Main Menu

Employers Conducting Background Checks on Applicants and Employees Must Adhere to Complex Federal and State Laws

December 31, 2002

In the aftermath of September 11, 2001, many employers - especially those in high profile industries - have implemented new procedures intended to enhance the safety and security of their employees, customers and the general public. Such procedures often include conducting criminal and other background checks on job applicants and current employees. However, the right of employers to conduct background checks, and to act on information obtained from such checks, is restricted by both federal and state laws. This article describes the restrictions on conducting background checks under federal law and under the laws of New York, New Jersey and California.

What Information May An Employer Request?

Federal Law

Under federal law, employers may not ask applicants or employees about arrest records (as opposed to convictions) because a policy of making adverse employment decisions (i.e., not hiring an applicant, terminating an employee, denying a promotion) based upon an arrest record may be found to have a disparate impact on some minority groups.

Employers may ask about criminal convictions but should not have a policy absolutely barring employment because of any criminal conviction, as such a policy may be deemed discriminatory if the reason for the denial is not job-related and the policy has a disparate impact on a protected class. For example, a conviction for theft would be relevant for a position with financial responsibilities, while a conviction for driving under the influence of alcohol probably would not be job-related for a position that does not require driving.

New York Law

It is unlawful under the New York State Human Rights Law for an employer to ask about or take an adverse employment action based upon "any arrest or criminal accusation . . . not then pending" which was "followed by a termination of that criminal action or proceeding in favor of such individual. " N.Y. Executive Law § 296 (16).

Employers can inquire about criminal convictions, but it is illegal in New York to deny employment to an individual because he or she has been convicted of a criminal offense, or because of a finding of "lack of good moral character" based upon a criminal conviction, unless there is a "direct relationship" between the criminal conviction and the job, or unless hiring the person would pose an "unreasonable risk to property or the safety or welfare of specific individuals or the general public." N.Y. Executive Law § 296 (15); Correction Law Art. 23-A, § 752.

New Jersey Law

Having a criminal record is not expressly listed as a protected category under New Jersey's Law Against Discrimination ("LAD"). However, the New Jersey Division on Civil Rights ("DCR"), the agency that enforces the LAD, takes the position that it is discriminatory to inquire about an applicant's number and kinds of arrests. According to the DCR, an employer may inquire about "convictions that bear a relationship to the job, and have not been expunged or sealed by a court." In all events, the DCR recommends that employers advise applicants that a criminal conviction is not an absolute bar to all employment.

California Law

It is unlawful in California to seek information concerning any arrest or detention that did not result in a conviction. In addition, with certain narrow exceptions, it is unlawful to seek information regarding any conviction for which the record has been judicially ordered sealed, expunged or statutorily eradicated (e.g., juvenile offense records), any misdemeanor conviction for which probation has been successfully completed or otherwise discharged, and any arrest for which a pretrial diversion program has been successfully completed. Calif. Labor Code § 432.7. California employers also may not inquire about convictions for most marijuana possession offenses if the convictions are more than two years old. Calif. Labor Code § 432.8.

California employers can lawfully seek information about other criminal convictions and can deny employment if the denial is based upon a legitimate business purpose. As noted with regard to federal law, employers should not automatically bar employment to applicants with a criminal record; such a policy may violate California law if the reason for the denial is not job-related and the policy has a disparate impact a protected class.

Conducting Background Checks

Federal Law

Under federal law, an employer is permitted to conduct background checks of applicants, even before the applicant has been given a conditional offer of employment. If an employer chooses to conduct such background checks, it should have a uniform policy of conducting checks for all applicants, or all applicants for particular types or levels of positions, to avoid being accused of discriminatorily targeting a protected group.

Many employers use outside agencies to perform credit, reference and criminal background checks. Employers that do so must comply with the terms of the Fair Credit Reporting Act ("FCRA"). When an employer does not use an agency and obtains information for itself that is available to the public from a local law enforcement agency or police department, the employer's actions are not covered by FCRA.

Under FCRA, employers that use outside agencies to perform background checks must give employees and applicants a "clear and conspicuous disclosure" in a separate document (not within the employment application itself) that a consumer report may be obtained for employment purposes, and must obtain written authorization from the applicant or employee. There is nothing in FCRA that prohibits an employer from rejecting an applicant (or taking an adverse action against an employee) if the individual refuses to authorize a background check. Employers must also provide individuals with a summary of their rights under FCRA.

Many outside agencies use their own forms to comply with FCRA. Employers presented with such forms should review them carefully to ensure that they meet FCRA's requirements.

New York Law

New York does not have a statute governing the procedures to be used when conducting criminal background checks, but employers in New York must comply with FCRA.

New Jersey Law

When an employer in New Jersey uses an outside agency to conduct background checks, it must comply with both FCRA and the New Jersey Fair Credit Reporting Act ("NJFCRA"). The notice and authorization requirements under federal and New Jersey law are essentially the same.

If an employer wishes to obtain criminal records itself (rather than using an outside agency for this purpose), the records may be obtained from the State Bureau of Investigation ("SBI") by the use of prescribed forms, which must be signed by the applicant. The forms, and a manual with instructions for completing them, can be obtained by calling (609) 882-2000, extension 2884, or by writing to the Division of State Police, Attn: Criminal Information Unit, P.O. Box 7068, West Trenton, N.J. 08628-0068. The Criminal Information Unit also has a website, www.njsp.org/about/serv_chrc.html.

According to the regulations governing criminal background checks in New Jersey, employers that conduct their own criminal background checks must sign a certification stating that: (1) the requesting employer is authorized to receive criminal history record information; (2) the records will be used solely for the purpose of determining the applicant's qualifications for employment; (3) the records will not be disseminated to persons for unauthorized purposes; (4) the requesting employer will furnish the applicant with adequate notice to challenge the accuracy of the records provided by the State Bureau of Investigation; (5) if requested by the applicant, the requesting employer will provide the applicant with a reasonable period of time to correct the records; and (6) the requesting employer will not presume guilt for any pending arrests or charges indicated in the records received from the State Bureau of Investigation.

California Law

California also has its own version of FCRA, the Investigative Consumer Reporting Agencies Act ("ICRAA"), Calif. Civ. Code § 1785 et seq., which sets forth employers' responsibilities regarding consumer and investigative reports used to obtain information on applicants and employees.

Obtaining Reports From Outside Agencies

Under ICRAA, an employer seeking a criminal background report on an applicant or employee from an outside investigative consumer reporting agency must obtain the individual's prior written authorization and must provide the individual with a separate document (i.e., not on the employment application form) that:

  • states that a background check is being requested;

  • provides the name, address and telephone number of the agency being used;

  • provides a summary of the individual's rights under ICRAA; and

  • includes a space (e.g., a box to check) for the individual to indicate if he or she wants a copy of the report.

Calif. Civ. Code § 1786.16(a) and (b).

An employer is not required to comply with the disclosure and prior authorization requirements if the report is being sought "due to suspicion held by an employer of wrongdoing or misconduct by the subject of the investigation." Calif. Civ. Code § 1786.16(c). In other words, if an employer suspects a current employee of theft and wants to obtain a background report from an agency as part of its investigation, it need not tell the employee that it is conducting a check, nor does it need to get the employee's authorization before obtaining the background information. If, however, the employer takes any adverse employment action based upon the report (e.g., discharges the employee), the employer must provide a copy of the report to the employee.

ICRAA was recently modified to provide that employers using an outside agency are no longer automatically required to give the background report to the applicant or employee. Applicants and employees must now request a copy of the report, in which case the employer must provide the information within three business days of the employer's receipt of the report.

Presumably, an employer may discharge or deny employment to an individual who refuses to provide written authorization for the employer to obtain a background report from an outside agency. Nothing in ICRAA specifically prohibits an employer from doing so, and there are no reported court decisions addressing such a situation.

Employers Conducting Their Own Background Checks

Employers that conduct their own background checks (rather than using an agency) are required by ICRAA to inform individuals that a background check is being performed and to provide copies of any public record (e.g., criminal and DMV reports) to the applicant or employee within seven days of the employer's receipt of the records, unless:

  • the employer suspects misconduct or wrongdoing (i.e., the reports are obtained in the course of an investigation of employee theft), in which case the report may be withheld until the completion of the investigation; or

  • the employee or applicant has waived his or her right to receive the records by checking a box on a job application or other form indicating that he or she does not wish to receive a copy of any public record.

Calif. Civ. Code § 1786.53. As noted above, the employer must also provide a copy of the report to the employee or applicant if the employer takes any adverse action (i.e., refuses to hire or terminates) based upon the report.

Acting Upon An Employee's Or Applicant's Criminal Record

Federal Law

Under FCRA, if an employer decides not to hire an applicant - or to terminate a current employee - in reliance upon information obtained from an outside agency's criminal background check, the employer is required to provide the individual with a copy of the criminal background check report and a written description of his or her rights under FCRA. Many employers consider it prudent to comply with this procedure whenever a decision not to hire or a decision to terminate has been made after obtaining a criminal background check report, even if the report was not the basis of the decision, to avoid potential claims that the rejection or termination was actually based on the report and that FCRA disclosure obligations were not followed.

Under federal and state law, employers can reject an applicant or terminate an employee where a background check reveals that the individual has lied on his or her employment application by falsely claiming that he or she has never been convicted of a crime.

New York Law

As noted above, employers in New York are not free to reject an applicant or fire an employee solely because of the person's criminal record. N.Y. State Executive Law § 296(15); Correction Law Art. 23 . An employer may not reject an applicant on the basis of a criminal conviction unless there is a "direct relationship" between the offense and the job, or unless hiring such a person would pose an "unreasonable risk to property or the safety or welfare of specific individuals or the general public. " Correction Law Art. 23-A, § 752. For example, an employer would not likely be held in violation of the statute for refusing to hire as a child care provider an individual who has been convicted of child molestation.

Where an employer denies employment to an individual because of a criminal conviction, the employer must, upon request, provide a written statement informing the person of the reason he or she has been denied employment within 30 days of the request.

New Jersey Law

Employers using an outside agency to conduct background checks must comply with FCRA and the NJFCRA, both of which require employers who take an adverse employment action based upon information in a report to provide the applicant or employee with a copy of the report and a written description of his or her rights under the FCRA and the NJFCRA.

In addition, as noted above, employers that perform their own background checks by requesting criminal information from the State Bureau of Investigation must sign a certification which, among other things, states that the applicant will be given adequate notice to challenge the accuracy of the records provided by the SBI and that, if requested by the applicant, the employer will provide the applicant with a reasonable period of time to correct the records.

California Law

Under ICRAA, if an employer takes any adverse employment action based upon records uncovered in a background check (whether the background check is conducted by an agency or by the employer itself), the applicant or employee must be given a copy of the records.

Conclusion

Employers wishing to conduct background checks on employees and job applicants are well advised to seek legal counsel before doing so, given the complex federal and state laws that regulate such conduct.