Hot Topic # 1: What Background Checks Should You Conduct?

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1 HOT TOPICS IN BACKGROUND SCREENING Pamela Q. Devata Scott M. Paler Seyfarth Shaw LLP Breadth. Depth. Results. CH Hot Topic # 1: What Background Checks Should You Conduct? 1

2 Depends on the following: What do you want to know? Will the employee be driving a company vehicle? Type of job/position Federal and State law restrictions Other requirements (type of industry) Consider Using: Credit reports Criminal reports Driving records Social security trace Employment verification Educational verification 2

3 Hot Topic #2: Should You Develop Background Screening Policies Or Hiring Criteria? Checklist of Questions to Consider When Creating A Background Screening Policy Who will be screened? (i.e., applicants only, all employees, top executives, managers only). When will background screening occur? (i.e., pre-employment employment only, annually, at time of promotion, post-offer, pre-offer, etc.). What forms will be given to applicants/employees before the background checks are conducted? What types of checks will be conducted? How far back will the checks go? What form will the results be given to the employer? Who will have access to the results? How long will the screening process take? What information will be considered in making employment decisions? Will any information automatically disqualify an applicant/employee from being hired/promoted? 3

4 Will the nature and gravity of the offense or offenses, the time that has passed since the conviction and/or completion of any related sentence, or the nature of the job assignment be considered before making any employment decision? Who is the ultimate decision-maker regarding background information? What actions will be taken if an applicant/employee falsifies his/her application? Who will be responsible for complying with the federal Fair Credit Reporting Act (FCRA) and state laws regarding employment screening? Who will be responsible for administering the adverse action process under the FCRA if applicable? Background Screening Policy Different from hiring criteria Highly recommended Notify employees and applicants that background screening will be performed so there is no question in the future. Guidance to HR about consistent application 4

5 Hiring Criteria: Pro s and Con s Pros: Consistency among departments, offices, locations, hiring managers, etc. No surprises for employees/applicants Cons: Little room for extenuating circumstances May require displacing many employees/applicants Difficult to capture every possible crime /situation Hot Topic #3: How To Choose An Appropriate Vendor? 5

6 First question is: In-house or Outsource? Legal ramifications of each Generally in house FCRA does NOT apply (but state law implications may exist) Outsourcing requires complying with the FCRA Cost associated with both (employee time and resources) Experts in industry (resource availability and knowledge of what can be used/obtained) Benefits of Outsourcing Doing background checks in-house can divert time and resources from your core business. Qualified CRAs can usually find and deliver background information more quickly and accurately than if the search is performed inhouse. A reputable CRA should be fully knowledgeable about the FCRA and best able to comply with all aspects of the law. BUT Make sure you hire the right CRA for the job! 6

7 How do you select an appropriate vendor? What should a background check include? What may a company legally ask for in a search? What is unlawful? If you don t know what you are getting when you order a background check, you probably won t get what you need, and you may create liability for your company Obtaining a Good Background Check What to ask for from the CRA Search methods (including sources in consults and frequency) Who performs the search? Who reviews the information after it is collected? (Usually a search company will hire runners to go to various court houses and collect data) Turn-around time for a search (should be three days or less) How it handles incomplete or inaccurate records What to ask for from the applicant (Identifiers) Full Name (including maiden, middle, previous, aka) Date of birth Social security number (properly maintained in a secure location) Driver s license number 7

8 Where Will A Good CRA Search For Records? County courthouses State criminal records repositories The federal Integrated Automated Fingerprint Identification System Private databases maintained by some criminal background checking companies Each of these sources contains different information which may be relevant to your background check. Is It Always Better To Spend More Money On A Background Check? An Internet search for a background search company will reveal dozens of providers offering a variety of search packages, prices and promises. Simple, inexpensive searches may not get you the information you need, and may not be worth the small price you pay. As we discussed, you may not need the most comprehensive, costly background check possible for every job applicant. 8

9 Hot Topic #4: How Should You Handle Independent Contractors? Notice, Authorization and Certification Requirements When an Independent Contractor Employer is Assigning an Employee to a Site or Specific Employer, whose responsibility are the notice/authorization requirements? Depends: Who is the End-User? Whose the Employer? 9

10 Notice, Authorization and Certification Requirements End-User is the company that is using or relying on the information in the report to make an employment decision. (Usually the Contractor). What if Owner wants to see the report? This may or may not make it an End-User, but the notice/authorization must specifically state this fact. Contractor is generally the employer of temporary staffing employees. Responsible for pay, training, placement, etc. Who Can Require Background Checks? Can Owners Require Background Checks on Independent d Contractors? YES: May require background check before a person is assigned as condition of placement (i.e., based on the specific job) May require background check to determine site/location access. 10

11 Who Can Require Background Checks? Can Independent Contractors run a background check on an applicant before he/she is placed with an Owner? Yes, as long as the Company gives the appropriate notice and gets authorization. Can Independent Contractors terminate an employee on the basis of a background check? Yes, for failing to consent to a background check or on the basis of information contained in the check. Adverse Action Responsibilities of End-User taking adverse action: Before adverse action is taken employer must provide consumer with: a copy of the consumer report a summary of the consumer s rights under the Act 11

12 Waiting Period.... After adverse action is taken the employer must provide the consumer with: Notice of the adverse action taken Name, address, and toll-free telephone number of the consumer reporting agency that furnished the consumer report Statement that the CRA did not make the decision to take the adverse action and is unable to provide specific reasons why the action was taken Waiting Period.... After adverse action is taken the employer must provide the consumer with: Notice of the consumer s right to obtain a free copy of the consumer report from the agency within 60 days Notice of the consumer s right to dispute the accuracy or completeness of any information in the consumer report furnished by the agency 12

13 Whose Responsibility is Adverse Action? The End-User(s) Generally the Contractor Companies will often contract that the Independent Contractor will be responsible for complying with Adverse Action Requirements as the employer. Hot Topic #5: Should You Rely On Electronic Signatures For FCRA Forms? 13

14 The fundamental challenge is proving identity Laws that apply Fair Credit Reporting Act (FCRA), 15 U.S.C. Sec et. seq. Electronic Signatures in Global and National Commerce Act (E-Sign Act), 15 U.S.C. Sec. 7002(a)(1) Uniform Electronic Transactions Act (UETA) State Laws NOTE: Many of these haven t been tested as they relate to Disclosure/authorization forms 14

15 FCRA No specific provisions regarding electronic signatures Require specific consent from consumers in the form of a written signed document FTC has opined that electronic signatures can be valid (if you comply with E-Sign) E-SIGN ACT Went into effect in October States that neither contracts nor signatures should be denied legal effect solely because they are in electronic form. Congress included a reverse preemption clause allowing state law to supersede E-Sign if the state either adopts a piece of similar legislation i.e., the Uniform Electronic Transactions Act (UETA) as approved by the National Conference of Commissioners i on Uniform State t Laws (NCCUSL); or passes a law that is consistent with E-Sign. 15 U.S.C. 7002(a)(1)(2000). 15

16 UETA-Uniform Electronic Transactions Act 46 states, as well as District of Columbia and the Virgin Islands, have adopted UETA. UETA essentially states as follows: a record or signature will not be denied legal effect or enforceability solely because it is in electronic form; the parties must agree to conduct the transaction electronically the authenticity of an electronic record or signature may be shown in any manner, including a demonstration of the effectiveness of the security procedures in place; companies may satisfy records retention ti laws by maintaining i i electronic documents, so long as there are assurances that the electronic documents have not been altered. See A Few Facts About the Uniform Electronic Transactions Act, Practical Tips Require Applicants to Consent to Electronic Submission and Storage Use A Well-Recognized Method of Encryption to Protect Applications Select A Signature Method That Allows For Objective Identification of Applicant 16

17 Require Applicants to Affirmatively Consent to Electronic Signature Under UETA and E-Sign, parties to an electronic transaction must consent to having the transaction in electronic form. Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances. E-Sign suggests that prior to this consent, a consumer must be informed of certain rights. Require Applicants to Consent to Electronic Submission and Storage Under E-Sign, consumers must be appraised of: any right or option the consumer has to obtain the record on paper or in other non- electronic form; his or her right to withdraw his or her consent, together with any conditions, consequences or fees that would result from such a withdrawal. The Act specifically notes that these consequences may include the termination of the business relationship; the procedures the consumer must use to withdraw consent or to update his or her electronic address; whether the consent is for information relating to a single transaction or for identified categories of records that may be provided over the course of a relationship; and how the consumer may request and obtain a paper copy of any electronic record that is sent may be obtained even while the consumer consent to receive electronic media is still in effect, and whether any fee will be charged for such a copy. the hardware and software requirements for accessing and retaining the electronic records the consumer is consenting to receive, and the consumer must consent in a manner that reasonably demonstrates that the s/he can access the information in electronic form that is the subject of the consent. 17

18 Select A Signature Method That Allows For Objective Identification of Applicant Demonstrating the authenticity of electronic signatures in court could prove challenging. Whereas a hand written signature has objective characteristics that identify the signer, a typed name does not. Ideas for complying: Use a digital signature method Require applicants to submit number along with name Require applicants to provide wet signatures Use specific IP addresses as means of tracking Hot Topic #6: Future Developments Immigration Reform Congress may soon pass comprehensive immigration legislation. A new law could require additional background screening requirements during the pre-employment process. Chemical Regulations New Department of Homeland Security regulations for chemical facilities take effect on June 8, They mandate new background screening efforts. Definition of Willful/Adverse Action May Change The U.S. Supreme Court has heard oral arguments on what constitutes willful misconduct and adverse action under the FCRA. A decision may yield a significant impact on preemployment screening. 18

19 QUESTIONS? For More Information, please contact: Pamela Q. Devata, Seyfarth Shaw LLP, , Scott M. Paler, Seyfarth Shaw LLP, , 19