PART TWO: Background Check Expert Answers FAQs from Staffing Professionals

Employment Screening Resources® (ESR) Founder and CEO Attorney Lester Rosen
Employment Screening Resources® (ESR) Founder and CEO Attorney Lester Rosen

Written By ESR News Blog Editor Thomas Ahearn

This blog is the second of a two-part series. Click here for Part One.

Attorney Lester Rosen, founder and chief executive officer (CEO) of leading global background check firm Employment Screening Resources® (ESR), answered some frequently asked questions from staffing professionals following a webinar he presented sponsored by the American Staffing Association (ASA).

Earlier this year, Rosen – the author of “The Safe Hiring Manual” – presented a webinar titled “An In-Depth Conversation on Background Check Compliance” to discuss the issues that all staffing firms need to be concerned with regarding background checks.  Below are some of the FAQs and Rosen’s answers.

(NOTE: As with all information presented on the ESR News Blog, this information is provided for general educational purposes only, and is not given as or intended as legal advice of any kind or nature. For answers to specific issues that impact a company, the best approach is to consult with an attorney.)

QUESTION:  Do you have any information about pretrial diversions?

ANSWER: That is a program run at the county or state level by a court, prosecutor’s office, or the probation office that allows a minor first offender to have his or her case handled outside the normal criminal justice processes so that the person receives some sort of sanction and rehabilitation, but is not burdened with a criminal record.  Diversion programs center around such offenses as minor drug cases, petty theft, or domestic abuse (although in those cases it is used by courts and prosecutors very carefully).  If a person completes some sort of program and possibly volunteer work and stays clean and follows the court orders, the criminal matter does not become a conviction, and generally cannot be beheld against someone.  Some jurisdictions may have exceptions for certain public safety positions, but as a general rule, the idea is to literally “divert” first offenders from the stigma of a criminal record provided they engage in a program of some sort.  

QUESTION:  Is it legal to ask during the prescreening process if an applicant has a felony?

ANSWER: In many states, counties, or cities, that would be illegal.  Even if a jurisdiction has not passed a Ban the Box or Fair Chance hiring law, it is a discouraged practice by the U.S. Equal Employment Opportunity Commission (EEOC). However, if there is a bona fide occupational qualification where a criminal record is relevant, some employers take the position that transparency requires that the applicant be advised of that fact.

QUESTION: If the staffing company charges the client for the background check services, do you believe that makes the staffing company a “reseller” under the Fair Credit Reporting Act (FCRA)?

ANSWER:  As a practical matter, the difference between a “reseller” and a Consumer Reporting Agency (CRA) is small and can be hard to determine.  Generally, a reseller is a passive conduit of information that is passed through and has no discretion or evaluation.  However, even deciding what to pass to the client can arguably turn a reseller into a CRA.  And even if someone is a reseller, they have many of the same obligating that a CRA has. 

Staffing firms generally do not want to be either one.  However, staffing firms may want to make the services available and to be the one that bills the client for it.  Keep in mind that background checks are inordinately complex and the FCRA is a very detailed law, so unless you plan to really specialize in background checks, most staffing firms outsource it.

The solution, generally, is for the staffing firm to make it clear that the screening is done by a third party, and that the staffing firm is not a background screening firm or a reseller as defined by the FCRA.  That means, for example, that an applicant should sign forms directly with the background screening partner and the client (workplace) should have a direct agreement with the screening provider.  Where it gets confusing is if the staffing firm makes it appear that they are the ones doing the background checks, or if the staffing firm offers a “white label” solution where they put their name on a background screening platform or have the client sign agreements with them.  A staffing firm needs to be very careful to make sure they are not a CRA or reseller. 

However, the fact that the staffing firm does the billing, gets a revenue share, or has a link to their screening provider is not going to make them a reseller, as long as it is clear to everyone that they are not a background firm.   

QUESTION:  Is it lawful to request a full background check on a candidate who has not yet been made an offer?

ANSWER: That depends on the jurisdiction.  There is no federal requirement that a background check should be post-offer.  Background checks do not include medical data, so they are not covered by the post-offer rule of the Americans with Disabilities Act (ADA) of 1990.  However, many states, such as California, require that checks to be made post-offer as part of the California Fair Chance Act hiring law. 

QUESTION:  Should you do a background check on your temporary employee when the client doesn’t do checks on their own employees? Are we opening ourselves up to lawsuits? We currently only do background checks if the client requires them for their employees.

ANSWER:  There is a trend among staffing firms to do background checks on all “temps,” even if the client does not want it.  Of course, the real first question is how much risk your workers represent.  A background check is a risk management tool, so if you perceive risk, an appropriate check can help.

For some staffing firms, the downside is the cost of the check and the delay in placing people.  A staffing firm needs to balance all these factors.   

QUESTION:  Are there any problems with telling the client, when submitting a candidate who is a licensed healthcare professional, that the state licensing board shows that the individual has been convicted of a crime even though their license is valid?  (For example, the Board may have previously suspended the license but after a period of time the license has been reinstated.)

ANSWER: The answer will depend on the specifics of the situation.  If it was an offense that is otherwise reportable under all of the state rules, the information can likely be communicated, but the client needs to understand the EEOC approach to the use of criminal records, including the targeted screen process and individualized assessment.  The staffing firm will likely want to analyze the past criminal matter as it would any other criminal case in deciding to report it. 

QUESTION:  When we do past employment reference checks, do we need consent?

ANSWER: Getting consent is always the best practice.  It guards against allegations of invasion of privacy, and the party giving the reference may want it.  However, it is not a legal requirement (unless it is a specialized consent for a regulated industry).  Keep in mind that a current employer should not be contacted without express consent, because that could impact a consumer’s current job.

QUESTION:  I need to select a screening firm.  What is the best way to do that?

ANSWER: As with the selection of any vendor of critical service, a staffing firm needs to understand if the vendor is a good fit and does what is needed, and not select only on price.  Since the staffing industry is time and price sensitive, there could be a temptation to select the fastest and cheapest provider.  Unfortunately, that can be a sure-fire recipe for litigation, loss of clients, and a host of other issues. One approach to selecting a screening firm is to first make sure a firm is accredited by the Professional Background Screening Association (PBSA) – https://thepbsa.org/ – a non-profit organization that represents the screening industry formerly known as the National Association of Professional Background Screeners (NAPBS). There are over 100 accredited firms.  Although accreditation is not a guarantee that a screening firm will not be sued, sanctioned, or take shortcuts, the process is very intensive so that at least a staffing firm knows that an accredited firm has gone through a substantial review process to determine if it follows best practices.  Of course, an unaccredited firm may do a great job, but many staffing firms do not want to take that chance.  Another best practice is to use an RFP (Request for Proposal) so a staffing firm can compare one firm to another. The PBSA has a sample RFP, and ESR also provides one at https://www.esrcheck.com/file/ESR-Sample-RFP-for-Background-Screening-Services.pdf.  Of course, reputation counts, so check references as well as litigation history.  It is important to understand if the screening firm offers value-added services, so you are looking at the overall value, not just the invoice price. Of course, legal compliance expertise is critical, as well as providing a good user experience. You may also want to make sure a screening firm can integrate into an Applicant Tracking System (ATS).

QUESTION:  I want to verify if my current screening provider is doing a good job.  How do I do that?

ANSWER:  There are resources at the ESR website (www.esrcheck.com) that may help you review if your screening provider is taking shortcuts.  For example, there is a complimentary white paper from ESR titled “21 Shortcuts & Traps that Can Lead to Inaccurate Criminal Records” that is available at https://info.esrcheck.com/resources/whitepaper/shortcuts-and-traps-that-lead-to-inaccurate-criminal-searches.  Many times, the difference between hiring a solid firm and a firm that can cause you litigation requires a behind the scene understanding of the intricacies of the background check process.  However, there are any number of sources of best practices where you can evaluate how your current provider is doing.  For a detailed understanding of the industry, my book, “The Safe Hiring Manual” (3rd Edition/2017), has been referred to as “the bible for the screening industry.” To learn more, visit https://www.esrcheck.com/Tools-Resources/Safe-Hiring-Manual/.

QUESTION:  Can you speak a bit about conducting background checks on direct hire candidates? Should a staffing firm do them? Is it ok to bill for them?

ANSWER: It depends on what the staffing firm and employer agree to.  If the employer wants to outsource that task to the staffing firm, that can work, as long as the staffing firm is clear about who is the Consumer Reporting Agency (CRA) doing the work.  The fact the staffing firm performs the billing all by itself does not make a staffing firm a CRA.  But the best practice is to have a third party CRA perform the background check and to have the employer sign an agreement directly with the background screening firm as part of the client sign up process.  A CRA cannot perform a background check unless there is client certification and unless the applicant has signed a standalone disclosure and has also authorized the check.  It is important to pay attention to the formalities. 

QUESTION:  What does the House bill (“Comprehensive CREDIT Act of 2020”) that passed this week mean for credit checks for staffing companies?

ANSWER: Credit checks should be used sparingly for the simple reason that it is difficult to correlate what is in a credit report to job qualifications.  Contrary to popular belief, an employment credit report does not have a credit score, since that has no connection to employment.  However, it does have a credit history.  Most HR professionals understand that a credit report should be limited to just those positions where they can articulate a nexus between the report and job considerations.  The House of Representatives passed a bill that generally does not allow credit reports for employment, and some 11 states have passed laws regulating credit reports making employers disclose what they are looking for.  The best approach is to check with your lawyer and, even then, use credit reports sparingly and only if there is a clear and objective need.

QUESTION:  What if you specialize in Accounting and Finance?  Does the background check Ban the Box apply?

ANSWER:  Unless the Ban the Box law has a specified exception, then Ban the Box applies.  Obviously, there are certain positions that are sensitive, and it makes sense that an employer may be concerned about individuals with related convictions.  A person with a conviction for embezzlement may not make the best candidate for a bookkeeper.  However, the person may have had a driving under the influence (DUI) or possession of drugs for personal use or some other matter totally unrelated to theft or dishonestly.  Again, automatic elimination is disfavored, and every applicant is entitled to an individualized assessment approach.  

QUESTION:  If a client uses public records, i.e. bankruptcy cases, to exclude a candidate before an interview, am I required to send the candidate an adverse action letter? To be clear, a background check/credit check was not conducted.

ANSWER: First, bankruptcy is a potential issue due to the “fresh start” rule, so I would recommend checking with legal counsel to see if there is a bona fide reason to check that.  However, to fully answer the question, it is necessary to understand who is doing the check. If the employer is doing the check themselves in-house and not using any third party, it can be argued that it is not an FCRA search and no adverse action needed.  If the staffing firm is not doing any checks, the staffing firm most likely is not obligated to send adverse action notices.  However, this question is a good example of the need to fully understand the role of each party involved and who is doing what. 

QUESTION:  I did have a follow up question on the consent form we should get signed by any candidate who may be asked to let us share their background check with our client.  Can you tell me the proper wording to let them know there is no implied contract of employment with our client?  If you have a template that would really help.  I want to make sure it’s clear and concise.

ANSWER: In our view, language about sharing a background report should go into the consent form.  The “disclosure” form should not have excess language. You should work with our attorney to approve language that makes it clear that your client can see the report but that does not create a “joint employment.”

QUESTION: I sat in on your ASA webinar last week regarding background check compliance.  During the webinar, you stated under the FAQs that a background check should be kept separate from the personnel file.  What I don’t recall you saying, though you certainly may well have, is why.  Would you please explain the “why” of that for me?

ANSWER: The Fair Credit Reporting Act (FCRA) has strict limits on how a consumer report can be accessed.  There must be a permissible purpose, and employment can be the purpose.  However, when it comes to a personnel file, those are much more widely used and available in the organization.  Managers, staff, or HR may go into a personnel file for all sorts of reasons (benefits, attendance, assignments, confirming a course has been completed, etc.).  The danger of having the background check report in the personnel file is that a variety of people may have access to it who do not have a permissible purpose, and it arguably violates privacy and the FCRA.  Also, if a person, for example, has a criminal record, and you hire him or her after going through a process to determine suitability, there is the possibility that a staff member may discover that criminal record and that could lead to discrimination claims if the discovery leads to some adverse treatment.

That is all avoided by keeping the background check report separate.  These days, most background check reports are delivered electronically, so it is easy enough to have an “electronic” file where they are all kept.  We even caution against printing them out, since that can result in a copy left in the copier, or left on a desk, etc.  I should add the new direction in HR is an emphasis on privacy and data protection, so as part of that effort, and due to the FCRA, a screening report shroud ideally only be seen by a decision maker (and, if needed, by your attorney, of course) and precautions should be taken to prevent unauthorized disclosure or circulation.

QUESTION: The background screening company I use will not approve a consent form that will allow me to share the background check with our client.  According to them, it is part of the FCRA.  Is this correct?  And if it is what is the best practice in sharing these reports?

ANSWER: Although reasonable minds may differ, if the language is done correctly, there is no reason that the consent cannot be structured so the staffing firm can show the client the background check report. 

Rosen founded Employment Screening Resources® (ESR) in 1997 in the San Francisco, California-area. He was chairperson of the steering committee that founded the Professional Background Screening Association (PBSA) – a nonprofit trade organization representing the screening industry that was formerly known as the National Association of Professional Background Screeners (NAPBS) – and served as first co-chair.

Employment Screening Resources® (ESR) – a leading global background check firm – provides staffing background screening services specializing in the sourcing, staffing, and recruiting industries that help them find the right staffing candidate by eliminating unqualified and potentially dangerous candidates. To learn more, visit www.esrcheck.com/Background-Checks/Industry-Specific-Solutions/Staffing/.

NOTE: Employment Screening Resources® (ESR) does not provide or offer legal services or legal advice of any kind or nature. Any information on this website is for educational purposes only.

© 2020 Employment Screening Resources® (ESR) – Making copies of or using any part of the ESR News Blog or ESR website for any purpose other than your own personal use is prohibited unless written authorization is first obtained from ESR.