Smart Hiring

April 30, 1998-Smart Hiring - A PEO's First Line of Defense

With employee violence on the rise and employment-related litigation commonplace, employers need to use extreme care in hiring only qualified and responsible employees. While there are no guarantees when hiring new employees, employers can minimize future problems through the practice of "smart hiring." In simple terms, an employer must investigate an employee's background in order to reduce litigation and weed out potentially troubled employees. Although employers have access to a wealth of information on prospective employees, they must proceed with caution. This article looks at some of the most important sources of information on prospective employees and the legal minefields through which employers must navigate.

Employment History

An applicant's employment history contains invaluable information concerning his or her suitability for employment. Unfortunately, employers are having an increasingly difficult time obtaining anything more than an applicant's date of employment and position with a former employer. Former employees adopt this "don't ask, don't tell" attitude because they fear that providing negative information about a former employee may lead to a lawsuit for defamation and/or retaliation.

A prospective employer cannot force a former employer to disclose information concerning an applicant's employment history. To maximize the possibility that former employers will be cooperative, applicants should be required to sign a release which authorizes former employers to disclose information concerning the applicant's work history and pledges to hold them harmless for disclosing appropriate work-related information. In addition, a well-documented attempt to secure such information may be critical evidence in defending against a negligent hiring claim. A number of states have enacted laws which attempt to provide former employers with immunity from litigation when they disclose accurate information documented in a former employee's personnel file.

Credit History

Credit reports are a useful source of information on prospective employees, shedding light on an applicant's financial responsibility, debt load and ability to organize his/her affairs. An employer may secure a copy of an applicant's credit report if it complies with the provisions of the Fair Credit Reporting Act ("FCRA").

Employers should be aware of the recent amendments to the FCRA that impose new procedural requirements for obtaining an applicant's (or employee's) credit report. Specifically, the employer must notify the individual in writing ahead of time, in a separate document, that a credit report may be used for employment purposes. The employer must also secure the individual's written authorization before obtaining his or her credit report from a credit bureau. If an employer relies upon a credit report to deny employment or take other "adverse action," it must first provide the individual with a pre-adverse action disclosure which includes, among other things, a copy of the individual's credit report and a copy of "A Summary of Your Rights Under the Fair Credit Reporting Act", a document published by the Federal Trade Commission. After the adverse action is taken, the employer must provide the individual with an adverse action notice. This second notice also has a number of specific substantive requirements.

Criminal History

An applicant's criminal history may be extremely relevant in determining his or her trustworthiness and suitability for employment. There are certain restrictions, however, on the use of criminal records in the employment context. Most notably, there is a significant legal distinction between conviction and arrest records. Conviction records, usually obtained through state police agencies, may be an appropriate area of inquiry and serve as the basis for an employment decision. In order to avoid a claim of discrimination, however, an employer must be prepared to show a business necessity for the use of conviction records. A prospective employer may also be interested in an applicant's arrest record. While consideration of an applicant's arrest record is not per se illegal under federal law, there is an extremely heavy burden placed upon an employer to justify its need to do so.

Thus, employers should carefully evaluate what qualities they are looking for in prospective employees and make sure that their inquiries into applicants' criminal histories are narrowly-tailored to achieve legitimate objectives. On a related note, employers are generally prohibited from requiring prospective employees to take polygraph tests. Furthermore, employers should be aware that a number of states have enacted civil rights laws which specifically address an employer's ability to consider criminal records in employment decisions.

Litigation History

An employer can check local court files (which are usually available to the public) to determine whether the applicant has ever been a party to a lawsuit. A review of these files might provide valuable information such as an applicant's propensity for litigation or violence. In addition, court files may contain information which would allow a prospective employer to double-check information supplied by the applicant during the hiring process. Medical History

Information concerning an applicant's medical history may be directly relevant to his or her suitability for employment. Employers must be very careful when soliciting this type of information from an applicant, however, because of strict state and federal laws prohibiting handicap discrimination. The most comprehensive federal law in this area is the Americans with Disabilities Act of 1990 ("ADA").

Under the ADA, an employer may ask disability-related questions and require a medical examination of an applicant only after a conditional job offer has been extended. Employers may, however, make certain pre-offer inquiries in order to evaluate whether an applicant is qualified for the job. Proper pre-offer inquiries include the following:

Employers may ask about an applicant's ability to perform specific job functions. For example, an employer may state the physical requirements of a job (such as the ability to lift a certain amount of weight or the ability to climb ladders), and ask if an applicant can satisfy these requirements.
Employers may ask applicants to describe or demonstrate how they would perform job tasks.

Employers may ask about an applicant's non-medical qualifications and skills, such as the applicant's education, work history and required certifications and licenses.

Once a conditional job offer is extended, an employer may ask disability-related questions and require a medical examination as long as such steps are taken for all employees entering the specific job classification and are "job-related and consistent with business necessity." Employers cannot inquire at any time about an applicant's prior job-related injuries, workers' compensation history or current use of lawful drugs. However, an employer may ask applicants about the current illegal use of drugs because such conduct is not protected under the ADA. A test for current illegal use of drugs is not considered an medical examination under the ADA and can be administered at any point during the hiring process.

Personal History

Employers are sometimes interested in personal information concerning job applicants because such information is often an accurate barometer of their future performance and propensities. Employers must be careful in this area though; certain inquiries are prohibited altogether while others are allowed only where an employer can establish their relationship to a bona fide occupational qualification.

The Equal Employment Opportunity Commission ("EEOC"), the agency responsible for administering the majority of federal civil rights laws, has promulgated a detailed pre-employment inquiry guide which provides employers with guidance regarding lawful and unlawful pre-employment inquiries concerning an applicant's personal history. Employers should be aware of its contents and review their hiring practices to ensure that they are in compliance. In addition, management officials responsible for interviewing and hiring employees should be trained with regard to the scope of acceptable inquiries. Inappropriate questions, while not always proof of an unlawful hiring motive, can lead to expensive and time consuming litigation, even if the employer is ultimately vindicated.

Conclusion

In today's complex employment environment, all employers-and especially professional employers-must practice "smart hiring." As is true for any important business decision, an employer must investigate the facts thoroughly and make a well-reasoned determination. Thoroughness of a background check depends upon many factors, including the employer's specific needs and concerns; the position for which the applicant is being considered; and the resources the employer is able to allocate to such inquiries. Employers must routinely investigate the background of their prospective employees. Failure to do so-or doing it improperly-can have serious long-term and expensive consequences.