Administering Background Checks: Avoid Litigation

It is not uncommon in the health care industry for employers to require a background check and a drug test as a condition of an employment offer to a potential candidate. However, failure to follow state and federal guidelines in this area can subject an employer to potential litigation.

Background checks may cover a range of areas and are designed to ensure that candidates who receive employment offers represent themselves accurately in the application and interview process. Although not all areas may be utilized in every hiring situation, background checks include: employment references; educational references; financial references; motor vehicle record checks; and criminal record checks. Many HR departments conduct these checks using individual resources; however there are companies that provide comprehensive background check services which cover any and all of the above.

Some issues to keep in mind and keep liability at bay are:

• Employment references must be obtained with the candidate’s permission. Employers should ensure that their application forms include a statement granting this permission and that the statement is signed by the applicant. Most organizations will only supply information with a signed statement from the former employee while others will only verify dates of employment and salary. This is, in part, due to increased litigation by former employees who discovered that they were given poor recommendations.
• Educational references can be requested from the candidate by requesting transcripts or verification of graduation from the educational institution listed on the application.
• Financial references or credit history checks may be considered discriminatory toward women and minorities and generally should only be conducted if the position entails financial responsibility, such as the handling of significant amounts of currency or other valuables. Employers who need to do this type of screening must comply with the Fair Credit Reporting Act (FCRA) and more recently, the Fair and Accurate Credit Transactions Act (FACT). The FCRA requires employers to follow the following process when utilizing Consumer Reporting Agencies to perform investigations: provide a clear disclosure in writing to the candidate before the report is acquired; receive written authorization from the candidate to obtain the report;  if adverse action is going to be taken based on the report, the employer must provide to the candidate, within three days,  a copy of the report and a copy of the Federal Trade Commission notice “A Summary of  Your Rights Under the Fair Credit Reporting Act” and must advise candidate of his/her right to dispute the accuracy of information contained in the report.
• Motor vehicle record checks are maintained by Departments of Motor Vehicles and can be accessed by the employer. It is suggested that motor vehicle record checks only be conducted on candidates seeking positions requiring the use of organizational or personal vehicles in the course of performing their duties.
• Criminal Record Checks are considered consumer investigations and must comply with the FCRA requirements discussed above. Criminal record checks may be used to screen potential employment issues and to protect employers from litigation from negligent hiring that may arise if an employer knew, or should have known, about an applicant’s prior history that endangered customers, employees, vendors or others with whom the employee comes into contact.  If a criminal record check is going to be performed, the employment application must include a disclosure to that effect and must be signed by the applicant. Any negative information obtained should be carefully reviewed on a case-by-case basis, making sure to consider all the relevant information such as: how the crime relates to the position applied for; how recent was the conviction; how old was the applicant when the crime occurred; the level of risk to customers, coworkers, etc.  If the employer decides to make an adverse hiring decision based on negative information contained in the report, the applicant must be notified in writing and given a chance to respond. If the information is erroneous, the applicant is given an opportunity to provide information to clear the record.

Employers must ensure that they remain on top of federal and state guidelines, and the changes that may occur from time to time. Adhering to this will certainly avoid headaches and the dreaded threat of litigation.