Background Checks on Job Applicants: 3 Things You Need to Know

Are you using criminal background checks as part of your hiring process? If so, your use of them is subject to federal law. We can show you how to avoid some common – and dangerous – pitfalls when using background checks to safeguard your business.

Georgia law requires every employer to use “ordinary care” to ensure that its employees don’t pose an unreasonable risk of harm to others. Georgia courts have held that, at least sometimes, ordinary care will require an employer to perform a background check before hiring a potential employee. For example, in 2007 our Court of Appeals held that a home-security company that knew its salesmen would be entering customers’ homes as part of their job could be held liable for failing to run a background check on a salesman who later attacked a customer. Underberg v. Southern Alarm, Inc., 284 Ga. App. 108 (2007). Given the potential for liability, it isn’t surprising that many employers run criminal background checks on potential employees as a matter of course. But even though it might be required, running a background check on a potential hire carries its own risks if you fail to comply with applicable law governing how you procure and use background checks in the hiring process.

Before you use a background check in your hiring process, here are three things you need to know:

  • Federal law governs how you obtain the background check and what you do with it;
  • You have to get the potential employee’s consent before you begin; and
  • You have to take certain actions both before and after you reject the potential employee.

One: Federal law applies when you run a background check on a potential employee.

Even though state law may require a company to perform a background check, federal law imposes a completely independent set of requirements. That is because of the federal Fair Credit Reporting Act (or “FCRA”). 15 U.S.C. § 1681 et seq. To judge by its name, you might think the FCRA only applies to credit reports, not criminal background checks. You would be wrong. The FCRA is worded so broadly that many other types of reports fall within its purview. The statute applies to almost any commercially prepared report about a person’s “character, general reputation, personal characteristics, or mode of living” if the report is used to determine that person’s eligibility for employment. That statutory definition includes criminal background reports. See Farmer v. Phillips Agency, Inc., 285 F.R.D. 688 (N.D. Ga. 2012).

Two: You have to get the applicant’s permission before you get the report.

The FCRA requires a company to take specific steps any time it uses a background report in the hiring process. Before you get a background check, you must:

  • Tell the potential employee in writing that you intend to get a background report and get the applicant’s written permission to do so before ordering the report. And,
  • Certify to the company that is providing the report that you have complied with the FCRA’s requirements that you disclosed your intent to get the report and you got the applicant’s permission before you obtained the report. You also have to certify that you will comply with the FCRA’s dispute-resolution requirements, which are described below.

Three: You have to give the applicant a chance to respond to the report before you reject the applicant, and then you have to provide additional notice once you make the decision.

Once you get the report, the FCRA controls how you use it. Before you reject an applicant based on a background report, you must give the job-seeker:

  • A copy of the background report that you are relying on;
  • A summary of the employee’s rights under the FCRA prepared by the federal Consumer Financial Protection Bureau (CFPB), which include the right to dispute with the reporting agency any incomplete or inaccurate information contained in the report (a copy of the summary can be found on the CFPB’s website at http://files.consumerfinance.gov/f/201410_cfpb_summary_your-rights-under-fcra.pdf); and
  • Five days to raise any objection to the contents of the report.

If you have met these requirements, you can then reject the potential employee’s application. But your obligations don’t stop there. Once you have made the decision to reject the applicant, you must notify the applicant that you have declined him on the basis of the report and also provide him with:

  • The name, address, and phone number of the consumer reporting agency that supplied the report (including a toll-free telephone number established by the agency if the agency compiles and maintains files on consumers on a nationwide basis);
  • A statement that the consumer reporting agency that supplied the report did not make the decision to reject the applicant and cannot give the applicant the specific reasons for that decision; and
  • A notice of the person’s right to dispute the accuracy or completeness of any information the consumer reporting agency furnished, and to get an additional free report from the agency if the person asks for it within 60 days.

Be aware that these requirements apply if the report has played any role in your decision to reject the applicant. The report does not have to be the only factor in your decision, or even the primary one.

If you fail to meet any of these requirements, the applicant can sue you. What’s at stake if you get sued? Potentially a lot. At a minimum, the rejected applicant can recover any actual damages that she suffered as a result of the violation. You should be aware that “damages” include the applicant’s attorneys’ fees and court costs, which often far exceed any economic damages that the applicant directly suffered. Remarkably, actual damages can also include emotional distress. So even if the applicant did not suffer any measurable economic harm, you can still face a claim for substantial damages. Even worse, if a court finds that your failure to comply with the statute was “willful,” it can impose additional penalties, including punitive damages.

These types of suits are surprisingly common – one Atlanta law firm that specializes in FCRA cases has filed over 800 of these suits on behalf of rejected job applicants. To make matters worse, any liability you face for a failure to comply with the FCRA may not be covered under your business’s general liability insurance policy. To be covered by insurance, you will almost always need a separate employment-practices liability policy, and even then you will need to confirm that your specific policy provides coverage for violations of the FCRA. At a minimum, you will need to carefully follow the procedures described in the insurance contract regarding giving notice of the claim to the insurer.

As in so many areas of the law, an ounce of prevention is worth a pound of cure. If you have any doubts about your procedures or the state of your business’s insurance coverage when it comes to the use of background checks, contact Ben Byrd at Friend, Hudak & Harris for more guidance.

You Have Been Served | What to Do if You Have Been Served with Legal Papers

If you are served with legal papers, you must stop normal activities and take immediate action. What you must do and when you must do it depends on a number of variables (some of which are discussed in the next paragraph). Exploration of those variables is beyond the scope of this article. Instead, this is a quick summary and checklist of issues to consider, actions to take, and the time in which those actions must be taken.

The legal papers may come from a criminal court, from a court that handles civil disputes, or from an administrative agency. The papers may be a notice of an urgent hearing seeking immediate relief, a lawsuit against you, or a subpoena requiring you to produce documents or testify. You may have been served individually, or your company may have been served. The papers may be from a federal court or a court of the state. Within the state system, there are often several levels of courts.

This summary is written from the perspective of a small to mid-size business, although many of the issues apply equally to legal papers served on individuals or on large businesses. Businesses that have received such papers before may have procedures in place to address these issues, hopefully incorporating the points made in this article.

What Legal Papers Were Served?

Notice of a Hearing: The papers may provide very short notice of a Hearing, seeking a Temporary Restraining Order or an Injunction. Such papers require immediate attention.

Summons & Complaint: The Summons is a notice from a court that a lawsuit has been commenced against you or your company. The Summons tells you the time by which you must respond. The Complaint is the statement of the other party’s claim against you or your business.

Subpoena: Even if you are not a party to a lawsuit, you may be compelled to collect information and to give testimony in a legal proceeding. You have a limited time to object to the scope of a Subpoena, to seek to narrow the collection of information, and to seek compensation for the expense of compliance.

How Were the Papers Delivered?

Sheriff or Process Server: Commonly, such papers are delivered by a Sheriff or a Process Server; however, legal papers may be validly served in other ways. Always assume that the legal papers were properly served. (Your lawyer may later determine that service was not proper and raise a defense.)

Certified Mail or Statutory Overnight Delivery: Legal papers may arrive by Certified Mail – Return Receipt Requested or by UPS, FedEx or other such method that requires you to sign for the delivery. Do not avoid service by refusing to sign or by refusing to retrieve the Certified Mail from the Post Office.

Substituted Service or Publication: There are limited circumstances under which the other side may be able to “serve” you or our company by serving the Secretary of State or by publishing a notice of the lawsuit in a County Legal Organ, which is a newspaper authorized by applicable law to publish notices of legal proceedings. Even though you may not have actually seen the legal notice, the law will treat the substituted service or publication as valid service upon you or your company.

Novel Methods: As more communication and commerce are done by electronic devices, the boundaries are being pushed. A few courts have allowed electronic service. It is not yet common; however, if you are concerned that you may have received legal papers electronically, ask your lawyer.

Who May Be Served?

Personally: The papers may be served on you, individually, or as a representative for your company. You may be served at your work, at your home, or at any place you are found.

Person with whom you reside: The papers may be properly served on an adult who resides with you.

Agent or Employee: Your business may have designated an Agent for Service of Process or service may be attempted on an employee or other agent of your company. Your Agent or employee must be aware of the issues discussed in this article.

What is the Time For Response?

Read the papers and get an idea of when action is required. Putting aside the sometimes complex rules for counting dates, generally:

Notices of Hearings seeking urgent legal relief (TROs or injunctions) typically have very short deadlines. The date will be shown in the Notice. Your first call should be to your lawyer.

Subpoenas generally specify the date for a response or compliance with the Subpoena. In addition, the Subpoena may require the filing of any Objections you may have on or before the time specified for a response. While the deadline to file an Objection is often 10 or 14 days after service, it can be earlier.

Summons & Complaint: a Summons typically states the time within which a response must be filed, generally 21 days from the date of service for proceedings in federal court and 30 days from the date of service for proceedings in Georgia courts.

What to do?

As soon as you are aware of legal papers, you should make a note of how, where, when, and by whom the papers were received. Make those notes on the papers or on some other record maintained with the original copy of the papers.

Never ignore legal papers, even if you believe they were not properly served or that the claims are groundless. If you ignore the papers, you may miss your opportunity to resist the imposition of a Temporary Restraining Order, you may lose the right to object to a Subpoena or to seek compensation for the costs of complying, or, if you ignore a Summons & Complaint, every allegation of fact will be deemed admitted and default judgment will be entered against you or your business.

Instead, contact your lawyer, your insurer, and contact the business that may have agreed to indemnify you (for example, pursuant to a contract). Failure to give notice may cause you to lose your right to contest the relief sought, lose your insurance coverage for the claims at issue, or lose your right to be indemnified.

Immediately upon service, you should collect all necessary information, e.g., the names and contact information of witnesses and identification of relevant information and documents. Once identified, you must preserve the paper files and electronic files on computers.

Who to Contact?

Your Lawyer: Service of legal papers triggers important deadlines, and action must be taken before those deadlines expire. If you do not take appropriate action within those deadlines, you lose the right to defend against the lawsuit – even if the lawsuit has no merit. You must immediately notify your lawyer about the notice, suit, or subpoena so that your lawyer can determine the important deadline dates and file the necessary responses.

In addition, you may have a claim against the person or entity that sued you or your business, called a “counterclaim.” Some such counterclaims are “compulsory” and must be made at the time when you respond to the Summons & Complaint. Discuss these with your lawyer immediately so that your lawyer is able to timely assert any compulsory counterclaims.

Insurance Carrier: Your insurance policy can be a great benefit, not only paying for any damages that may be found due but, often as importantly, paying for the cost of your defense. The insurance policy, however, has important conditions that must be met in order for the insurer to provide coverage and a defense for a given claim. Those conditions include notifying the insurer of a potential claim and immediately transmitting a copy of the legal papers to the insurer. Failure to meet those conditions within the time required by your insurance policy could result in a denial of insurance coverage for the claim, even if the claim is otherwise “squarely” covered by your insurance policy.

Another Business: You may have negotiated contract terms with another business requiring that business to indemnify you or your company or to purchase insurance protecting your company. You and your lawyer should explore whether any such rights are available and, if so, immediately notify that other business and tender the defense of the action.

Confidentiality of Your Communications.

Your communications with your lawyer seeking legal advice about the legal papers are privileged, as long as those communications are maintained in confidence by you.

Conversely, anything you say to the Process Server, to the author of the legal papers, or to your co-workers may be used against you in the legal proceeding. You should not comment upon or discuss the matter with the Process Server, the adverse party, or your co-workers unless instructed to do so by your lawyer. Be careful about who is in the room when you speak and to whom copies of emails are sent.