Big verdict underscores importance of background checks

One would think that businesses with whom people entrust children or the elderly would conduct routine criminal background checks of its employees. In fact, in Ohio, it’s the law. At least one employer, however, an assisted living facility in Newport News, Virginia, unknowingly hired an employee with a long criminal history, including assault and battery. On May 28, a jury found the facility liable for failing to exercise reasonable care in hiring the former felon. The lawsuit involved the employee’s sexual assault of a resident. The ex-employee has been criminally charged with five forcible sodomy counts, three carnal knowledge counts, and one abuse and neglect count. For these acts, the jury awarded the abused resident $750,000 in damages.

There is a good lesson for all employers to learn from this example. Backgrounds checks are inexpensive. The potential exposure from hiring an employee with a criminal history, however, is large. Do your bottom line and the safety of your employees a favor and consider implementing routine criminal background checks for all employees. For information on how to use this information without running afoul of EEO laws, I recommend EEOC targets use of arrest and conviction records.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus.

For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

Ohio Senate seeks to ban use of credit in employment decisions

There is little doubt that the current economic crisis has caused havoc on a lot of good intentioned people’s credit scores. During the good old days , people over-extended their credit, bought houses they can no longer afford, and otherwise lived beyond their means. With the retraction of the credit market and the exponential rise in home foreclosures, many people’s credit histories and FICO scores have suffered.

Ohio Senate Bill 91, however, is a reactionary move to this crisis that simply goes too far. This bill proposes to prevent employers considering people’s credit histories when makes an employment decision:

It shall be an unlawful discriminatory practice for an employer to use a person’s credit rating or score or consumer credit history as a factor in making decisions regarding that person’s employment, including hiring, tenure, terms, conditions, or privileges of employment, or any matter directly or indirectly related to employment.

Jim Siegel, a reporter for The Columbus Dispatch, quotes Tony Fiore of the Ohio Chamber of Commerce:

Senate Bill 91 will face opposition from business groups that want flexibility in how they determine whether someone is right for a job.

“Do you want someone with a bad credit history managing the company’s money, or yours?” said Tony Fiore, a lobbyist for the Ohio Chamber of Commerce.

“The employer needs that ability because they want to make sure they’re putting the best people forward, not only to help the company, but help the people relying on the company.”

Aside from the concerns voiced by Mr. Fiore (which I wholeheartedly echo), there is also a bigger issue at play here. There already exists a federal law the gives employees significant protections in how employers use credit information. The Fair Credit Reporting Act [PDF] make it illegal for any employer to obtain or use one’s credit for making an employment decision without the individual’s written authorization. And, an employer cannot take an adverse action (such as firing, or refusing to hire) based on information contained in a credit report without first giving the individual a reasonable amount of time to dispute the accuracy of the information or otherwise offer an explanation. With these federal protections in place for employees and applicants, Ohio’s businesses do not need to be prohibited from using this important tool.

[Hat tip: employeescreenIQ Blog]

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus.

For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

Background check protects employer from negligent hiring claim

A claim of negligent hiring requires proof of five elements under Ohio law:

1. the existence of an employment relationship;
2. the employee's incompetence;
3. the employer's actual or constructive knowledge of the employee's incompetence;
4. the employer's act or omission causing the plaintiff's injuries;
5. the employer's negligence in hiring or retaining the employee as the proximate cause of the plaintiff's injuries.

Prewitt v. Alexon Services (Butler Cty. 8/25/08) concerns an employee who was raped by a co-worker. When Alexon hired the co-worker, it conducted a background check that revealed a misdemeanor disorderly conduct conviction, but not past history of sexual assault or abuse. Prewitt claimed that Alexon's screening was negligent because it did not conduct any additional inquiry or investigation to discover that the disorderly conduct conviction was sexual in nature. The court disagreed, finding that Alexon was entitled to rely on the results of its background check.

No applicant vetting process is perfect. Applications ask for criminal histories, and some companies go one step further by actually ordering a background check. At that point, what else can a company do? The transaction costs associated with a typical background check are high enough. If every employer had to investigate every conviction that shows up on a report to discover its underlying facts, the hiring process would grind to a halt. Thankfully, the court in Prewitt realized that reasonable steps taken by an employer deserve a reasonable result - in this case, the dismissal of the claim against the employer.

Accuracy of background checks poses potential problem for employers

Business Week magazine this week is running a story on the lack of accuracy in credit reports. The article claims that inaccuracies are a huge problem in the background checking industry, and gives a few heart-wrenching anecdotal examples to support the allegation. Dan Schwartz, at the Connecticut Employment Law Blog, has done the math, however, and estimates that only 0.000023 percent of all background checks end up in a complaint being filed with the Federal Trade Commission. Dan's conclusion: "Are there issues with faulty records on some? Absolutely. But the numbers presented in this article hardly suggests a rampant problem with background checks."

It's the faulty records, however, that present the biggest risks to employers. Third party background checks by employers on current or prospective employees are governed by the federal Fair Credit Reporting Act ("FCRA"). It has very stringent requirements employers must comply with before obtaining or using a background check from a third party:

1. The employer must first disclose to the employee or applicant that a background check will be done and receive written consent.
2. The employer must then certify to the consumer reporting agency that it made the disclosure and has obtained written consent. An agency that does not ask for this certification, or provides a background check in its absence, should be a huge red flag about its credibility and the credibility of the information provided.
3. Finally, if you are going to take an adverse action based on information disclosed in the background check (such as not hiring someone), you must first provide the applicant or employee with a copy of the report you received along with a copy of the person's rights under the FCRA (available directly from the FTC). An employer must then wait a reasonable period of time (5 business days) before actually taking the adverse action, at which time the applicant or employee must be provided with an adverse action letter under the FCRA.

Any one of these steps can cause potential liability issues for an employer, but the only risk of any real damages stems from using an inaccurate report. Let's say, for example, a company violates the statute, but in the process learns of an applicant's bona fide criminal history. That history automatically disqualifies the person from consideration. Even though the statute has been technically violated, how has the person been harmed by not being hired for a job he or she was not qualified for in the first place? If, however, the criminal history was faulty (for example, the person was the victim of identity theft), and he or she is disqualified without having the opportunity to dispute the inaccuracy, that violation of the FCRA could open a company up to the fully panoply of employment-related damages.

Just because FCRA is seldom enforced does not mean that it should be ignored. Compliance is relatively simple, and failing to comply is an unnecessary risk for businesses to take.

Firing of Food Network host illustrates resume fraud

Cleveland restaurateur and Iron Chef Michael Symon is set to take over as the new host of the Food Network's Dinner: Impossible series this fall. Great news for Chef Symon and Cleveland in general, but what does this have to do with employment law? According to the Cleveland Plain Dealer, the Food Network fired the show's prior host for resume fraud:

Symon is stepping in at "Dinner: Impossible" after the St. Petersburg Times revealed in early February that original host Robert Irvine exaggerated a wee bit on his resume. Like that bit about cooking for England's royal family. And being a White House chef, among other things.

Resume fraud is a big problem for employers that largely goes undetected. Some surveys show that perhaps as many as 30-40% of resumes contain intentional inaccuracies, such as lies and exaggeration about education, prior jobs, experience, and qualifications. The issues for businesses are two-fold:

1. How does one guard against hiring a candidate with exaggerated or flat-out false credentials?
2. What does one do upon finding out that an employee lied to get the job?

1. Background checks
The best way to guard against resume fraud is to thoroughly screen all job candidates' credentials. Myriad companies offer services for checking the veracity of job applicants' background information. Do your homework, though, as some companies are much better than others. Also, check with your attorney, because the Fair Credit Reporting Act has certain mandatory notice and consent requirements that could subject you to unnecessary liability if they are not followed.
Reference checks should also be part of any screening process. Ohio business should not fear accurately responding to inquiries from other business about past employees. Ohio has a statute, R.C. 4113.71, that gives employers a qualified immunity to provide job reference information. An employer can give a prospective employer information about an employee's job performance without fear of liability, unless the former employer knows the information is false, or makes the disclosure with the intent to mislead, in bad faith, or with a malicious purpose. The statute also has an exception for violations of the employment discrimination laws, so, for example, you can't give good references to white employees and bad references to black employees and safely hide behind 4113.71.
2. Post-hiring detection
What happens, however, if you find out that an employee lied about his or her background after that employee has already started working? Viewing this situation as "no harm, no foul" (i.e, the employee is doing a good job, so I'll overlook the resume fraud) is short-sighted. Unless a company consistently terminates employees who have been found to have lied or embellished their credentials, it likely risks a discrimination claim if and when it chooses to fire an employee within a protected class for resume fraud.
Also, a failure to consistently enforce a policy against resume fraud will limit a business's ability to use an after-acquired evidence defense. Often times, resume fraud is not uncovered until after a terminated employee sues the company and the employee's background is dissected during the discovery process. The after-acquired evidence defense permits an employer to cut-off its liability for back pay to a terminated employee at the point in time it would have fired the employee based on something learned after the employee was terminated. Thus, if it is uncovered during litigation that an employee lied about his or her background, the after-acquired evidence defense allows for the termination of back pay liability as of the date of that discovery. Unless, however, a company has a consistent policy of terminating those who lie on their resumes, it will have an uphill battle convincing a court that it would have terminated this plaintiff upon the discovery.
As with most issues in employment relations, it is best to temper expectations. Employment applications should contain clear disclosures that the employee signs off on, which states the all of the information is true and accurate to the best of the employee's ability, and that false information will disqualify the candidate from employment and subject the employee to termination. Employee handbooks should contain similar language that resume fraud discovered during employment is grounds for immediate termination. Of course, policies are only as good as their consistent enforcement.

Revisiting the facebooking of job applicants

Several months ago I wrote about basing personnel decisions on an applicant's or employee's off-work online activities. Today, three articles on this same topic came across my screen that make this topic worth revisiting: Do Employers Using Facebook for Background Checks Face Legal Risks?; Facebook a risky tool for background checks, lawyers warn; and Employers may be searching applicants' Facebook profiles, experts warn.

These articles predict indefensible discrimination lawsuits and general gloom and doom for employers who use Facebook, MySpace, YouTube, etc., to conduct background checks on job applicants. They suggest that companies are unnecessarily risking liability in a landscape that is uncertain until courts are asked to lay down some rules on these issues.

What is going on here? I'm the first person to tell companies not to be the test case for emerging HR practices, and to let others blaze the trail by defending the inevitable lawsuits. I just can't see how a company can face liability if it non-discriminatorily looks for information on job applicants on the web. People put this information in the public domain for anyone and everyone to see. It's one thing if employers use Internet searches to pre-screen job applicants before the interview process. That's a big no-no, for the same reason we no longer ask job applicants to submit photos -- it reveals demographic information that an employer could use to screen out certain minorities, genders, and other protected groups. Once a company decides to consider an applicant and actually meets the person, those concerns disappear.

A couple of helpful pointers for companies to consider. As with all personnel practices, it is best to have a written policy for supervisors, managers, and others involved in the hiring process to follow. That policy should make clear that Internet sources cannot be checked until after a job applicant has been interviewed, and that if a search is going to be conducted for one applicant for a position, it must be done for all. It also not a bad idea to put a disclaimer somewhere on the job application stating that publicly available Internet sources may be checked post-interview as part of consideration process.

EEOC targets use of arrest and conviction records

Last year, the EEOC launched it E-RACE Initiative. E-RACE stands for Eradicating Racism And Colorism from Employment. According to the EEOC:

The E-RACE Initiative is designed to improve EEOC's efforts to ensure workplaces are free of race and color discrimination. Specifically, the EEOC will identify issues, criteria and barriers that contribute to race and color discrimination, explore strategies to improve the administrative processing and the litigation of race and color discrimination claims, and enhance public awareness of race and color discrimination in employment.

One barrier that the EEOC identifies as contributing to race and color discrimination is employers' use of arrest and conviction records in hiring decisions. To remove or limit this barrier, the EEOC has set a 3 year goal to "develop and implement investigative and litigation strategies to address selection criteria and methods that may foster discrimination based on race and other prohibited bases, such as ... arrest and conviction records." In other words, the EEOC intends to litigate charges based on arrest or conviction records.

This EEOC initiative sets a dangerous precedent. I've always understood that using arrest records could cause a disparate impact, but that conviction records are fair game in employment decisions. E-RACE signals that use of the latter without a business necessity or job relatedness could also violate Title VII. This policy begs the question of what convictions are related to what job. Certain jobs are no-brainers. Anything with children will automatically disqualify a felon, for example. What about a warehouse worker, though? What is an employer's liability if a violent felon recidivates in the workplace? What about non-violent felons? Do you want a check kiter manning your cash register? These are difficult questions without easy answers. I'd like to give the EEOC the benefit of the doubt on this issue, but when it makes litigation a key cog in this initiative, it makes me nervous for companies that rely on criminal histories in employment decisions. For now, the safest course of action would be to tailor the use of specific convictions to related jobs. Practically, however, I doubt the feasibility of such limits, given the liability issues that swirl around the edges of such hires.

[Hat tip: Human Resource Executive Online]

Can employers base employment decisions on employees' personal internet activities?

Courtesy of The Washington Post comes this gem:

Kevin Colvin, an intern at the Anglo Irish Bank of North America ... e-mailed his manager on the afternoon of Oct. 31 claiming "something came up at home" in New York and that he needed to miss work the next day. For whatever reason, perhaps managerial intuition, his boss decided to inspect Colvin's Facebook page on Nov. 1 and apparently found pictures of the intern dressed as a fairy, beer in hand, at a Halloween party in Massachusetts.

Rather than reprimand him, the manager decided to have a little fun. He shot Colvin an e-mail back stating: "Thanks for letting us know -- hope everything is ok in New York. (cool wand)" with the fairy picture attached. And if that weren't embarrassing enough, the manager reportedly BCCed the rest of the company. Those images are now being forwarded to offices around the world for cubicle dwellers to enjoy.

(The article has a link to the offending picture, for those who are curious).

The internet now provides a plethora of social outlets -- blogs, social networking sites such as MySpace, Facebook, and Twitter, video repositories such as YouTube and Break, and even an entire alternate universe, Second Life. Once someone puts something out on the internet, it becomes fair game for anyone and everyone to see, employers included. The WP article cites a vault.com survey in which 82 percent of employers responded that negative information from an online profile would affect their decision to hire an applicant. Presumably a similar but likely small number would also consider negative online information in a decision to continue the employment of a current employee. It is hard to imagine that an employer is somehow invading an employee's privacy by viewing something that is publicly available on the web. If an employee is at-will, and standards are otherwise neutrally applied, there should not be anything unlawful about making a hiring or employment decision based on an employee's personal internet presence, especially if you catch the employee in a lie, such as was the case with Kevin Colvin.

Federal Judge indefinitely blocks Social Security "No Match" Rules

A California federal judge yesterday placed an indefinite hold on the Bush Administration's proposed rules for the handling Social Security "no match" letters. The rules would have required employers, upon receipt of a no match letter from the SSA to either verify the offending employee's immigration/ citizenship status or terminate the employee. Today's New York Times does a nice job summarizing the judge's order and the fall out from it:

The judge, Charles R. Breyer of the Northern District of California, said the government had failed to follow proper procedures for issuing a new rule that would have forced employers to fire workers if their Social Security numbers could not be verified within three months. Judge Breyer chastised the Department of Homeland Security for making a policy change with "massive ramifications" for employers, without giving any legal explanation or conducting a required survey of the costs and impact for small businesses.... If allowed to take effect, the judge found, the rule could lead to the firing of many thousands of legally authorized workers, resulting in "irreparable harm to innocent workers and employers." ...

Some conservative lawmakers who argue for vigorous enforcement of the immigration laws as a priority said they were outraged by the judge’s ruling. "What part of 'illegal' does Judge Breyer not understand?" asked Representative Brian P. Bilbray, Republican of California and chairman of the House Immigration Reform Caucus. "Using a Social Security number that does not belong to you is a felony. Judge Breyer is compromising the rule of law principles that he took an oath to uphold." ...

Judge Breyer found that the Social Security database that the rule would draw upon was laden with errors not related to a worker’s immigration status, which could result in no-match letters being sent to legally authorized workers. "There is a strong likelihood that employers may simply fire employees who are unable to resolve the discrepancy within 90 days," even if they are legal, he wrote.

This decision indefinitely blocks the new rules until the court conducts a trial sometime next year and reaches a final decision. It is unlikely, however, that Judge Breyer will change his mind. Most likely, the Bush Administration will continue to push this issue through trial and into the appellate courts. A Democratic Administration in 2009, however, would almost certainly bring an end to this cause.

Are you facebooking as part of background checks?

Msnbc.com writes on the wealth of information employers can learn from a job applicant's Facebook and other social networking webpages.

Job candidates who maintain personal sites on Facebook or MySpace are learning — sometimes the hard way — that the image they present to their friends on the Internet may not be best suited for landing the position they’re seeking.

Although many employers are too old to qualify as members of the Facebook Generation, they’re becoming increasingly savvy about using social networking sites in their hiring due diligence. That has both job candidates and human resources professionals debating the ethics and effectiveness of snooping on the Web for the kind of information that may not come up in a job interview.

According to a March survey by Ponemon Institute, a privacy think tank, 35 percent of hiring managers use Google to do online background checks on job candidates, and 23 percent look people up on social networking sites. About one-third of those Web searches lead to rejections, according to the survey.

Social networking sites have gained popularity among hiring managers because of their convenience and a growing anxiety about hiring the right people, researchers say.

Big corporations long have retained professional investigators to check job applicants’ academic degrees, criminal records and credit reports. But until now the cost has deterred the ability of smaller firms to do the same level of checking, said Sue Murphy, a director of National Human Resources Association.

These online searches can reveal a wealth of information not otherwise attainable through a more customary background and criminal records search: risqué pictures, pictures of drug use or heavy alcohol use, poor writing skills, and radical political positions. Any one of these could convince a potential employer that a particular job candidate is not not a good fit or not worth the risk of hiring.

A word of caution -- if you choose to make these searches part of your hiring process, you should do so uniformly to avoid the appearance of disparate treatment. That is not to say that every job candidate for every position needs to be screened, but if you are going to screen one candidate for a particular position, you should do the same for all candidates, and apply the same standards based on the results. While the online search itself is lawful, it is still illegal to use that information in a disparate manner to unlawfully discriminate.

Supreme Court adopts recklessness standard for willful Fair Credit Reporting Act claims

In the employment context, the federal Fair Credit Report Act ("FCRA") requires specific notice and consent before an employer can conduct a background check on an applicant or employee, and pre-adverse action and adverse action notices before a company can take an adverse action (refusal to hire, termination, demotion, etc.) against an applicant or employee. If this language is foreign to you, you should contact your employment counsel to ensure that your application process complies with this law. Compliance is important, because there are damages and penalties, including attorneys' fees and costs, available for an aggrieved individual. For a negligent violation, a plaintiff is entitled to additionally recoup actual damages only. For a willful violation, the panoply of available damages expands to include statutory penalties and punitive damages.

In a potentially employee-friendly ruling, the Supreme Court has ruled that a willful violations of the FCRA do not merely cover intentional and knowing violations, but also reckless violations. The Court distinguished between civil law, where "willfulness" nearly always includes a component of recklessness, and criminal law, where it requires purpose and intent. The Court then adopted the common law definition of recklessness - an objectively assessed high risk of harm. By blurring the distinction between negligence and willfulness by injecting an aspect of reasonableness into the damages calculus, the Court has made it potentially more difficult for employer to avoid the higher damages that go along with a finding of willfulness.

For a copy of the Court's decision, see Safeco Insurance Co. of America v. Burr.