The Devil Inside: The Legal Liabilities of Background Screening

By Aldrich, Catherine | Risk Management, February 2007 | Go to article overview

The Devil Inside: The Legal Liabilities of Background Screening


Aldrich, Catherine, Risk Management


A routine criminal background check by a major bank with operations in several states found that an applicant applying for a teller position in Wisconsin had felony convictions for rape and sexual assault. Following established corporate procedures, the hiring manager informed the applicant of these findings, and swiftly rejected his application for employment. Within weeks, the applicant filed a wrongful hiring discrimination lawsuit. The bank defended the action vigorously but was found to have violated fair hiring laws and was ordered to pay a judgment of more than $1 million as well as offer the sex offender employment within the company. What went wrong?

As the bank would soon discover, compliance with both federal and state laws regulating background checks is paramount in all screening processes. The existing regulatory environment is a patchwork of disparate rules and regulations, but an employer must follow all relevant laws in force in the locale where they are hiring to avoid creating potentially costly liability.

The bank had established what it thought were reasonable hiring standards and had followed all the privacy roles contained in the Fair Credit Reporting Act (FCRA) pertaining to background checks. But it had ignored local restrictions that stated an employer could only consider prior criminal convictions that were significantly related to the performance of the applicant's prospective job. The court in this case ruled that since a bank teller working behind a security partition would never be in physical contact with customers, there was no possibility for assault or rape during the conduct of his job. Therefore, the bank could not use the prior felony convictions in its hiring deliberations.

Why Screen?

Savvy risk managers know that when it comes to recruiting and hiring a quality workforce, character counts. With more and more evidence confirming that resumes from many of today's job applicants often contain discrepancies, employers cannot rely on a piece of paper and a person's interviewing skills alone. Thus, a comprehensive background check is increasingly becoming a required practice for employment purposes.

A background check is, in very broad terms, an inquiry into an individual's character, general reputation, personal characteristics and overall ethical patterns. Depending on an employer's risk reduction goals, a background check may include a criminal history search as well as a thorough review of credit reports and/or driving records. More rigorous background checks may include verification of employment history, education, professional references and professional licenses held, and mandated industries also include drug testing and fingerprint records.

The overall goal of requiring a background check as a condition of employment is to hire the most qualified applicant, while simultaneously reducing the risk of hiring the wrong applicant. Some of the most compelling risk reduction reasons for conducting background checks include:

* Reduce shrinkage. A national study by the University of Florida indicates that 48% of inventory shrinkage is due to employee theft. A criminal records search can help identify potential thieves before they are hired.

* Protect your customer. Many applicants will access to customers' personal identification information during the execution of their job. A criminal records search can identify those with a history of fraud to safeguard operations.

* Reduce workplace violence. Criminal searches can identify applicants with a history of violence that could disrupt operations, ruin its reputation and lead to potential lawsuits.

* Eliminate drug use. Drug-free workers are more productive, miss fewer days of work and better embrace an organization's goals and values.

* Uncover deception. Applicant integrity is an essential character trait, so verification of employment and education history is essential to make sure that applicants have the experience that they claim and can achieve the performance and efficiency that an organization expects. …

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The Devil Inside: The Legal Liabilities of Background Screening
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