In the Trenches: When it comes to screening applicants, how thorough is too thorough?

Aug. 19, 2014
In this edition of In the Trenches, Acme wonders if they are breaking the law by conducting background checks.

After Lottie Larcen was fired for stealing coworkers’ lunches from the break room, Bill Bigshot, Acme’s head of security, recommended to human resources that the company start running background checks on potential new hires. Sam Surley, manager of the Acme Falls plant, adamantly agreed, having had one too many sandwiches swiped by his once-trusted receptionist. Sam didn't intend to wait around for HR to implement Bill's sound advice.

So when he began reviewing applicants to replace Lottie, he asked Bill to call in a favor from Sonny Snoops, his buddy on the Acme Falls police force. Sonny had just started a side business, LockUp LookUp, taking advantage of his access to police department records to provide just this sort of information to prospective employers, landlords, and cautious singles performing “due diligence” on potential mates.

Sam had narrowed down his choices to three candidates: Paula Priors, Pete Poach, and Susie Stickyfingers. He planned to interview all three once he heard back from Sonny that their records were clean. Meanwhile, though, Sam got a call from Barry Boorish, the plant’s reliable shipping and receiving manager. His niece, Brenda Bland, had just moved to town from Pennsylvania, and needed to land a job quickly.

As far as Sam was concerned, the job was Brenda’s. He wanted to keep it in the Acme family, and he wanted a receptionist that he could trust, above all else. Sandra Stickler, the HR recruiter, insisted that Sam interview the other candidates anyhow, to avoid the appearance of nepotism. But Sam had news for Sandra: LockUp LookUp just reported that both Paula and Pete had arrest records, and he had no intention of interviewing them. As for Susie, Sonny’s search came up empty.

Sandra was outraged that Sam had run background checks on the applicants. Sandra continued to scream at Sam on the phone as he put her on hold. Barry was standing at the entrance of his office, his face white. His niece Brenda had just been picked up by the Acme Falls police department. It turns out she’s the notorious “Hapless Hamburglar of Harrisburg.” Minutes later, Sandra appeared at the door next to Barry. “Do you realize the legal liability that you have exposed this company to?” she shrieked.

What legal liability did Sam expose this company to?

A labor and employment analyst’s response:

Sam has exposed Acme to possible discrimination lawsuits, liability under the Fair Credit Reporting Act (FCRA), and violations of other laws restricting the use of background checks of prospective employees. And he couldn’t have done it at a lousier time: This is an area of intense focus of late on the part of the EEOC; the plaintiffs’ bar has also taken note; and state and local laws restricting the use of criminal information in hiring are spreading like wildfire.

Many employers rely on background checks to screen job applicants. That, in itself, doesn’t violate the law. But the problem, at least as the EEOC and the U.S. Supreme Court see it, is that the arrest and conviction rates of African-Americans and Latinos are far higher, statistically, than those of whites. As a result, a policy of automatically ruling out job applicants with criminal records has a “disparate impact” on nonwhites. Such a policy may have a disproportionate impact on males, as well. Therefore, a blanket restriction of this sort may be unlawful under Title VII, the federal antidiscrimination law.
Employers can use a job applicant’s criminal history as a factor in hiring decisions only if the particular crime that the applicant has committed somehow relates to the specific job that the employer is seeking to fill. In EEOC parlance, the use of an applicant’s criminal history must be “job-related and consistent with business necessity.” Employers may have a convincing argument that background checks are justified when filling jobs in banking or finance, if the prior crime is embezzlement, for example, or passing bad checks, or in positions where employees serve customers in their homes or have public contact with vulnerable populations, such as in healthcare or childcare. But filling Lottie’s receptionist position would not warrant such scrutiny.

The EEOC also expects employers to look at the bigger picture, considering the nature of the particular criminal offense and its severity, as well as how much time has passed since the offense was committed. And even then, employers can use criminal convictions only, not merely arrests, which tend to befall racial minorities even more disproportionately than convictions. Also, employers have to apply the same standard to all applicants when requesting a background check or questioning them about their criminal background, regardless of their race, color, national origin, gender, religion, disability, or age.

Moreover, under the FCRA, employers need written permission from job applicants before obtaining background reports about them from a third-party agency such as LockUp LookUp. If the employer intends to make a negative employment decision based on the contents of a background report, it has to provide a copy of that report to the applicant and give the individual a reasonable opportunity to explain any negative information found. There is good reason for these safeguards: The background information uncovered is not always reliable, especially when the job applicant has a common surname.

Finally, it’s important to note that “ban the box” laws are proliferating with increasing frequency around the country. These measures typically forbid the use of check boxes on preliminary job applications asking whether the applicant has been convicted of a crime. The rationale behind these state laws and city ordinances is that a job applicant with a criminal background shouldn’t be tossed from consideration right out of the gate by virtue of an X in the checkbox; the applicant should at least have a shot at a job interview and a chance to explain.

Whether Acme Falls is subject to a ban-the-box provision is unclear — we don’t know where this hypothetical company town is located — but, if so, it appears to be the only background check restriction that the company didn’t manage to violate. Acme’s rogue manager undertook background checks selectively, rather than investigating every applicant; failed to secure advance permission from the applicants before doing so; made negative hiring decisions based on arrest records only; and did not inform the failed applicants that the negative background information was the reason for their rejection, let alone give them a chance to explain themselves. And, as a practical matter, the background investigation that Sam obtained was insufficient. Searching one small jurisdiction hardly secures confidence. And, even if Sam had properly investigated Brenda along with the other applicants, her Harrisburg exploits would not have surfaced through Sonny’s less-than-thorough methodology.

Employers must ensure that they have lawful policies and practices in place, are using legally compliant job application forms, and are considering applicants’ criminal information only where appropriate. Acme may well have such a system in place and perhaps a more reputable third-party vendor to take on the task, but, because Sam recklessly bypassed HR, these precautions were useless. Perhaps the bigger lesson for employers here: They need to rein in reckless managers and discipline those who fail to heed company protocol.

Lisa Milam-Perez, J.D., labor and employment analyst
Wolters Kluwer Law and Business, (773) 866-3908

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