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Get ready for increased legal scrutiny and regulations of your background screening and prehire testing procedures. In recent months, the EEOC, Congress and state legislatures have signaled interest in putting new restrictions on employers.

EEOC. The EEOC is poised to issue guidelines within the next year on how employers should conduct checks of applicants’ credit reports and criminal histories in a nondiscriminatory manner.

The agency is also considering rules describing when employers can use credit-history checks in the prehire process. It may also rewrite the current guidelines related to when employers can use arrest and conviction records in hiring.

In late 2009, the EEOC filed a rare discrimination lawsuit related to a company’s use of screening methods. It claimed a Dallas-based event-planning company used credit reports and criminal checks to “deprive a class of black, Hispanic and male job applicants” of their employment rights. (EEOC v. Freeman Co., D. Md.)

The suit is consistent with a five-year-old EEOC informal guidance that said it’s discriminatory under Title VII to have a “blanket” policy of not hiring applicants with a history of arrests because it disproportionately excludes minorities.

Congress. Meanwhile, a bill pending in Congress (H.R. 3149) would ban employers from using credit reports in the hiring process unless the job related to national security or at certain financial institutions.

Current federal law requires employers to obtain written permission from applicants to check their credit history.

Congress has already taken other steps. The recently passed health care reform law requires the federal government to develop a national system for conducting criminal background checks of prospective health care workers who deal directly with older patients.

Advice: Now’s a good time to make sure your screening tests are in compliance. For starters, don’t run credit checks on every applicant.

“A blanket application of credit checks provides your company with less of an ability to argue that it is job related,” said attorney Leslie Silverman of Proskauer Rose, during a recent Society for Human Resource Management (SHRM) conference. Other tips:

  • Be able to give a rational business reason on why a credit check is needed for predicting job performance.
  • Make sure managers use only the information that’s relevant to the job to make a hiring decision.
  • Give candidates a chance to explain the reasons for negative credit information.

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