Screening Your Employees? Here is How to Reduce Your Risk of a Lawsuit

Change is sweeping through employment law, and small businesses are finding themselves caught in the riptide. With an increase of lawyers filing Fair Credit Reporting Act (FCRA) class action lawsuits against businesses over the past year and the Equal Employment Opportunity Commission (EEOC) cracking down on disparate impact in hiring, every business owner needs to be aware of the federal and state laws on screening potential employees.

This is why the hiring and compliance experts at TriNet and GoodHire will be sharing insight into how to address pre-employment screening issues in an in-depth employment screening best practices webinar on April 7 at 11 a.m. PT / 2 p.m. ET. The webinar will help you get a handle on the employment screening issues and learn best practices for staying compliant.

Avoiding FCRA pitfalls

Over the past year, lawyers representing employees and candidates filed a number of class action lawsuits under the FCRA. Even many name-brand companies with access to large HR and legal departments did not escape being named as defendants in these lawsuits. Based on review of these class actions, we’ve seen two specific FCRA issues come up repeatedly: consent and the use of consumer reports in making employment decisions.

Let’s start with consent. It’s simple, right? You’re required to get an applicant’s permission in writing before you run a background check. However, you must also provide the applicant with “clear” and “conspicuous” written disclosure that a consumer report may be obtained for employment purposes. A company’s failure to comply with these requirements is often the catalyst of a lawsuit.

Employers must also comply with specific steps when using consumer reports and before taking any adverse action based, at least in part, on the information obtained from the consumer report.

Importantly, states have relevant laws, too. Skipping any steps or ignoring a state-specific law can also lead to a lawsuit.

Our webinar will give you tips to avoid these issues.

The EEOC is watching

Employers must also ensure that their internal screening and hiring policies do not violate Title VII of the Civil Rights Act of 1964 and similar laws. While FCRA class actions are on the rise, the EEOC has increased its scrutiny of employers’ screening and hiring policies in order to assess potential violations under Title VII.

According to the Society of Human Resources Management, an employer’s “policies, practices, rules or other systems that appear to be neutral but result in a disproportionate impact on protected groups are deemed to have a disparate impact on that particular protected group and thus may violate Title VII.

For example, in 2013, the EEOC filed a lawsuit against BMW’s manufacturing facility in South Carolina, alleging its criminal record screening policy — which excluded from employment all persons with certain criminal convictions — negatively impacted African-Americans, in violation of Title VII. After two years of litigation, the parties settled. BMW was ordered to refrain from using its criminal record screening policy and to pay $1.6 million to the 56 claimants in the litigation, among other requirements.

This lawsuit is a prime example of an employer’s hiring policies creating a disparate impact and leading to litigation.

Banning the box is sweeping the nation

And then there’s the ban-the-box legislation. The phrase “ban the box” refers to removing the checkbox on job applications that asks whether or not an applicant has been convicted of a crime. Eliminating this question on job applications was designed so that employers considered a job applicant’s qualifications first, without the stigma of a conviction record.

Banning the box doesn’t mean employers are prevented entirely from asking a candidate or employee about their criminal history or running background checks. But there are important rules employers must follow to determine when (and how) to ask the questions or run the background checks.

So far, 20 states, the District of Columbia and more than 100 cities and counties have already banned the box, so it’s a good bet similar legislation is on the minds of other government officials.

Due diligence can help

You may be reaching for your hiring policies right now or googling “FCRA.” It certainly makes sense to review your background check consent forms to make sure they follow FCRA regulations and to keep a record of all pre-adverse action and post-adverse action notices you’ve sent.

It’s also a good idea to consult with legal counsel while reviewing your hiring guidelines and policies.

In the meantime, don’t forget to sign up for the employment screening best practices webinar on April 7 to get additional insight into what you need to know to keep your hiring practices legal and compliant.

This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.

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