Employment Background Checks: Legal Considerations

In a down economy where unemployment is a source of significant frustration to many, background checks are another cause of growing concern for job seekers. These checks often include a comprehensive review of finances, including bankruptcies, financial black marks, and other personal information that doesn’t seem necessary to determine an applicant’s ability to perform the job. Concern regarding these practices has caught the attention of the EEOC, and allegations of discrimination appear to be on the rise. 

Read what lawyers on JD Supra have to say about employment background checks, and what employers and applicants can do to protect themselves:

Privacy Implications of Employment Background Checks: U.S. Supreme Court Rules for Employers (by: Mintz Levin)

“Employers in the public and private sector should take note of the path taken by the U.S. Supreme Court in its decision on January 19th, addressing a privacy challenge to a background check by government contractor employees…Of interest to private employers is the Court’s favorable acknowledgment that private employers frequently and legitimately use background checks. This case should remind all employers to take note of the requirements associated with such pre-employment inquiries and update their background check process for compliance with the current state of the law.” Read more »

Use of Credit Checks as a Hiring Screen Draws Questions (by Dinsmore & Shohl LLP)

“Still reeling from the recession and effects of massive job losses, many job applicants’ credit histories have taken a hit. Whether a result of a job loss, medical bills, or other unforeseen circumstances, financial woes of applicants may be linked to factors outside their control. Many lawmakers, after learning that qualified applicants are losing job opportunities due to the results of a credit check, have begun addressing the use of credit histories in hiring – specifically, to try and ban the practice in most instances.” Read more »

Better Double Check Your Use Of Credit Checks (by Fisher & Phillips LLP)

“The current push by states to limit credit checks for employment purposes comes on the heels of the Equal Employment Opportunity Commission’s (EEOC) focus on the possibility that using credit histories in the employment context could have a disparate impact on protected groups, such as African-Americans, Hispanics, women, and those with disabilities.” Read more »

EEOC Alleges That The Use Of Credit Histories To Make Employment Decisions May Have A Disparate Impact On Minorities (by Sheppard Mullin Richter & Hampton LLP)

“[The defendant]contends that it conducts background checks on all applicants, regardless of race, and that the use of credit reports is a necessary component of its background checks into applicants who would be dealing with financial matters, such as financial aid, if hired. The EEOC alleges that this practice violates Title VII of the Civil Rights Act of 1964 because it has a discriminatory impact on applicants due to their race and it is neither job-related nor justified by a business necessity.” Read more »

Employer Use of Criminal Background Checks and Credit Reports in Hiring Faces Heightened Scrutiny by EEOC (by Lane Powell PC – Labor & Employment Law)

“The Equal Employment Opportunity Commission (“EEOC”) has intensified its oversight of facially neutral employment criteria that may have a disparate impact on protected classes such as racial minorities and women…In light of the EEOC’s initiatives, employers who conduct credit or criminal background checks should make sure that their practices do not give rise to claims of “disparate impact” discrimination by members of protected classes.” Read more »

When Are Background Checks Discriminatory? (by Warner Norcross & Judd)

“With the economy in disarray, employers increasingly are using criminal background checks and credit reports to narrow their application pools. Approximately three out of four U.S. businesses perform background checks, both criminal checks and credit reports, as part of their preemployment screening process…This increased use of criminal background checks and credit reports has peaked the interest of the Equal Employment Opportunity Commission (EEOC), and not in a good way.” Read more »

Pre-Employment Background Checks: The Cure Can Be As Bad As The Disease (by Warner Norcross & Judd)

“Employers who use a third party to gather background information and verify references must be sure to comply with the federal Fair Credit Reporting Act (FCRA). From its title, you may conclude that the FCRA only applies to traditional credit reports. It covers much more than that…”, and the FCRA imposes special requirements. Read more »

Legal Challenges to Applicant Credit Checks (Davis Wright Tremaine LLP)

“Employers face rising criticism regarding their use of credit histories in hiring decisions. Civil rights advocates raise concerns that use of credit histories unfairly disadvantages certain segments of the population. Advocates for low-income individuals are concerned about the “Catch-22” for job applicants: One cannot re-establish credit without a job, and one cannot get a job with bad credit.

All levels of government have taken notice. As a result, an employer’s use of credit histories in hiring decisions could be risky. This advisory explains the current state of the law and presents a number of precautions to protect from a future lawsuit or agency complaint.” Read more »