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Criminal Background Checks: What's Legal for Employers?

Mark Henricks

In the hiring process, many employers conduct reference and background checks to make sure they really know the person they're bringing into their organization. But when it comes to a candidate's criminal past, is it legal to pry, and consequently deny the person employment because of it?

The answer depends on where the interview takes place, because laws vary. It also depends on when during the application process it is asked, who is asking, who is being asked and what will be done with the information.

"This is a very technical world," said Elan Parra, managing director of New York City-based investigative firm Lemire. "There are a lot of nuances."

Federal regulations

As far as the U.S. Equal Employment Opportunity Commission (EEOC) is concerned, employers can ask job applicants about criminal background — but that doesn't mean you get a free pass to turn down the applicant.

Carol Miaskoff, assistant legal counsel with the EEOC in Washington, D.C., said what matters is how you use the information you receive. For example, if an employer finds out about a conviction and uses it to turn away an African-American candidate but hires a white candidate with the same or very similar record, it would be considered discrimination, according to the EEOC.

Even if a blanket prohibition against hiring people with criminal convictions is applied the same way, regardless of race, that prohibition may still run afoul of the law if it excludes more members of protected minorities, Miaskoff said. Last year, automaker BMW paid $1.6 million to settle an EEOC case involving similar allegations against a North Carolina supplier. [See Related Story: Best Background Check Services]

Employers generally can't use blanket prohibitions at all if they are not relevant to the work.

"They should be focused and they should be thoughtful in terms of what kind of criminal record and for how long," Miaskoff said. "Is it really relevant to your job selection?"

The EEOC also specifies that an employer can't use an arrest alone to justify not hiring someone, because an arrest is not a conviction.

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Although the EEOC seems like the most likely federal agency to be interested in this, the Federal Trade Commission comes into play even earlier in the process via the Fair Credit Reporting Act. FCRA restricts what employers can do to research candidates using third-party consumer reports, including criminal background checks as well as credit histories. 

First, FCRA requires that employers get the applicant's written permission to do a background check, which has to be a completely separate piece of paper from the application.

"The applicant has to be put on notice that there's going to be a report requested and that report has to be authorized separately," Parra said.

If anything questionable turns up on the report, the employer must give the applicant a copy and tell him or her about FCRA protections before taking action based on the report. Finally, the employer must send the applicant notice if it decides not to hire or promote because of the report.

Local legislation

A growing number of states and cities are passing laws restricting what and when employers can ask applicants. These "ban-the-box" laws prohibit yes-no check boxes on applications after questions such as: "Have you ever been convicted of a crime?"

Many ban-the-box laws only allow questions about a person's criminal background later during the application process. For instance, the law that New York City passed last year allows criminal questions only after a conditional offer of employment has been made, said Parra.

"Inquiring" does not just refer to asking candidates. New York City also bars targeted Internet searches that aim to find out if a person has a criminal background, postponing the search until after a conditional job offer has been made. Employers are also prohibited from advertising that applicants must be arrest- or conviction-free, Parra said.

California state law goes even further, by restricting most employers from asking about a person's criminal background at all, unless it's for those employers hiring for law-enforcement positions and for some jobs that involve working with children.

"Employers cannot directly ask employees about arrests that did not result in convictions, diversion matters, expunged, sealed or dismissed cases," noted Kacey McBroom, an attorney with the Kaedian law firm in Los Angeles.

California also restricts how employers investigate candidates using third parties as well as home-brewed Internet searches, McBroom said. Simple online name searches readily turn up cases that go back as far as 2000, where arrests were never followed up by convictions, or the cases were legally expunged after being found unjustified. However, many employers still conduct do-it-yourself investigations without following the notification and use rules.

The consequences of noncompliance

The EEOC does not say how many complaints, among the 100,000 or so it receives annually, allege improper criminal background questioning or investigation. However, Miaskoff said complaints are common and, as the BMW settlement indicates, penalties can be stiff.

The EEOC does not have a preset schedule of penalties for criminal background infractions. Instead, monetary penalties are based on financial damages to affected individuals, such as lost pay, Miaskoff said. The EEOC may also impose what it calls equitable relief. In BMW's case, that required hiring some people who were rejected for criminal history.

New York City's penalties can go up to $250,000. Violators of the federal FCRA can be liable for actual damages up to a more modest-sounding $1,000, Parra said.

"What becomes a moving target are punitive damages," he added. "Punitive damages can be whatever is permitted by the court."

The EEOC's rules don't apply to companies with fewer than 15 employees. However, FCRA and the California Investigative Consumer Reporting Agencies Act apply to all companies regardless of size. New York City's 2015 law applies to businesses with at least four employees.

To navigate the rules on criminal background checks, our expert sources advised business owners to check with state employment offices, the federal Small Business Administration, the EEOC, the FTC, private investigative firms and reporting agencies, and each other. And stay current, they cautioned — the rules can change, and the ban-the-box law, in particular, is becoming widespread.

"There are over 100 cities and states that have made efforts to move in this direction," Parra said. "This is going to continue, and it looks there are going to be very nuanced requirements on a city-by-city and state-by-state basis that employers are going to have to become aware of."

Editor's Note: Looking for a background check service? Fill out the form below to get free quotes from our vendor partners.

Image Credit: 5 second Studio/Shutterstock
Mark Henricks Member
<p>Mark Henricks writes about business, personal finance, health, fitness and other topics from Austin, Texas. A graduate of the University of Texas School of Journalism, he has worked as a reporter, editor, author and freelance writer for many leading publishers. Reach him by <a href="">email</a>, on Twitter (<a href="">@markhenricks</a>) or visit his website, <a href="">The Article Authority</a>.</p>