The Cut of His Jib Doesn’t Jibe

Background checks can protect a company from negligent hiring allegations and promote a safe environment for employees and the public.

By Barry J. Nadell

SECURITY MANAGEMENT, September 2004

Before hiring a woman to care for an elderly patient, a home healthcare agency conducted a background check. The company learned that the applicant had been convicted of second-degree robbery, had spent one year in jail, and had been forced to take an anger management course. Three weeks after the agency denied employment, the woman’s name appeared in the local paper, detailing her arrest for the kidnapping and murder of a child. In another case, a hotel chain performed background checks on all of the employees at a newly purchased hotel and learned that several had felony convictions and one had been convicted of murder. In a third situation, a nurse-placement service learned by running Social Security traces that two of its nurses were using Social Security numbers of deceased individuals. A further check of all the employees’ driving records revealed that one had been convicted of a hit-and-run.

AS THESE REAL-LIFE examples illustrate, companies that do not run background checks are likely not getting the quality employees they expect. To further put the problem into perspective, consider what the background searches conducted by InfoLink Screening Services, Inc. (the author’s company) turned up in 2003: 7.9 percent of the searches revealed a criminal conviction, 20 percent revealed problems with a credit report, and about 28 percent found poor driving records, including driving under the influence (DUI). Some searches identified job applicants who were listed as registered sex offenders or had licensing problems. Overall, fifteen percent of the employment verifications InfoLink performed that year found negative information or discrepancies from what was reported by candidates on their applications.

Unfortunately, companies sometimes wait for an occurrence of violence in the workplace, a theft, suspicion of workers’ compensation fraud, or a sexual harassment complaint before including thorough background checks in their hiring process. InfoLink regularly receives inquiries from companies eager to institute background checks as soon as possible. These companies typically have internal problems, such as embezzlement, which more often than not could have been prevented by background investigations.

Companies would do better to implement these policies proactively. In so doing, they would protect not only their assets and their staffs, but also their reputations and their bottom lines.

Legal principles. Employers have a duty to exercise reasonable care in hiring individuals who may pose a threat of injury to members of the public. If a company has not taken due care before hiring a new employee and someone is injured as a result, the employer may be subject to charges of negligent hiring or negligent retention.

To win a negligent hiring claim, the plaintiff would need to show that the company was negligent and that this negligence was the proximate cause of the plaintiff ’s injuries. One way to show negligent hiring is to prove that it was not reasonable to hire the employee in light of information the employer should have been able to discover through proper pre-employment screening. Companies that cannot prove they were diligent in attempting to avoid negligent hiring through screening are likely to face costly court judgments.

For example, in the 1991 case of Ward v. Trusted Health, No. 94-4297 (Suffolk Superior Court), Trusted Health Resources hired Jesse L. Rogers as an aide in a home healthcare program without performing a criminal background check. Rogers later beat and stabbed to death John W. Ward, a 32-year-old quadriplegic in his care, and Alba Pellegrini, Ward’s 77-year-old grandmother. These murders were reportedly committed to cover up thefts Rogers made while working at Ward’s home. Ward’s parents sued Trusted Health Resources and were awarded $26.5 million in compensatory and punitive damages.

Federal and state laws. Although background checks are advisable in general, some federal or state laws mandate them. For example, federal law requires comprehensive background checks for all childcare providers. In addition, most states have enacted their own background check requirements for anyone working with children, the elderly, or disabled persons. For example, Wisconsin’s Caregiver Law requires background and criminal history checks of personnel who are responsible for the care, safety, and security of children or adults.

Texas law requires that in-home service companies or residential delivery companies obtain the criminal history of any current or prospective employee of the company whose duties require entry into another person’s residence. According to the law, these records must be obtained from the Department of Public Safety or a private vendor approved by the department.

Federal law also prohibits convicted felons from engaging in financial and security-oriented transactions. And in Oregon, a recent state law prohibits a person from being employed by a mortgage banker or broker as a loan originator if the person has been convicted of any crime or category of crime specified by the Department of Consumer and Business Services. The amendment requires any company employing or contracting with a loan originator to conduct a criminal records check on the applicant.

What to check. Federal and state laws also govern what type of information a company can seek in a background check and how it should be handled. For example, under some state laws, it may be illegal to seek financial information unless relevant to the job. A company will want to make sure that it has the subject’s permission to conduct any background checks and that the company or its service provider complies with all disclosure requirements and other related laws. In general, however, a company will want to include the following in background checks.

Social Security. The background check should begin with a Social Security trace report by going to any of the three major credit bureaus or by using databases that have purchased this information in bulk. This report helps identify the subject, provides other names used by him or her, and reveals past addresses that can be used as locations to check criminal history.

Criminal history. With the information garnered from the Social Security trace, the criminal history can be checked. A search may reveal convictions, arrest warrants, and bail status, but many state labor codes and fair-employment guidelines limit the content of an employment background check by not allowing arrests to be reported. Certain states have industry exceptions regarding arrest information, which often involve the timing of the conviction. In 12 states, the time period for which a consumer reporting agency is allowed to report conviction information is limited to seven years. In four of these states, if the subject is expected to earn a specific dollar amount, the report may go beyond seven years. Any earlier criminal record cannot be a factor in a hiring decision.

But even where the conviction is within the time frame, there may be legal constraints on the employer’s use of that information. The practice of using a criminal conviction as one of the selection criteria for employment, even though neutral on its face, may violate Title VII because studies indicate that minorities are convicted more frequently than non-minorities. The Equal Employment Opportunity Commission (EEOC) and U.S. courts have held that an employer may not lawfully deny employment or discharge an employee because of a criminal conviction unless the conviction is related to the job for which the applicant is applying or which the person already holds.

The EEOC and the U.S. courts require the examination of several factors in determining whether someone who has been convicted of a crime may be disqualified for employment. The commission states that an employer can deny employment to any applicant based on prior conduct if the conduct indicates that the applicant would be unfit for the position, even if no arrest occurred. In other words, it is the conduct, not the arrest or conviction, that the employer may consider. The EEOC forbids, however, a blanket policy barring employment to those who have been arrested for a crime.

EEOC guidelines also indicate that consideration should be given to factors such as the age of the individual when the conviction occurred, the length of time since the conviction, and whether the individual is rehabilitated.

The most important factor and the one most often cited by the courts is the relationship of the nature of the conviction to the specific position the applicant is seeking. Therefore, it is a good idea for employers to make a separate evaluation for each person who has been convicted of a crime against the requirements of the specific job.

Driving records Employers should also consider driving records in their background investigations. Although the job may not require driving, a motor vehicle report can provide great insight into a person’s character. Reports with DUIs or drug possession charges, several tickets or accidents, a current warrant, or an applicant’s failure to appear in court may be a precursor of poor on-the-job performance.

A motor vehicle report also contains the subject’s date of birth (DOB) from the state department of motor vehicles. The researcher can check the birth date on the license against information provided by the subject as a way to ensure that the DOB information, which is needed for the criminal records search, is correct. Because DOB is the primary identifier in a criminal record, an accurate date of birth is critical in the search process.

Credit reports. Credit reports should only be sought where they are relevant to the position to be filled. Credit reports are an excellent tool to determine the reliability of any employee who handles cash, has a company credit card, has access to accounting records, or can commit the company financially. Although bankruptcies are public records, employers cannot discriminate against applicants who have filed for bankruptcy.

Workers’ Compensation Claims. In most states, employee compensation claims are public records once the claim has gone through the state system or the workers’ compensation board. But under the Americans with Disabilities Act, employers cannot use medical information or the fact that an applicant filed a workers’ compensation claim as a basis for not hiring an applicant. Furthermore, because this information is medical in nature, employers may access workers’ compensation records only after making an offer of employment, and may not rescind an offer due to a workers’ compensation claim.

Employers sometimes discover that an applicant failed to reveal previous employers against whom they had filed claims. In such situations, employers should review with legal counsel the possibility of rescinding the offer based on the fact that the applicant falsified the application by omitting to mention past employers.

The Fair and Accurate Credit Transactions Act of 2003, which amended the Fair Credit Reporting Act, restricts consumer reporting agencies (CRAs) from providing applicants’ medical information to companies.

For reports given to insurance companies, CRAs must have the employee’s consent. With regard to reports for employment or credit, CRAs must have the employee’s consent, and must clearly describe what the medical information will be used for. The medical information must be relevant to the employment or credit transaction. Thus, the release must be very specific and the CRA must receive a certification from the user regarding how the medical information will be used. Drug screenings are one example of medical records that might be appropriate. Companies should consult legal counsel with regard to specific situations to ensure compliance with any applicable restrictions.

Civil records. While it might be nice to know whether an applicant sued his or her previous employer, civil lawsuits are generally not job-related and employers should use extreme caution if they choose to conduct a search of civil records. Regardless of any authorization within the disclosure form provided to the employee, employers should seek civil information only if they are confident that discovery of lawsuit information could relate to the job requirements.

Although civil searches may reveal the issuance of a restraining order or other documentation that may help an employer identify a propensity for violence, the benefits of such information may not outweigh its potential legal ramifications. Employers can be sued for illegal hiring practices if it is determined that they have used civil information that is not related to the job. Furthermore, because there are generally no mandated identifiers such as date of birth or Social Security numbers linked to a civil file, it is often difficult to positively match potential employees with a specific case. Often the only information available is a name and address, and typically only the name is given. Therefore, it is difficult to confirm that the civil proceeding actually involved the potential employee.

Civil records should only be used when they are included with a more extensive background search, such as in a search for management or upper management personnel. In those cases, civil suit searches could help discover relevant information about whether the person should be entrusted with a senior position.

Database research. Recently, databases purporting to be national criminal files have become available. While companies seeking background information have been successful in purchasing these bulk files, purchasers of this information must be cautious and realize that the information is not national, current, or accurate. Employers reviewing the sources within these databases typically find that not every state, and certainly not every county court, is represented. Even if information is listed from these sources, it often only pertains to felony cases and does not include misdemeanors or infraction information. Finally, this information may not be updated regularly, and information within the database may have been expunged.

These databases can, however, serve as a starting point, because the data from them can be used to identify records in counties the potential employee visited but never lived in or counties where the subject lived so long ago that the location does not appear on a Social Security trace report. This search, however, should never replace an accurate court search of all past counties of residence.

Not all databases are the same, but they are generally composed of several state correctional institution lists, sex offender lists, state repository lists, and some county jurisdiction information. Not all states or counties offer bulk data for sale. Studies evaluating criminal conviction records have found that the databases can miss critical convictions and that some criminal databases that claim to be a national database offer less information than others.

The FBI’s National Crime Information Center database (NCIC), is restricted to only duly authorized criminal justice agencies and is not accessible by employers or consumer reporting agencies. For many years, investigators had the ability to offer a search of the NCIC’s Wanted Person File, also known as the "hot file records." In July 2001, however, APB Item 23 was issued, creating a new policy that stated, “the commercial dissemination of state or federal hot file records obtained from NCIC is prohibited.”

The advice indicated that “any advertising of services providing ‘data for dollars’ is prohibited.” Consequently, the wholesale marketing of data for profit is prohibited as in the example of a pre-employment screening company requesting that wanted-person checks from NCIC be conducted on individuals for a non-criminal justice purpose like employment.

Other searches . Prospective employers should always contact a candidate’s past employers for verification of the employment information provided on the application. The prospective employer should also ask about job performance. Similarly, education and any claimed professional credentials should be verified.

Where the search is job-related, employers should consider state sex-offender lists, professional license verification, character references, drug tests, physical exams, OIG/Medicare-medical fraud reports, military records, and state repository records. State repository records are collections of court decisions handed down throughout the state.

Every new hire has the potential to enhance the company’s performance and profitability. By conducting a proper background check, management can improve the likelihood that the person will not, instead, create problems and become a source of liability.

Barry J. Nadell is president and co-founder of InfoLink Screening Services, Inc., Chatsworth, California. He is a member of ASIS, and has been a speaker at several national conventions. Information provided in this article is not intended to be, nor should be construed to provide, legal advice of any kind. The author accepts no liability whatsoever for any information contained within. Before making any changes employers and consumer reporting agencies should consult their legal counsel.