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Know the law governing background criminal and credit checks

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in Discrimination and Harassment,Employment Background Check,Hiring,Human Resources

THE LAW: Title VII of the Civil Rights Act allows covered employees to file lawsuits against employers that have policies that appear to be neutral, but have a disparate impact on minorities or protected classes.

Additionally, the Fair Credit Reporting Act (FCRA) requires employers to obtain releases to obtain a job applicant’s or employee’s credit information. The law limits how employers may use the information they uncover.

Numerous states have laws governing hiring practices as well, and some of them have recently stepped up enforcement efforts. Because state laws vary greatly, employers should consult with their attorneys before using criminal or credit checks in hiring.

WHAT’S NEW: Two lawsuits challenging the fairness of background checks serve as cautionary tales for employers.

The U.S. Census Bureau recently was hit with a class-action Title VII lawsuit because it requested arrest information from applicants seeking census-taker jobs. Most state laws forbid the use of arrest records in hiring, allowing employers to consider only actual convictions.

The suit alleges the Census Bureau didn’t differentiate between summary offenses, misdemeanors and felony convictions. The bureau asked for all criminal information, regardless of how long ago the offense occurred. Rejected applicants had 30 days to produce court records, but the suit alleges the bureau’s instructions weren’t clear about what documentation was necessary. Many applicants complained of difficulty in obtaining proper documentation because many cases were so old, courts no longer had records in any easily accessible form.

In the other recent case, the EEOC in 2009 sued Freeman Companies for using a combination of credit and criminal records checks to screen job applicants. The EEOC claims the practice created a profile that unfairly screened out black, Hispanic and male job applicants.

State regulatory agencies are stepping up enforcement, too. Earlier this year, the Pennsylvania Human Relations Commission (the state equivalent of the EEOC) issued guidance stating that any employer requiring criminal background checks was presumed to have a policy that disparately impacted minorities. That makes it much easier for rejected minority applicants to sue employers in state court.

HOW TO COMPLY: No law bars employers from conducting criminal background checks. However, conducting checks when it isn’t necessary not only wastes resources, it may increase the risk of being sued. The same is true of credit checks.

Don’t assume that a one-size-fits-all hiring process is a good idea.

For some jobs, such as those involving unsupervised work with vulnerable populations such as children or the elderly, state or federal law may require a criminal background check. If so, the employer has no choice. But employers should avoid the trap the Census Bureau stumbled into and ask only about convictions, never arrests.

For positions where workers are closely supervised and don’t handle a great deal of money, criminal record checks would seem to be of little use. Remember, if you’re sued, you’ll be forced to prove the record check was required by business necessity. That may be a difficult argument to make.

If you must conduct a criminal records check, limit its scope. Beware asking about offenses that occurred many years ago. Remember that many states prohibit employers from asking about misdemeanor or summary offense convictions.

Asking only about felony convictions within a limited period of time seems prudent. Consult your attorney to determine the laws in your state.

Credit checks

Take a similar approach to credit checks to protect your organization.

Seek credit information only for jobs in which an employee would have access to money. Seek a credit report rather than a credit score. Credit score methodologies are proprietary, so only the credit scoring company actually knows what factors go into the score or what its predictive value is.

Note: Generally, credit scores are designed to predict how well someone will pay their bills—not whether they will steal from their employer.

Those who argue that credit checks disparately impact minorities claim that the information used in credit checks and credit scoring are the result of prejudice built into the credit system.

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