Guidance for Recruiters Who Run Background Checks on Contractors

By DEBBIE FLEDDERJOHANN, President of Top Echelon Contracting

If you run background checks on contractors, you will want to be sure to read a recent government document on the proper use of those checks.

The Equal  Employment Opportunity Commission (EEOC) and the Federal Trade Commission (FTC) have teamed up to create the technical assistance document titled “Background Checks: What Employers Need to Know” explaining the laws governing background checks.  These agencies enforce the laws regarding background checks.  While the EEOC ensures that background checks are not discriminatory, the FTC enforces the Fair Credit Reporting Act (FCRA), which protects the privacy and accuracy of the credit reports used in background checks.

The document does not provide any new regulations.  Instead, it provides tips for acquiring and utilizing information from background checks properly based on existing regulations.   It is important to note that the use of background checks is not illegal, but this document illustrates the importance of following the regulations of the EEOC and FTC.

Below are some key points addressed in the document:

• Don’t intentionally discriminate.   If you require a background check of one candidate for a position, it should be required of all candidates for that position.  You don’t want to run background checks only on people of a certain race, for example.

• Don’t unintentionally discriminate.  Employers can run into trouble when they have blanket policies forbidding the employment of people with a certain criminal background that is particularly common among a certain race or other protected class.  Such a policy can create what is known as disparate impact, meaning that the policy disproportionately filters out a protected class.  If you cannot show that basing employment decisions on that factor is “job related and consistent with business necessity,” you could be faced with a discrimination lawsuit.

• Have the candidate sign a waiver before running a background check.  The waiver should state that the information may be used to make decisions about their employment.  The notice must be in writing and in a stand-alone format.  It can not be part of the employment application.

• Notify individuals BEFORE taking adverse employment action.  Give the individual a copy of the background check and “A Summary of Your Rights Under the Fair Credit Reporting Act.”  This gives them the opportunity to explain the negative information.

• Communicate properly AFTER adverse employment action.  If you are rejecting a candidate due to negative information on a background check, you must notify them (orally, in writing, or electronically) of that and provide them with the name, address, and phone number of the company that ran the background check.  Be sure to state that the background check company did not make the hiring decision and that they cannot give the reasons for it.  The individual can, however, dispute the accuracy or completeness of the report and request a free report from the background check company within 60 days.

• Keep records in compliance with regulations.  Per the EEOC, you must retain employment records for a year after the records were made or a year after the employment action was taken, whichever is later.  If you are charged with discrimination, you must retain the related records until the case has concluded.  Records that no longer have to be kept must be destroyed properly (burn, pulverize, shred, etc.).

Background checks are no longer limited to direct hire employees because contractors are increasingly handling more critical and sensitive tasks.  Background checks can help ensure that you are not putting your client or your reputation at risk by placing a certain contractor.  Not only that, but your clients may require that your candidates be run through a background check before they can start an assignment.  They may require some or all of the following checks:

• Social Security Number verification
• Statewide misdemeanor and felony check
• Sex offender
• Address history
• County-level specific checks for the places the contractor has lived

Many recruiters choose to outsource background checks, and all of the other employment tasks associated with contractors, to a contract staffing back-office provider.  If you decide to go this route, you will want to be sure that the back-office can handle the types of checks listed above AND that they are following the laws of the EEOC and FTC.

Background checks are a great way to protect you and your clients, but only if they are handled properly.
(Editor’s note: This article is for informational purposes only.  It should NOT be construed as legal or tax advice.)