Emerging Legal Standards in Background Checks | DCR Workforce Blog

Emerging Legal Standards in Background Checks

As Professor Paul Wilkinson said, “Fighting terrorism is like being a goalkeeper. You can make a hundred brilliant saves but the only shot that people remember is the one that gets past you.” This doesn’t just apply to terrorism. One way or another, the threat of an unsavory workplace incident is an abiding concern for all recruiters when they decide to onboard a worker, within a short period of coming to know of their existence, in most cases. Background checks help them to address these concerns to a very large extent and demonstrate that the hiring process was not negligent.

Liability for discrimination

But the results of a background check are not always cut and dried, and subjectivity becomes inevitable, as most people are prone to harboring biases, prejudiced opinions, assumptions and other personal baggage that colors their evaluation of another human being. Many times, these tendencies come to the fore in background checks, and they provide the grounds for discrimination-based legal action and class action suits.

Employers have found themselves between a rock and a hard place.  If an individual was employed without a background check and then committed a criminal act against the company and it was later discovered that the individual had a history of this behavior, the company would be subject to criminal and civil legal action.  The Equal Employment Opportunity Commission (EEOC) argues that criminal, drug and credit checks are often discriminatory, and that they tend to result in the disqualification or outright rejection of a disproportionate number of individuals from a certain ethnic or racial background.

Hobson’s Choice – no more

Earlier this month, Judge Roger Titus of the U.S. District Court for the District of Maryland dismissed a lawsuit brought by the EEOC alleging that a company “unlawfully relied upon credit and criminal background checks that caused a disparate impact against African-American, Hispanic and male job applicants.” His ruling unequivocally asserted that the threat of such action from EEOC could result in employers choosing to expose themselves to potential liability through hiring employees with criminal and fraudulent intent. The judge also asked if the EEOC itself is not among the 87% employers who affirmed that they use criminal background checks in hiring.

Judge Titus stated that employers have a right to careful and appropriate use of criminal history information as an essential part of the employment process.

Two key points were made in this case:

  1. “Careful and appropriate use” of criminal history and credit information is not inconsistent with Title VII, while “indiscriminate use” could be illegal.
  2. Complaints must be based on evidence that the use of criminal history and credit checks resulted in a disparate impact on an identified group.

Even with this ruling, employers had better tread cautiously as regulations are increasingly unclear. Refer to the EEOC’s Enforcement Guidance issued in 2012. In addition to the EEOC guidelines, many states have passed laws eliminating questions regarding criminal history from job applications. Areas of particular sensitivity include differentiating between arrests and convictions, methods of gathering data, timing of information gathering in the hiring process and the relevance of a particular type of conviction to the specific job opportunity. In the midst of this uncertainty, companies must formulate a clear employment policy, document a reliable process for the conduct and use of background checks or credit checks, and maintain all the records meticulously.

Working with temporary workers

In the past, the staffing industry added an average of 1,000 to 2,000 jobs per day. For 2009, this totaled approximately 8.6 million temporary and contracted employees for the year. Approximately 53% of those who remained in the workforce moved on to permanent positions. Temporary and contracted are expected to make up nearly half of the work force in U.S. companies by 2020. It’s estimated that 50% of these workers did not have background checks performed on them either at the start of the temporary assignment or when converted to a permanent employee.

Some employers leave it to the staffing agency to conduct background checks but do not take the trouble to spell it out or make it binding on the staffing agency. V-Tech Communications did the same, to its cost when hiring the temporary payroll clerk Teena Rodriguez on a permanent basis. She ended up embezzling $1.3 million, and V-Tech was unable to bring a claim against Robert Half Inc. as the contract did not include a clear mandate or process to verify her background and references.

All in all, employer fears of challenge by the EEOC are reduced. However, they must be sure that any contract with a staffing agency defines what the rules for selection and rejection are when specifying that the agency is obligated to conduct a background check. As the candidate is a potential employee of the staffing agency – not the host company – it can be made the responsibility of the suppliers to conduct a background check but to do so without having the actual information conveyed to them.

The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.