Employment background checks – an important reminder.

The Equal Employment Opportunity Commission (“EEOC”) and the Federal Trade Commission (“FTC”) recently issued a joint publication that provides employers with a helpful reminder about the importance of carefully evaluating their applicant and employee background check procedures.

Follow this link for a copy of the EEOC/FTC joint publication.

For northern New England employers, this publication also serves as a reminder of additional state-specific background check requirements that apply in Vermont and New Hampshire.

Employers are generally permitted to conduct background checks in connection with employment-related decisions, such as hiring, promotion or internal investigations. Background checks can provide useful information about an applicant’s work history, criminal record, or financial history.

While background checks may be useful, it is critically important to comply with the state and federal laws that govern them. In particular, employers must be mindful of the process by which they obtain the background check, and how they use that information once it is obtained. In their joint publication, the EEOC and FTC remind employers of these principles.

EEOC and FTC – what employers need to know.

The EEOC is the federal agency charged with investigating most types of illegal employment discrimination, including discrimination on the basis of race, national origin, color, sex, religion, disability, genetic information and age. The EEOC therefore cautions employers against using information obtained through background checks in an unlawfully discriminatory manner.

For example, the EEOC warns that employers should not intentionally single out applicants or employees of a certain race (or other protected characteristic) for background checks. Likewise, the EEOC cautions that background check procedures or policies that may appear neutral and non-discriminatory, but have the effect of unfairly affecting people of a particular protected classification, are unlawful. As the joint publication explains, “employers should not use a policy or practice that excludes people with certain criminal records if the policy or practice significantly disadvantages individuals of a particular race, national origin, or another protected characteristic, and does not accurately predict who will be a responsible, reliable, or safe employee.”

The FTC is a federal agency with powers under the federal Fair Credit Reporting Act (“FCRA”).  Although the term “credit reporting” would seem to imply that FCRA only applies to checks for financial history, the statute can apply to a wide swath of background information, including educational, criminal or disciplinary histories.

The FCRA has specific procedures that employers must follow when conducting background checks. Generally, for background checks governed by FCRA, employers must first

  • inform applicants or employees in writing that a background check may be used in a decision affecting their employment, and
  • obtain their permission to conduct the check.

The employer must also certify to the company performing the credit check that it is in compliance with FCRA and other laws governing illegal discrimination. If an employer then decides to take an “adverse action” (e.g., not hire the applicant) based on information obtained in the background check, the employer must provide a written notice to the affected applicant or employee, along with the report and a special document called “A Summary of Your Rights Under the Fair Credit Reporting Act.”

After allowing a “reasonable” time for the applicant or employee to review this information, the employer must next provide notice to the applicant or employee that the adverse action was caused by information in the report, and give specific information intended to allow for the applicant or employee to dispute the report with the credit reporting agency that provided it.

Vermont and New Hampshire Considerations.

Beyond these federal requirements, Vermont has enacted what are perhaps the most onerous background check prohibitions for employers in the entire country.  In a 2012 amendment to Vermont’s Fair Employment Practices Act, the State prohibited employers, subject to certain exceptions, from using or even requesting information about financial history or credit worthiness of applicants.  Although the Vermont law creates exceptions to this prohibition for certain industries (e.g., financial institutions), the Vermont law still prohibits such exempted employers from using credit history as the “sole factor” in employment decisions.

Additionally, Vermont and New Hampshire prohibit discrimination based on a greater variety of protected classifications (e.g., sexual orientation) than federal law enforced by the EEOC. Accordingly, there may be additional considerations that apply to background checks based on the specific state in which they are being conducted. Compliance with state law must therefore be considered in addition to the federal requirements discussed in the joint publication.

What to do.

Employers should carefully evaluate and review their background check procedures for compliance with state and federal law.  This area of the law is complex and the basic joint publication provided by the EEOC and FTC will not answer every question.  The publication does not address particular factual situations that employers may face on a daily basis, or the complexities raised by state law.  Accordingly, all employers should consider having their background check procedures reviewed by legal counsel.

If you have further questions or would like to discuss strategies to manage these developments, please contact a member of Downs Rachlin’s Labor and Employment Law Group.