Background checks can be helpful tools in guiding your hiring choices, as well as subsequent decisions. Once you've used them and won't need them again for awhile, it's easy to tuck these reports away in a file and forget them. But, like most aspects of business, the handling of background checks is subject to government rules.

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Employee Background Checks
Avoid the Pitfalls

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Background checks can be helpful tools in guiding your hiring choices, as well
as subsequent decisions. Once you've used them and won't need them again
for awhile, it's easy to tuck these reports away in a file and forget them. But,
like most aspects of business, the handling of background checks is subject to
government rules. In this case, two different agencies, the Equal Employment
Opportunity Commission (EEOC) and the Federal Trade Commission (FTC) are
in charge of how you use background checks and how you retain and dispose
of them. The two agencies enforce different rules, but they have jointly
issued a set of federal laws and regulations applicable to background checks,
which you need to know.
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One of the recently released web-based documents consist of summaries of
rules applicable to employers, and another one advises employees (and
prospective employees) of their rights and obligations with respect to
background checks. The Federal Trade Commission enforces the Fair Credit
Reporting Act (FCRA), which spells out most of the rules governing
background checks, and the EEOC polices the use of background checks if
there is discrimination involved.
We tend to think of background checks only as something we do when
considering an applicant to hire. But they might also be very helpful if you are
thinking about promoting or transferring an existing employee -- or even
deciding whether to keep the individual on board. A lot can happen between
the day an employee is hired, and when he or she is a candidate for more
responsibility. The person's employment history, education, criminal record,
financial history and social media usage are all fair game in a basic
background check. You can also dig deeper. Just be sure you know how you
are allowed to use these reports and what your responsibilities are.
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4. Disposing of Background Checks»
What the EEOC says:
Any personnel or employment records you make or keep (including all application
forms, regardless of whether the applicant was hired, and other records related to
hiring) must be preserved for one year after the records were made, or after a
personnel action was taken, whichever comes later. (The EEOC extends this
requirement to two years for educational institutions and for state and local
governments. The Department of Labor also extends this requirement to two years
for federal contractors that have at least 150 employees and a government contract
of at least $150,000.)
If the applicant or employee files a charge of discrimination, you must maintain the
records until the case is concluded.
What the FTC says:
Once you've satisfied all applicable recordkeeping requirements, you may dispose of
any background reports you received. However, the law requires that you dispose of
the reports - and any information gathered from them - securely. That can include
burning, pulverizing, or shredding paper documents and disposing of electronic
information so that it can't be read or reconstructed.
For more information, see:
Disposing of Consumer Report Information? Rule Tells How.

5. Duty to Inform
For employers, rule number one is: When you are planning to use a
commercial background check provider, the employees and prospective
employees you will be checking out must be informed of your plans.
Moreover, you must tell them in a letter which only addresses this topic -- it
cannot be buried in a long letter covering multiple subjects. The letter must
also state the obvious, which is, you might use information gained from the
research to make employment-related decisions.
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You should also get their written consent. But... what if the employee
refuses? In a job application, you can articulate a simple policy such as this:
You will not consider any applicants who decline granting permission for a
background check.
An employee who wants to stay with your company would have to think long
and hard about refusing to authorize you to conduct a background check
after he has been on board for a number of years. Needless to say, if the
employee refuses, this should raise some red flags.
While the employee's refusal to permit a background check does not
necessarily give you grounds to terminate him, you could respond by letting
him know he cannot be considered for a promotion unless a background
check is run.
Note: The notification and permission requirements only pertain to
investigations carried out by commercial background check companies.However, if
you were to conduct the investigation on your own, you risk treading into areas that
would give the subject grounds for accusing you of an invasion of privacy.

7. Investigative Reports
A more thorough background check known as an "investigative report" also
can be conducted, but you are obliged to share the results of this report upon
the subject's request. The purpose of an investigative report is to try to learn
more about a person's character, general reputation, personal characteristics
and lifestyle. Naturally, such reports require personal interviews of people
who know the candidate well, and as a result are considerably more
expensive. As a general rule, you should avoid digging any deeper than you
absolutely need to, based on the nature of the job involved.
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The FCRA requires you to certify to the commercial background check service
provider that:
• you notified the person of your plans to commission an investigation,
• you have complied with the FCRA
• and will not use the information to make any decisions which would
violate federal anti-discrimination rules.
Note: State laws often govern some aspects of background checks; be sure you
comply with them as well.

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If you intend to decline to hire an applicant or terminate an employee based
on information contained in the background check report, you have two
obligations. You must:
1. Give the person a notice regarding your decision, along with a copy of the
report, thereby providing him an opportunity to challenge or explain any
negative statements in the report before you follow through with your
plan, and
2. Furnish a copy of a document, generally supplied by the background
check company, titled "A Summary of Your Rights Under the Fair Credit
Reporting Act."
If the person offers no defense, or at least not one which changes your mind,
after you make your "adverse action" you need to tell the person several
things. The list includes the basic fact of your decision and that it was based
on the report, and that the person "has the right to dispute the accuracy or
completeness of the report," according to the FTC.

10. What Constitutes Discrimination?
As noted, the EEOC's focus is on whether you use background checks in a
discriminatory manner. "It's illegal," the EEOC states, "to check the
background of applicants and employees when that decision is based on a
person's race, national origin, color, sex, religion, disability, genetic
information (including family medical history), or age (40 or older).“
The next logical question is, what would constitute evidence of such
discrimination? This is assuming you don't commit the obvious blunder of
only conducting background checks for, let's say, job applicants who appear
to have Hispanic family ancestry.
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Here are two admonitions from the EEOC:
First, "take special care" when basing employment decisions on background
issues "that may be more common among people of a certain race, color,
national origin, sex, or religion; among people who have a disability; or
among people age 40 or older.“

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The EEOC offers this illustration: Employers should not use a policy or
practice "that excludes people with certain criminal records if the policy or
practice significantly disadvantages individuals "that fall into one of the
demographic categories listed above, when the criterion (in this case, a
criminal record) "does not accurately predict who will be a responsible,
reliable, or safe employee.“
Second, be flexible if it appears that an individual's disability might impact job
performance. Before rejecting such an applicant out of hand, "allow the
person to demonstrate his or her ability to do the job -- despite the negative
background information -- unless doing so would cause significant financial or
operational difficulty," instructs the EEOC.
This link takes you to a page on the EEOC's website which addresses the
subject broadly, and includes additional links to pages that allow you to get
into the weeds.

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