new year 2016

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If you ring in the New Year with a list of new year’s resolutions, chances are, your business should, too. For those who prefer to learn from others’ mistakes before they become their own, here is one simple resolution to put at the top of your HR Team’s list for 2016. 

To put the stakes into perspective, in 2015, minor technical violations of the Fair Credit Reporting Act cost individual companies millions of dollars each. This federal law, which despite its name applies to more than just “credit” checks, imposes a number of specific requirements as to both the form and substance of background check authorization forms (among other things) used for employment purposes.

Many of the violations are surprising, and even counter-intuitive: consider language such as a statement of at-will or equal opportunity employment, an acknowledgment of the employer’s privacy policies, a waiver of liability for conducting the background check, or information pertaining to the employer’s philanthropic activities, to name a few. All of these items have a place, but NOT in your background check authorization form! These are precisely the kinds of impermissible “extraneous language” (sometimes one- or two-liners) that have gotten your business counterparts into legal trouble.   

Background checks for employment purposes are most commonly performed for new hires or rehires, although they are also permissible for current employees, with appropriate authorization from the individual. That means that a faulty background check authorization form exposes a company to significant legal repercussions just about every time a new employee is hired, pursuant to the most common background check practices. 

Defects in a background check authorization form can go undetected for years. Then one day, the company is served with a lawsuit. Most commonly, the suit is styled as a class action, meaning the employer’s potential financial exposure is multiplied by the number of background checks performed using faulty forms over a look-back period of between two and five years, depending on the particular facts. This multiplier can have a devastating effect on your company’s 2016 bottom line. 

The good news is, you do not have to abandon employment-related background checks altogether– nor should you. However, be sure to perform periodic reviews of the forms used, and if necessary, enlist the help of legal counsel to stay abreast of changes in the law. 

Tips for your background check authorization form:

  • Provide notice to the individual that a background check may be performed for employment purposes;
  • Specify the kinds of information that may be obtained as part of the background check. This may include, among other things, credit background, civil judgments, education, employment history, or general reputation;
  • Include language giving authorization, and specify whether it is for hiring purposes only, or is to remain effective during employment, for things like promotion, retention or reassignment;
  • Remove extraneous language. Consider moving it to the employment application;
  • Detach the authorization form from any other paperwork, and provide it to the individual as a stand-alone document, usually a single page.

Many employers rely on third party contractors to perform background check services, and often to provide the background check forms. Delegating these tasks can be an indispensable time saver to busy Human Resource professionals, but it requires a careful selection process. When contracting with an outside background check company, look out for “buyer beware” warnings in the fine print, cautioning that background check services do not constitute legal advice. Be sure to ask the right questions, including whether the forms provided have been reviewed by legal counsel, and are approved for use in the state(s) where your business operates. It is advisable to consult independent legal counsel to ensure your forms comply with changes in the law.  In addition to federal law, state and local laws impose additional requirements on criminal and credit checks, including the timing of when they may be performed, even with proper authorization. 

Before the ambition of another January wears off, consider forming healthy new habits by reviewing your business’s background check authorization forms, along with your other employment policies. If you’re already ahead of the curve with your background check forms, then check out these additional tips for 2016 by Lisa Berg.