When starting a new business, one of the first tasks to get your business up and running is hiring employees. In doing so, you may want to conduct background checks on applicants to prevent any surprises after the applicant is hired. Background checks can be a useful tool in evaluating applicants; however, employers should be aware of state and federal laws that limit how information obtained from a background check may be used, as well as an applicant’s rights when a background check is conducted.
In North Dakota, background checks on applicants are not prohibited, but an employer must still comply with state and federal anti-discrimination laws, as well as federal law regulating the use of the information contained in credit reports. In requesting and conducting a background check, an employer must be careful not to violate the Fair Credit Reporting Act, which governs the use of information obtained in an applicant’s credit report, and federal and state anti-discrimination laws, which prohibit discrimination of applicants based on race, color, sex, national origin, or disability. To ensure compliance with these laws, an employer should develop hiring procedures and policies with a knowledgeable attorney. A brief primer on the major steps that should be taken when using background checks, and those likely to be recommended by an attorney, is below.
Importantly, whenever a background check will be conducted on an applicant, an employer must obtain the applicant’s written consent to perform the background check. The consent form must notify the applicant that the information obtained in the background check will be used in determining whether to hire the applicant.
In addition, employers should avoid using blanket exclusions to automatically disqualify applicants, such as disqualifying any applicant with a prior judgment against her, or any applicant with any type of criminal history. Rather, employers should identify the specific duties of the position and specific information in a background check that may disqualify an applicant from the position. For example, if a position requires an applicant to handle and deposit into a company account, a prior conviction for theft from a previous employer could justifiably disqualify the applicant from the position, as the conviction would indicate a lack of trustworthiness. In contrast, disqualifying an applicant because she was previously evicted would be more tenuous and appear to be a blanket exclusion with no specific relation to the job duties.
In practice, the best way to avoid the appearance of blanket exclusions is to make offers of employment to chosen applicants contingent on a successful background check. If the offer is then revoked based on information obtained in the background check, the applicant should be informed of the specific information that disqualified her, as well as the reasoning as to why the information disqualified her. The employer should also afford the applicant an opportunity to explain the concerning information and provide any additional information before the employer makes its final hiring decision.
Regardless of whether the employer hires the applicant, the applicant must be given access to all of the background information obtained upon request and at no cost to the applicant. If an applicant’s credit history formed the basis for denying the applicant employment, additional disclosure requirements apply and the applicant must be informed of the information that led to the denial and the source of the information, including the name, address, and phone number of the agency that the employer gathered the information from. The applicant must also be provided with:
- a copy of the credit report
- a “Summary of Your Rights Under the Fair Credit Reporting Act” Notice
- the name, address, and phone number of the company that provided that report
- notice that the company providing the report does not make the hiring decisions
- notice that the applicant has the right to dispute the accuracy or completeness of the report, and to get an additional free report from the reporting company within 60 days
Finally, while following the above suggestions will help to ensure an employer is complying with state and federal law, the employer should still develop a written policy outlining its hiring policies and procedures. A manual explicitly stating the hiring procedures and policies will allow an employer to better train staff to adhere to the correct procedures and avoid activities that could be discriminatory or illegal use of an applicant’s background information.
To assure your company has the proper hiring policies and documentation in place, it may be wise to consult with an experienced business attorney like Steve Welle of O’Keeffe O’Brien Lyson Attorneys of Fargo, ND. Steve may be contacted by email or by phone at 701-235-8000 or toll-free 1-877-235-8002.
