employment; and (2) they are able to articulate legitimate business reasons why this position requires a background check and others do not. If a majority of the applicants to that position are racial minorities and there is no legitimate business reason this position should be subject to a background check when others at your company are not, this puts the employer at risk for a discrimination claim.

3. Know What to Consider When Conducting a Background Check

   There are many restrictions on what information employers can consider when they conduct a background check, including the use of credit checks and criminal history. Several states prohibit the use of credit checks in employment with limited exceptions for specific jobs (e.g., financial advisors) or where the employer can demonstrate credit history is substantially related to the job. Clients can review the Limitations on Credit Checks in Employment Chart to see what state restrictions you have. As a best practice though, even if the employer is legally permitted to conduct a credit check, we recommend employers not do so unless specifically required to by law.

   With respect to criminal histories, background check results often contain arrests and convictions that employers are prohibited from considering when making an employment decision. For example, many states prohibit employers from considering any arrest that did not result in a conviction, as well as convictions more than seven years old, subject to limited exceptions. Clients can review the Ban-the-Box Chart for their state’s restrictions.

Whether employers must comply with the FCRA or not, they should be sure to obtain the applicant’s written authorization to conduct the background check. The authorization should include an acknowledgment the applicant received the notice/disclosure and is authorizing law enforcement agencies, federal/state agencies, schools/universities, employers, etc. to provide the requested information.

For sample disclosure forms, the required Summary of Rights, and authorization forms, clients can review the Recruiting page, Step 4: Background Checks.

5. Review the Background Check Information

After employers conduct the background check, review the information received. If the applicant has a criminal history, be sure to only consider the information the employer is legally authorized to when determining if the applicant is still eligible for hire. This is discussed above in Step 3.

If the applicant’s background check came back clear, then go ahead with the next step in the hiring process. However, if the background check contains information that could remove the applicant from the hiring process, then the employer must take additional steps before it makes that decision, as discussed below.

1. The nature and gravity of the offense or conduct. The EEOC states the nature of the offense or conduct may be assessed by looking at the harm caused by the crime (for example, theft causes property loss). The legal elements of a crime also may be instructive. A conviction for felony theft may involve deception, threat, or intimidation. And with respect to the gravity of the crime, a misdemeanor is generally less severe than a felony.
2. The time that has passed since the offense, conduct, and/or completion of the sentence. In considering the time passed, there is no bright line rule the EEOC gives. However, the more time that has passed since a conviction, the less relevant it probably is versus a conviction in the recent past.
3. The nature of the job held or sought. In considering the nature of the job sought, an employer cannot rely just on a job title. It must look at the essential duties of the job, (e.g., data entry, lifting boxes), the circumstances under which the job is performed (e.g., the level of supervision, oversight, and interaction with co-workers or vulnerable individuals), and the environment in which the job’s duties are performed (e.g., out of doors, in a warehouse, in a private home).

The purpose of this balancing test is to link the criminal conduct to the essential functions of the position. A stronger link will demonstrate the employer’s refusal to hire is job-related and consistent with business necessity. The EEOC’s guidance gives several examples employers may find helpful when determining if denying employment due to a criminal history is job related and consistent with business necessity.

On occasion, the Green Factors may support denying an applicant employment without further evaluation. For example, an applicant convicted of identity theft who applies for a position as a financial advisor could be denied the position with little risk of a discrimination claim. However, more often than not, this is not the case and employers should err on the side of caution and conduct an “individualized assessment.”

According to the EEOC’s guidance, an individual assessment means the employer informs the applicant they will be excluded from the hiring process because of past criminal conduct and then gives the applicant an opportunity to demonstrate why they shouldn’t be excluded from consideration. Providing this opportunity can be done through the pre-adverse action notice required by the FCRA, discussed in Step 7 below; however, even if the employer is not required to comply with the FCRA, this individualized assessment should still be done if they believe a criminal conviction removes the applicant from employment consideration.

There are several factors the employer should consider when doing an individualized assessment:

1. The facts or circumstances surrounding the offense or conduct.
2. The number of offenses for which the individual was convicted.
3. Age at the time of conviction, or release from prison.
4. Evidence the individual performed the same type of work, post-conviction, with the same or a different employer, with no known incidents of criminal conduct.
5. The length and consistency of employment history before and after the offense or conduct.
6. Rehabilitation efforts (i.e., education/training).
7. Employment or character references and any other information regarding fitness for the particular position.
8. Whether the individual is bonded under a federal, state, or local bonding program.

If a candidate refuses to cooperate with an employer’s inquiries, a decision may be made without any additional information. Employers should maintain documentation of their conversations with applicants and employees to support their hiring decision, leaving out any statements of opinion. If, after making the individualized assessment, the employer determines an applicant’s criminal history disqualifies the applicant from employment, the applicant should be provided with written notice of the decision not to hire and information on the disqualifying conviction. Individual state laws may require additional information in such notice.

7. Issue a Pre-Adverse Action Notice
If employers intend to not hire the applicant based on the information in their background check, whether because of a criminal history, social media search results, reference check, or otherwise, then they should issue them a pre-adverse action notice. This step is required under the FCRA.

A pre-adverse action notice informs the applicant the employer intends to not hire them based on the results of their background check. This gives the applicant an opportunity to dispute any information contained in the background report and provide details the employer needs to conduct the individualized assessment for convictions discussed in Step 6. For a template pre-adverse action notice and a list of enclosures that must be provided under the FCRA, clients can review the Recruiting page, Step 4: Background Checks.

Under the FCRA, the applicant must be provided at least 5 business days to dispute the report and provide you with supplemental information; however, we recommend giving a 10-day window.

8. Evaluate Any Additional Information the Applicant Provides

If the applicant provides the employer with additional information, then they should evaluate it. If the information relates to a conviction, conduct the individualized assessment discussed in Step 6. If you receive information changing your mind and you now want to go forward with hiring the applicant, then proceed with the hiring process. If, however, the employer does not receive anything from the applicant, or the information provided does not change the employer’s mind, then proceed with sending the adverse action notice.

9. Issue an Adverse Action Notice

If the applicant does not provide information in response to the pre-adverse action notice, or the information provided does not change your mind, then send the applicant an adverse action notice. This notice informs the applicant the employer will not be hiring them based in whole or in part on the background report. For a template adverse action notice that complies with the FCRA, clients can review the Recruiting page, Step 4: Background Checks.

Employer Takeaways

A thorough background check, conducted in accordance with the state law, the FCRA, and EEOC guidance, is a helpful tool employers can use to hire the best person for their business, protect against negligent hiring claims, and mitigate the risk an applicant sues for discrimination in the hiring process.

To help hire the best and avoid red flags, be sure to have:

1. Job applications compliant with the latest laws;
2. Conduct effective interviews;
3. Perform reference checks; and
4. Perform background checks.

For more tips, guidance, and dos and don’ts in the hiring process, clients can speak with our certified HR Professionals.

The Real Issue
The first person HR interviews is the male employee who made the complaint. During the interview, the employee admits the female employee’s clothes did not violate the company’s dress-code, nor was the attire unprofessional. He also tells HR he believes it was merely a coincidence she walked in front of the window at the exact moment the sun shone through. HR proceeds to ask the employee if there is anything else he would like to add to the investigation. At this point, the employee opens up and reveals the likely reason he complained.

Apparently, the female employee is involved romantically with the department manager. The male employee proceeds to tell HR how the department manager favors the female employee at work. When asked to give examples, the male employee rattles off several examples of where the female employee was given preferential treatment (e.g., better assignments, longer lunch breaks, etc.).

Now What?
HR doesn’t get to rest. Favoritism based on gender (or any other protected class), can result in claims of sexual harassment and discrimination. Now, this claim will have to be investigated. The process will start again: talk to the complainant, talk to the accused, take witness statements, and draw a conclusion.

Here, the investigation into a seemingly meritless complaint revealed a much bigger and more serious issue. Regardless, an employer must investigate. It is not HR’s or the manager’s role to pass judgment on the employee or the complaint. Follow the proper process: investigate then reach a conclusion.

For useful forms, policies, and guidelines on workplace investigations, including an investigation toolkit, clients have access to the Employee Complaint Investigations resources.

1. Talk with the employee. Ask them how their disability affects their ability to perform the task in question. Do not ask about diagnosis, only how job performance is affected.
2. Ask what accommodation the employee thinks is necessary so they can perform the task. If the information they provide is insufficient or they do not have an answer, you can ask them to have their doctor complete an assessment of their disability as it relates to their job functions. This includes asking what the doctor suggests as an accommodation.
3. The employer should determine if they can make the accommodation. The employee must be able to perform the essential functions of the job, but there are usually always ways to accommodate. For example, moving less essential duties of the job to another employee, changing a shift, providing lifting assistance, or a chair. Most accommodations are easily accomplished and cost less than $500, with many costing nothing at all.
4. If the employer cannot provide the requested accommodation, it can suggest an alternative modification that will allow the employee to perform the job. The provided accommodation does not always have to be the one the employee requested but it does need to allow them to perform the job.
5. Come to an agreement on the accommodation and implement it. Document the conversation and the outcome with the employee for the confidential file.

If the employer reaches a point where it feels it cannot accommodate the employee because doing so would be an undue hardship, employers are encouraged to talk with an HR professional or employment law attorney before proceeding. Undue hardship is very difficult to prove, and ePlace Solutions does not encourage taking that approach.

Clients can follow these simple steps and get professional assistance when needed. Remember the interactive process is a conversation with your employee; don’t make it harder than it needs to be!