Ensuring Fair and Legal Background Checks at your Business

Jul 3, 2024

ALBANY, NY | Conducting background checks on individuals can help inform businesses who need to make hiring and promotion decisions and ultimately help determine what individuals you allow at your business. However, businesses should be aware of the legal requirements to ensure that they are complying with both federal and state laws.

At the very onset of determining whether to background check or not, you should remember the cardinal rule – it must be the same for everyone. With employees, this means setting strict criterion for what roles get background checks (only the front desk department) and ensuring that all people within the designated roles (but every single person in that department). With guests, it means everyone who is staying at your business for a certain length of time. When it comes to both guests and employees, businesses at a bare minimum must make sure that they, or the company they are using, are obtaining written consent from the individuals who are having their background checked.

What does this entail more specifically?

Relevant Federal Laws

Background checks may not be conducted solely because of someone’s race, national origin, color, sex, religion, disability, genetic information, or age.142 U.S.C. § 2000e et seq. Conducting a background check solely because of someone’s disposition in the above categories may be considered discrimination and can have legal repercussions.2Id. This is why you must check everyone in the same category, as discussed above.

When conducting a background check through a third-party agency, you must comply with the Fair Credit Reporting Act (FCRA).3See Dalton v. Capital Associated Indus., 257 F.3d 409 (4th Cir. 2001); Gary M. Deutsch, Internal Audit Procedures Handbook § 2-6.13 (2024). The FCRA requires that background checks can be provided only where an employer has given clear notice to the employee (or prospective employee) that a background check will be conducted on their behalf.415 U.S.C.A. § 1681b(b)(2) (West). The notice, which must be on its own page, must be signed prior to requesting the background check and must let the job candidate know that it can be used in decisions concerning their employment and hiring.5Id. The employer must also certify that the disclosure to the employee has been made and that the background check is not being used to violate any federal laws.615 U.S.C.A. § 1681b(b)(1) (West).After results are received and prior to taking any adverse action (i.e. not hiring the applicant) based on a background check, the employer must provide the employee with a copy of their background check and a notice of their rights.715 U.S.C.A. § 1681b(b)(3) (West).Such notice of rights should be provided to the employer by the reporting agency.815 U.S.C.A. § 1681b(b)(1) (West).

When conducting background checks for non-employment-related individuals, it is integral to get written consent from the individual to perform the background check.915 U.S.C.A. § 1681b(a)(2) (West). When taking adverse action premised on the findings of the background check (i.e. not allowing them to stay at your business), the business must provide some information to the consumer. Specifically, if it’s credit report-related, (1) notice of the adverse action; (2) the numerical credit score in written format; (3) the name, number, and address of the reporting agency and a statement that the reporting agency did not make the adverse determination; (4) notice of the consumer’s right to obtain the credit report from the consumer agency which shall include the 60-day period under that section for obtaining such a copy and the applicant’s rights to dispute the findings.1015 U.S.C.A. § 1681m(a) (West). If the adverse action is related to the criminal part of the background check, the business must once again, give notice of the negative decision/adverse action, which must contain (1) the name and contact information of the background check company and (2) tell the prospective applicant about their rights to dispute any inaccurate information in the report.

But, state laws can impose additional requirements or thresholds regarding background checks.

New York Specific Laws

A background check in New York may not reveal an arrest for a crime for which the defendant was convicted, released, or ended parole over seven years ago.11N.Y. Gen. Bus. Law § 380-j(f)(v) (McKinney). This seven-year threshold comes up frequently at both the state and federal levels. Additionally, an employer may not decline to hire a previously convicted individual unless the crime committed either creates an unreasonable risk to property, safety, or welfare of people or the general grounds of the business, or where there is a direct relationship between the committed crime and the employment sought.12N.Y. Correct. Law § 752. For example, if a background check comes back with results that include embezzlement, then this would give you grounds to not hire for a position handling the monetary matters of the company, as the crime is related to the job duties. Upon request from the denied applicant, the employer must provide the reason for denial within 30 days of the request.13N.Y. Correct. Law § 754.

Pennsylvania Specific Laws

In Pennsylvania, information of a criminal conviction may only be considered to the extent that the information relates to the applicant’s suitability for employment for the applied-for position, and the employer must notify the applicant in writing if the decision not to hire is based upon criminal history.1418 Pa. Cons. Stat. Ann. § 9125. This is comparable to New York when comparing the requirement that the conviction be relevant to the job applied for.

Texas Specific Laws

Like other states, Texas focuses on the seven-year time frame, however with an added salary threshold. Texas prohibits a background check from displaying any criminal background information for a crime committed over seven years ago and for which the salary of the job is below $75,000 annually.15Tex. Bus. & Com. Code § 20.05.

Massachusetts Specific Laws

Massachusetts, conversely, has a shorter time period as it prohibits employers from requesting arrest information for a crime in which no conviction occurred, a first misdemeanor conviction for specific crimes such as drunkenness, simple assault, speeding, and disturbance of the peace among others, any misdemeanor which had a conviction longer than three years ago, and any criminal record that was sealed or expunged.16Mass. Ann. Laws ch. 151B, § 4.

As a business owner, protecting your business is a constant battle, and a background check is one of the weapons that you can utilize in your arsenal. Knowledge is always power, and knowing who is at your business at any given time can help with your insurance, help protect your guests and employees, and ultimately help prevent unexpected incidents during operation. The Towne Law Firm is fully equipped with industry experience and legal expertise to help business owners review and revise their policies to abide by State and Federal Law. Contact us today: info@townelaw.com.

Written by TLF Partner, Christine Taylor and Summer Associate, Eli Raul. Contact Us Today!

The Towne Law Firm’s business law team provides advice and counsel to numerous publicly and privately held corporate, commercial, and business entities across a wide range of industries. From small, closely held companies to entities with hundreds of employees earning hundreds of millions of dollars annually, we have the experience to address the multitude of issues which arise in the formation, ownership, and operation of a business.

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