Skeletons In The Closet? Minimizing The Risks Of Background Checking

Careful checking of job applicants' backgrounds can reduce the likelihood of hiring individuals whose past actions might foreshadow future negative behavior. Learn the best ways to legally and effectively find out more about potential employees.

Background checks are an important tool for both lawyers and their business clients. They provide useful information and help validate the results of hiring processes. They also require lawyers and employers alike to carefully navigate a diverse and often confusing array of federal and state laws. An ideal background check accomplishes two goals: identifying the preferred candidate for the job while reducing an employer's potential legal liability. To achieve these goals, lawyers and their clients must understand how different laws can shape the substance and form of any background check.

Consider the following scenario. A job applicant walks out of your client's office after an interview. The applicant has an engaging personality and an impressive list of accomplishments, and the client thinks she is perfect for the job. Only one obstacle remains before your client is ready to extend an offer: the background check. The client calls you for advice about what to do next. What do you tell your client? Should he ask the applicant for references? Hire a third-party investigator to handle the legwork? Type the applicant's name into Google to see what turns up? Ask the applicant for her Facebook name and password?

Dramatic technological advances, combined with general economic uncertainty, have significantly changed the scope and nature of background checks over the past few years. The advent of services such as Google, Facebook, and Twitter, as well as governmental programs like E-Verify, has given employers easier access to more background information on prospective employees than ever before. At the same time, an intensely competitive job market has allowed employers to be more selective with staffing decisions, giving job applicants greater incentive to be misleading about potentially damaging background information.

Given these developments, it is not surprising that the federal agency responsible for enforcing most U.S. employment laws, the U.S. Equal Employment Opportunity Commission (EEOC), has recently shown an increased interest in cracking down on illegal background checks, specifically those that consider arrest and conviction records and credit history information. Notably, in January 2012, the EEOC announced a $3.13 million settlement with Pepsi Beverages concerning the use of arrest records to eliminate certain job applicants from consideration.1 And in April 2012, the EEOC updated its guidance on criminal background checks for the first time in more than 20 years.2

Reasons to Do Background Checks

Despite the potential liabilities, background checks remain an important and, in some cases, essential part of the hiring process. Perhaps the most common reason to conduct a background check is to verify information provided by an applicant to ensure that the applicant will be successful in the job and advance the interests of the business. Although background checks may be conducted before extending an offer of employment, typically it is better to conduct a background check after making a job offer, because doing so at that stage is cheaper (because you are conducting a background check on only one applicant rather than the entire applicant pool) and carries less risk of appearing discriminatory.

Regardless of whether the check is conducted before or after making an offer, verifying applicant-provided information is essential to help prevent future performance issues and ensure that the employer has hired exactly who it thinks it has hired. Recent examples of resumé misrepresentation involving chief executives at RadioShack, Veritas Software, and Lotus Corp. demonstrate that even high-profile employees at large, public companies can fool the hiring committees and get away with resumé fraud for years.3

Background checking is also essential for ensuring safety, preventing theft, and protecting employers from potential tort liability. Not only can identifying a history of violence or theft in an applicant's background help avert an unfortunate incident from occurring in your workplace, but also the existence of a background checking procedure may help other employees to feel safer and more secure in the workplace.

In addition, a background checking procedure may help protect an employer from a negligent hiring suit should an employee later injure a customer or coworker. Wisconsin law recognizes a cause of action for negligent hiring; that is, when the wrongful act of an employee is the cause-in-fact of a plaintiff's injury, an employer may be held liable if the employer's negligence in hiring the employee is a cause-in-fact of the employee's wrongful act.4 In such a case, the employer may be liable for negligent hiring even if the employee's wrongful action is not in itself an actionable tort.5 A background check will likely reveal information about the violent or criminal history of job applicants, and clients, in the exercise of due diligence, should consider that information before making hiring decisions. Failure to check an applicant's background may lead to bad hiring decisions and unnecessarily expose a business to a liability risk.

In certain industries, such as banking or securities, a background check may be required by federal law. A background check might also be required by state statutory or administrative requirements. For example, Wisconsin's Caregiver Law requires background checks for workers who are responsible for the care, safety, and security...