Performing background checks on prospective employees can prevent problems. But if you don’t handle them exactly as the feds demand, you could face even bigger trouble. Just ask employers who have been penalized for "technical" violations of the law.
The law in question is the Fair Credit Reporting Act, and that may have you shaking your head. After all, you’re not extending credit to prospective employees. However, some of the FCRA’s provisions apply to the use of pre-employment background checks. If you don’t follow those provisions to the letter, your company (and not the background screening service) can be held liable.
Just ask the folks at Michaels Stores. A federal district court class action targeted them for technical violations of the FCRA and a similar New Jersey act. The violations concerned a required disclosure. Michaels provided the disclosure to job applicants, but included it on the job application along with other notices required by ten of the states in which the company does business. So what did they do wrong? As written, the laws required a stand-alone disclosure. Choosing to include it with all the other red tape broke the law.
Paramount Pictures wound up in hot water for including a standard liability release on a disclosure form. Again, the FCRA states that the required disclosure must appear in a form that "consists solely of the disclosure." The decision to add the liability release was well-intentioned and easy to understand, but it proved to be quite costly.
Then there’s the case against a national staffing firm that failed to disclose information about its background screening provider, didn’t give the prospective employee the opportunity to request a copy of any screening report, and failed to provide a report until after deciding not to select him for a job. Those may not seem like significant violations, but when you consider the legal costs and potential damages, it makes far more sense to be sure that you’re doing all the right things, in the right order, and at the right time.
The FCRA requires that employers follow a two-step process. If you request a background screening of an applicant and decide not to hire based upon what the report reveals, you can’t just say, "Sorry. We’ve chosen someone else." First, you have to send what is known as a pre-adverse action letter, a copy of the background screening report, and a summary of the applicant’s rights. That includes an opportunity to review the report and dispute any of the information. After a "reasonable amount of time" (interpreted as a minimum of 5 days), you can issue the actual adverse action letter stating that you’re not hiring the applicant. If you fail to send both letters in the proper order, you fail to formally notify the applicant of his or her rights, or fail to allow the prescribed time, you’re in violation.
The issue becomes even more complicated if you do business across state lines, because nearly 20 states have additional provisions that go beyond the FCRA. For example, California law says that background checks cannot include any misdemeanor marijuana possession convictions that are more than two years old. However, the FCRA says that all convictions are reportable. So if you’re considering a candidate from Fresno who has a three-year-old pot conviction, you can’t be made aware of it — but only if the job is in California. If the job is in Indiana, you can consider the conviction. But if you’re an Indiana company with an office in California? You can see why it’s easy to be tripped up by these technical violations.
Staying on top of the complexity of these federal and state laws, as well as case law regarding their application and enforcement, is why our company works with a variety of law firms. They’ve helped us develop all of our authorization forms, and they modify the language when laws change. Sometimes, clients are tempted to change the language we use, but we always counsel them to leave the forms exactly as written. As the cases I’ve described here demonstrate, those simple variations can trigger complex violations.
A few years ago, the biggest fear among HR professionals was that their companies weren’t performing background checks or were using inadequate approaches. Today, the big fear involves failure to perform the checks correctly. That’s why it’s so important to partner with a screening company that understands the law and protects your company from problems like technical violations. That little bit of extra effort can prevent huge losses.
Mike McCarty is CEO of Danville-based Safe Hiring Solutions.