As business owners, we must remain confident in our ability to ferret out less qualified employment candidates through interviews and job skill evaluations. But what’s the role of criminal and motor vehicle record background checks?

While they may not drive most of our hiring decisions, careful thought should be given to how, when, and under what circumstances these checks are conducted as well as how they should influence employment decision-making. The criteria should be clear and consistent. And all of this should be decided long before a job position is posted.

Failing to conduct necessary checks can lead to catastrophic consequences and overwhelming liability, and conducting them improperly can just as easily, too. The solution is to give background checks the serious consideration they are finally due.

DIRE CONSEQUENCES

In 2010, Texas-based nonprofit Lutheran Social Services (LSS) uncovered a two-year embezzlement scheme by one of its employees that cost LSS — and indirectly the public that it endeavors to serve — nearly $50,000. The employee-perpetrator gradually absconded with the funds through hundreds of falsified expense reports over a two-year period. Sadly, the fraud was preventable.

LSS normally conducted criminal background checks. And before LSS hired the perpetrator, she had twice been convicted of fraud crimes, one against a nonprofit organization. An unfortunate happenstance allowed her to slip through LSS’s normally-diligent screening process. A criminal report was run, but it was merely dropped into the applicant’s file before it was ever reviewed. Management was unaware of it until it discovered the employee’s embezzlement years later.

This event, while disappointing, is a mild example of the damage that ill-intentioned employees can cause. The potential risks can be far worse. In one of the more notorious examples, a trucker with an extensive history of criminal sexual misconduct and assault was hired without a criminal background check by his new employer. He later raped and assaulted a hitchhiker while on duty. He was convicted of the crime, and his employer faced a $4 million verdict for negligent hiring.

These are extreme cases — few overlooked criminal reports or decisions to forego criminal checks will lead to such dire results. But they could. When they do, the costs can be astronomical, not only through immediate financial losses, but also from the resulting negative publicity.

This is not to say that criminal and motor vehicle background checks are without their risks, or that employers should conduct them without any forethought. Both federal and state laws regulate, to some degree, the methods that employers may use to screen job applicants. Failing to follow these legal requirements can pose as many risks as not conducting criminal and motor vehicle record (MVR) screening at all.

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BAN THE BOX?

In recent years, many state legislatures and legal reformists have ascribed to the “ban the box” movement, which strives to prohibit employers from using the dreaded “have you ever been convicted of a crime” inquiry on their employment applications. The theory behind the prohibition, which some states have adopted, is that many employers rely too heavily on broad assumptions that all those convicted of a crime, regardless of severity and circumstance, are unfit for employment. Legal reform would seek to minimize such all-inclusive hiring prohibitions.

This “ban the box” movement echoes the sentiment expressed by the Equal Employment Opportunity Commission (EEOC) through its most recent Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions under Title VII of the Civil Rights Act of 1964 (the “EEOC Enforcement Guidance”), issued in April 2012.

The EEOC has long taken the position that employers who rely too heavily on blanket stereotypes about past criminal actions may unwittingly discriminate against minority applicants, who face disproportionate conviction and incarceration rates. Over the past several decades, numerous cases provide support for claims against employers who do so under a “disparate impact” theory — the notion that a certain employment practice that has the effect, regardless of intent, of negatively affecting certain racial classes may be unlawful and could lead to civil liability.

In more concrete terms, employers with overbroad criminal background screening practices may face legal claims and liability if those practices disproportionately screen racial minorities from employment positions.

CONSIDER THE CRIME

Neither the EEOC Enforcement Guidance nor typical state laws ban the use of criminal background verifications outright. These authorities merely provide limitations that employers should follow when deciding how and when to use these screening tools.

For instance, the EEOC Enforcement Guidance, reduced to its essence, advises employers to thoughtfully consider the nature and gravity of the crimes being evaluated, the amount of time that has passed since the commission of the crime and the relationship between the crime and the posted job position. We intuitively understand and agree that a recent past conviction for check fraud should properly be screened for an applicant seeking a trusted money-handling position. The same can hardly be said of a 20-year-old minor drug offense conviction for an applicant seeking an entry-level administrative support position.

Similarly, state and federal laws provide restrictions on the use of MVRs and employer handling of those reports. The primary applicable federal enactment that employers must consider is the Driver’s Privacy Protection Act (DPPA) of 1994. The law restricts state motor vehicle departments from disclosing driving records without individual consent, or certification that the records are being used for a delineated purpose, such as for employment purposes.

While the DPPA permits an employer to access these records lawfully, an employer’s failure to keep private information in these records, such as Social Security or driver identification numbers, may expose the employer to liability under the DPPA or a variety of state laws.

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PROTECTING CREDIT PRIVACY

Perhaps the most shocking detail for employers new to MVR and criminal background screening is that these criminal and driving history reports are generally subject to laws protecting individual credit privacy.

When an employer retains a third-party agency to conduct background screenings for employment purposes, the agency in most cases will be considered a “consumer reporting agency,” and its reported findings are generally treated as a “consumer report” for purposes of the Fair Credit Reporting Act (FCRA). Conversely, criminal background and driving history information secured by the employer through its own investigation will generally not be considered a consumer report under the FCRA.

The FCRA requires an employer to provide notice to, and the consent of, individuals for whom it is securing any consumer report (including those reports limited to criminal and driving history information), when obtained from or through a consumer reporting agency (which is defined broadly).

Adverse action notices also must be sent to a job applicant prior to rendering an employment decision, based on adverse information in the consumer report. Criminal record checks should not pull records that are more than seven years old at the time of the record check. Failure to comply with the detailed Federal Trade Commission regulations concerning the FCRA could subject an employer to substantial liability.

UNDERSTANDING LIABILITY

Despite the certain need for MVR review and evaluation, there remains no bright-line legal rule dictating when a driving record is troubled enough to exclude an individual from a driving position, aside from the obvious expired, canceled or suspended license scenarios. The Department of Transportation standards also must be rigorously applied when we talk of commercial drivers. But what about other drivers with valid licenses who routinely handle non-commercial vehicles for their employers?

As many employers recognize, regardless of MVR reviews, they generally will be held legally liable for the negligent on-duty driving of their employees under a legal doctrine known as respondeat superior.

This does not mean that they should dismiss the importance of MVR reviews. At times, employers also have been held liable by juries when an employee operates an employer’s vehicle off-duty, or for personal tasks, usually under a negligent hire or negligent entrustment theory. In either situation, whether under a respondeat superior or negligence theory, the prospect for liability and significant punitive damages jumps dramatically if the employer had access to information that might reveal a history of driver shortcomings by the employee.

Some of the largest awards have come in cases where the driver had a past history of reckless or drunken driving, or in cases involving inattentiveness because of cellphones or texting. In recent years, these types of inattentive driving cases have resulted in monstrous awards, including a $21 million jury award against a nationally recognized company whose driver caused a motor vehicle accident while talking on a cellphone.

Certainly improved driving policies and training, and strict enforcement against violators, will help employers reduce these risks. So, too, can rigorous MVR review. Particular attention should be paid to recent past driver misconduct involving reckless, drunken or distracted driving.

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GOOD PRACTICE RECOMMENDATIONS

With these legal obstacles, employers face risks at every turn when navigating the hazards of criminal background and MVR checks for employment purposes. But these risks should not roadblock these important screening tools. Instead, careful thought and planning in advance can help minimize the risks. Simple steps that may reduce these risks include:

• Delaying inquiries into criminal histories until after a conditional offer of employment has been extended to the applicant.

• Preparing formal FCRA and MVR authorization forms and securing the applicant’s signed consent before searching for criminal and driving history information about the applicant.

• Devising meaningful and constructive employment procedures for relevant use of criminal background and MVR reports. The employer should know, long before a job is posted, which of the possible reports are job-related, and the company should adopt standards for considering criminal background and driving records histories relevant to the specific job at issue.

• Planning the handling of adverse reports in conjunction with the third-party screening agency to ensure that proper notice is provided to an applicant consistent with the requirements of the FCRA.

• Developing proper record protection and retention policies to ensure that confidential information contained in criminal and driving record reports is properly protected.

• With these measures firmly in place, employers can maneuver their practices onto safer courses and avoid unnecessary liability.

About The Author

Christopher Michael Mason is a shareholder with the Polsinelli law firm who specializes in the field of labor and employment law. Mason was a presenter for the seminar “Recruiting, Hiring, Motivating and Firing: A Human Resources Primer for Small Business” at the 2013 Car Rental Show.