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Background Screening Litigation Updates

Five Background Screening Litigation Updates that May Change Your Perspective

These five background screening litigation updates may change your perspective when it comes to risk mitigation. There have been many local, state, and federal laws enacted keeping HR professionals on their toes. This has resulted in some confusion and difficulties keeping up with all the changes. The National Review reported that “more than 17 percent of employers have eliminated or relaxed background check requirements to address recruiting and hiring challenges.” While many new laws have been enacted to promote fairness and second chance hiring, employers shouldn’t overlook the risk mitigation measures of a thorough background investigation. When conducted fairly and accurately, employers can have peace of mind knowing that deserving candidates are being hired despite any debts they have already paid to society and bad actors are not slipping through that could pose a threat to the company or a negligent hiring lawsuit.

(Download White Paper by CEO Mario Pecoraro, Best Practices to Follow when Considering an Applicant’s Criminal History in an Employment Decision“)

  1. Clear and Conspicuous Disclosures and Receiving Authorization Prior to Conducting Background Investigations
    • When using a background investigation company in the hiring process, it is important to ensure that they are adhering to the requirements of the Fair Credit Reporting Act (FCRA) regarding this notification rule.
      • Litigation Against Employer: The background check company, First Advantage, agreed to settle an FCRA class action violation suit to resolve claims it ran background checks without prior authorization from August 2013 to November 2020. According to the Top Class Actions article, First Advantage background checks class action settlement, Class Members are eligible for discounts on First Advantage products including Instant Check and Resume Check.
      • Litigation For Employer: The 2020 case of Walker vs. Fred Meyer, Inc., continues. After the US Court of Appeals for the Ninth Circuit ruled in favor of Walker agreeing that he was not provided a “clear and conspicuous disclosure” because “the explanation must not be so long or confusing that it detracts from the disclosure or in any way makes the disclosure unclear,” the case was sent to a magistrate judge of the district court who granted summary judgment to the employer agreeing that the violation was not willful because at the time of the plaintiff’s application, the stand-alone disclosure requirement was ambiguous. On September 24, 2021, the district court judge adopted the magistrate’s recommendation and dismissed the case.
  2. Pre-Adverse Action Notice
    • If an employer decides not to hire an applicant based on a background investigation, they must provide a copy of the background report and the opportunity to refute the contents. These background screening litigation updates include a surprising decision with regard to the candidates opportunity to explain negative but accurate information.
      • Litigation Against Employer: Managed Labor Solutions allegedly violated the Fair Credit Reporting Act (FCRA) by failing to provide pre-adverse action notices from June 1, 2016, to January 20, 2022, when denying employment. They agreed to pay $225,000 to settle a class action suit.
      • Litigation In Favor of Employer: The Eighth US Circuit Court of Appeals (which covers employers in many states including Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota) ruled job applicants can’t explain negative background checks before an offer is rescinded but can dispute the accuracy of a background check. The case involved a woman who applied for a position stating that she had no felony convictions but was later found to have been convicted of murder and armed robbery and sentenced to 25 years in prison. She was released after serving 12 years.
        • According to the article, “Court Rules Job Applicants Don’t have Right to Explain Accurate Background Checks Under FCRA” written by Roy Mauer and published by the Society for Human Resource Management (SHRM), on May 24, 2022, a three-judge panel ruled that a job applicant can’t “argue accurately reported convictions before losing a job offer.” The applicant sued a data-processing firm based in Missouri alleging the company violated the FCRA. She argued she should have been given a chance to explain the correctly reported convictions on her report.
        • The article quoted Richard Millisor, partner in the Cleveland office of Fisher Phillips who stated, “the act doesn’t give applicants the right to explain negative but accurate information in a consumer report before the employer can make an adverse employment decision.” He went on to say, “But when a discrepancy arises in a situation involving your company, you shouldn’t automatically assume that the results of the background investigation are correct or that the job candidate lied on the application. It’s important not to jump to conclusions but instead follow the proper process outline by the federal statute.”

(Download White Paper by CEO Mario Pecoraro, Best Practices to Follow when Considering an Applicant’s Criminal History in an Employment Decision“)

  1. Accuracy:
    • When conducting background investigations, accuracy is of utmost importance. Making a hiring decision based on inaccurate information can have devastating consequences for an applicant including loss of employment, damage to reputation, and emotional distress. For the employer, the ramifications can include costly litigation.
      • One way to mitigate risk is to avoid background investigations that rely solely on software automation without the “live person factor” to ensure results are accurate. Automated software scours the internet and databases for information that could pick up criminal activity for the wrong person. According to the Today show video posted on July 11, 2022, “How inaccurate background checks can affect securing new jobs,“ the companies that rely too heavily on computer algorithms instead of human interaction verifications are more likely to provide inaccurate reports, affecting innocent applicants who have to then clear their names.
        • Litigation Against Employer: In the Case of Richard Alexander Williams v. First Advantage LNS Screening Solutions, Inc. the plaintiff argued that First Advantage erroneously reported criminal records for a different person which caused Williams to be denied employment on two separate occasions: once for a conviction of selling cocaine and once for committing burglary and aggravated battery on a pregnant woman. In 2020, the plaintiff won the FCRA case, and the Court awarded him $250,000 in compensatory damages and reduced a $3.3 million punitive damages award to $1 million.
  2. Criminal Convictions Related to the Specific Position Filled
    • The following background screening litigation updates relate to the employment position. When considering an applicant’s adverse background, there are several factors that must be taken into consideration including a complete individualized assessment.
      • With over 80 million people having a criminal record, and 600,000 people released from jail and prison daily, it is critical for employers to offer these individuals a second chance at life. There have been laws passed in several states regarding second and fair chance hiring as well as attention given at a federal level concerning individuals with prior convictions.
      • One critical consideration is the duties and responsibilities that are specifically related to the job. Check your specific state(s) to ensure you are following local and state guidelines before making an adverse hiring decision.
      • Employers need to be careful not to exclude people with criminal convictions if it has no bearing on the position. However, there are cases where the employer should not have hired individuals because of the sensitive nature of the position.
        • Litigation: Conviction has no bearing on position: One of the most famous cases that established the Equal Employment Opportunity Commission’s (EEOC) guidance for considering the nature and gravity of the offense, the time elapsed since the conviction and the nature of the job sought is Buck Green v. Missouri Pacific Railroad. This landmark case heard in 1975 by the Eighth US Circuit Court of Appeals found that a man convicted of a draft violation for refusing military induction cannot be denied a civil service job.
        • Investigation: Convictions had bearing on sensitive positions: A more recent situation accuses the employer of putting unsafe individuals in sensitive positions. On May 11, 2022, the Associated Press posted, Report: Census Bureau backlogged on background checks. In this situation, the Office of Inspector General found the US Census Bureau’s background check process missed red flags, hiring 2020 workers with criminal records (including assault and burglary) who interacted with the public.  According to the article, “Nearly 7.5% of the hundreds of thousands of temporary workers hired for the 2020 census did not have their background checks properly reviewed and decided, ‘resulting in persons with significant issues working for the Bureau and, in some instances, contacting households’ during the door-knocking phase of the nation’s head count.”
  3. The Doctrine of Negligent Hiring
      • According to SHRM’s HR Glossary, “Negligent hiring is a claim that can be made against an employer when an employee causes harm to others and the employer should have known of the individual’s potential to cause harm but did not take steps to mitigate the risk (i.e., not hiring the individual). Conducting thorough background checks is one tactic employers use to avoid negligent hiring liability.”
        • Litigation Against Employer: In 2022, A Texas jury awarded $7billion in a negligent hiring case, one of the largest ever. An elderly woman was killed by a Charter Communications (Spectrum) service technician in her home in December of 2019. The suit alleged it hired the killer without a thorough background check. The company was accused of not delving into the perpetrator’s previous employment history which would have showed that he had been let go from previous jobs for harassment of co-workers and forgery. According to an article published on hrmorning.com, the field technician returned to her home the day after the service call driving the Charter Spectrum van and killed her. He left the crime scene with her credit cards and had informed his supervisors days earlier that he was experiencing serious personal problems and was out of money. He had disciplinary actions against him and demonstrated a pattern of stealing credit card and personal finance information from elderly female customers. The jury sided with the victim’s family and decided the attack was a “foreseeable” event.
        • Litigation For Employer:  The same article provided an example of a case where the employer was NOT held liable because of the question of foreseeability. In 2008, a Connecticut FedEx Kinko’s employee repeatedly serviced a customer’s computer in her home. One day, when he was there off duty, he was left alone with the customer’s young son and raped the boy. The customer sued FedEx Kinko’s for negligent hiring and supervision. The article goes on to say, “In that case, the court decided that the employer was not liable because it could not have reasonably foreseen that the employee would gain access to a customer’s home and sexually abuse a child while off duty.”

(Download White Paper by CEO Mario Pecoraro, Best Practices to Follow when Considering an Applicant’s Criminal History in an Employment Decision“)

In summary, understanding these background screening litigation updates can improve your risk mitigation measures. It is important for employers to assess each applicant on an individual basis and follow all laws related to “ban-the-box” which restricts when and how you can ask about criminal convictions on an application and regulations that make it “illegal and discriminatory” to inquire about an applicants’ criminal history until after the conditional offer is made. It is just as important to continue to conduct thorough background investigations to make sure you are hiring the best candidates for the position you are filling, avoiding negligent hire lawsuits and following all FCRA notification and authorization procedures. With careful attention to detail and policy, your workforce will be inclusive of those with criminal convictions yet safe, productive and in line with company goals.

Interested in learning more about compliance and best practices for your background screening program?  Let us provide you with a Complimentary Risk Review for your current process. For more information, email sales@allianceriskgroup.com.