The Risks Behind Conducting Background Checks

The Risks Behind Conducting Background Checks

Employers are increasingly facing lawsuits over how they handle background checks while screening job applicants.

For a lesson in what can happen, take the recent class-action lawsuit filed against a Whole Foods Market Inc. store in Fresno, California. The suit alleges that the store’s online form asking for job applicants’ approval for criminal background checks violates the Fair Credit Reporting Act.

The lawsuit seeks damages of up to $1,000 for each individual from whom Whole Foods obtained a consumer report without valid authorization, plus punitive damages and costs. Whole Foods has used the application form in question since January 2009, according to the suit.

This case highlights two things:

  • How careful employers have to be while conducting background checks; and
  • The importance of securing employment practices liability insurance, which will pay for most costs associated with employment-related lawsuits.

Forbes magazine recently published this list of how to conduct background checks without breaking the law:

Be broad and thorough – Look at the spectrum of information, which includes consideration of an applicant’s education, employment and criminal history, driving history, social media, and much more.

Companies lose great candidates when they look at only one specific item. Worse yet, you could become the target of an Equal Employment Opportunity Commission investigation for excluding applicants who have criminal records, no matter what the charge or how long ago the offense occurred.

Don’t use the ‘box’ – The EEOC and many states are making efforts to ban the “box,” which is that question on applications that reads, “Have you ever been convicted of a crime?” Instead, interview and consider all applicants equally. Then you can run a broad and thorough background check.

Follow the law – Before you start conducting a background check, make sure you first obtain a legal release from the applicant, inform that applicant of their rights, and provide them with a copy of the report.

Be consistent – Keep your application process consistent for all applicants. Applicants going for the same job should have the same checks run on them. While the investigation may vary between different job types, if it’s for the same position, keep your process uniform to avoid charges of discrimination.

Communicate – If you find something on a background check that may affect your decision to hire an applicant, you should in the very least ask the applicant about it. So many misconceptions, mistakes and reporting errors can be resolved via face-to-face communication.

Locate patterns – Positive and negative patterns are the best way to evaluate your applicant. A single good act or bad act should not be the defining measure of a person or of their job ability.

Considering consistent patterns of behavior is a defensible way for employers to make hiring decisions.

Don’t seek out only the negative – While most background checks are conducted to ferret out negative information, use them also to find positives that can help you decide on the best candidate.

Use a professional agency to conduct checks – A good screening firm has the experience and processes to be accurate and efficient. It also will prevent you from viewing data that might be a violation of state or federal law.

Employment practices liability insurance

Unfortunately, even if you do everything right, you can still be sued by an applicant for perceived discrimination or other infractions due to your background-check policy. An employment practices liability policy can cover the costs associated with a number of claims, including:

  • Wrongful termination claims
  • Discrimination claims (covering those by current, former and prospective employees)
  • Sexual harassment claims
  • Whistleblower claims
  • Wage and hour claims.

Other employment-related claims – such as libel, slander or other defamation, invasion of privacy, mental anguish, infliction of emotional distress, loss of consortium, assault, battery, breach of contract, negligent hiring, supervision, promotion or retention in connection with any other employment-related claim – can often also be covered.