Pre-Employment Screening Background Check Blog for Employers, Human Resources and Security by ESR

There are currently two bills that have passed the state legislature in California that are awaiting a decision by the Governor.  AB 2918 radically changes the use of credit reports for employment purposes.  According to the California Legislative Counsel, “This bill would prohibit the user of a consumer credit report, with the exception of certain financial institutions, from obtaining a consumer credit report for employment purposes unless the information is (1) substantially job related, meaning that the information in the consumer credit report relates to the position for which the person who is the subject of the report is being evaluated because the position has one or more specified characteristics, is a highly compensated or managerial one, or (2) required by law to be disclosed to, or obtained by, the user of the report.”  There is no definition as to what “highly compensated or managerial positions” means.  This bill, if signed into law by the Governor, represents a growing trend to limit the use of credit reports for employment purposes.

It is important to note that an employment credit report does NOT contain a credit score, since that is not a valid predictor of job performance.  However, it does contain a credit history, such as late payments and amounts due to financial institutions.  In numerous articles, ESR has advised employers to approach credit reports with caution.  However, this bill may result in outlawing employers from running credit reports on bookkeepers or others that handle money or have access to assets.

A second bill that is currently at the Governor’s desk awaiting his approval or veto is AB 3063. According to the California Legislative Counsel, this law would clarify existing California law dealing with the technical rules on the use of criminal records by employers.  Currently, the regulations of the Department of Fair Employment and Housing prohibit certain criminal matters from being considered by employers.  This law would place those same restrictions in the Labor Code. This bill would have no impact on ESR clients since ESR already utilizes the criteria of the Department of Fair Employment and Housing Commission in determining if a criminal record should be reported.

ESR will immediately send a special newsletter to its clients if these bills are signed into law that will explain the practical impact.

ESR has joined a group of like-minded Consumer Reporting Agencies that reject the offshoring of consumer data.  ESR is pleased to display the “Concerned CRAs” logo that represents a higher standard of consumer privacy protections.  As outlined in the May, 2008 ESR newsletter, some screening firms place job applicants and employers at risk by sending personal and identifiable information (PII) offshore for processing and preparing background reports. The purpose is to take advantage of cheap offshore labor. In some instances, foreign call centers are even used to contact past employers and schools, or to search public record databases for criminal records.  See: http://www.esrcheck.com/newsletter/archives/May_2008.php#T1

The problem?  Once U.S. information leaves our shores, it is completely beyond U.S. Privacy Protections. In order to process background reports, a job applicant’s date of birth and social security number are often needed, which is the key ingredients needed to commit identity theft.  Articles available on the internet document that identities stolen from foreign call centers are often sold illegally for illegitimate purposes.   That is not to suggest that data theft cannot happen here in the U.S.  However, if there is theft of PII in the U.S., there are resources and legal recourse so consumers can protect themselves.  It is impossible as a practical matter for a U.S. consumer to try to contact the police department in a foreign country to file a complaint.

Firms displaying the Concerned CRA’s symbol have self-certified that they do not send data offshore for processing.  Although there is a cost savings to screening firms who offshore consumer data to countries such as India, the risk to consumers in terms of potential identity theft is significant. What is worse is that U.S. job applicants have no idea that when they sign a consent for a background check that their personal data is at risk of going offshore.

In the alternative, the seal can be displayed if a CRA clearly discloses that data is sent offshore and explains the risks, and employers in turn clearly disclose the same to job applicants.

An exception is where an international verification is requested and the information needed is offshore. Even then, however, firms that have joined this effort have certified that they take a number of steps to minimize sending personal information being sent offshore.  For example, before sending consumer data offshore, a firm should make every effort to obtain the information directly from the past employer or school directly.  Data should only be sent offshore to a foreign research firm as a last resort.

ESR strongly advises employers to ask screening firms about their privacy and offshoring practices before risking personal information about their job applicants.  For more information, see http://www.concernedcras.com/

A federal district court judge in New Haven, Connecticut dismissed a negligent hiring lawsuit against FedEx Kinko’s, where the employer hired a self-admitted sex offender who used his position to solicit customers for his own computer repair business and molested an 8 year old boy whose family he befriended while fixing computers in their home.

The employee, Paul Sykes, admitted in a job application in 2004 that he had a 1989 criminal conviction that was the equivalent to statutory rape.  A seven year background check did not turn up the crime.  Further investigation revealed that the 1989 conviction was in fact related to sexual contact with boys.

According to a news account, Sykes was sentenced to 12 years in prison in the criminal case.

In the civil case, the plaintiff alleged that the employer either knew, or should have known,  that the employee was using Kinko’s to solicit customers for his own computer repair business,  and that the employer should not have put an admitted sex offender in a position where he could solicit business.

Among other defenses, the employer contended that the crime occurred off premises and therefore was not the responsibility of the employer.

In the ruling, the Court indicated that the employer “could not foresee that hiring Sykes as a Production Manger, a position that does not entail intimate contact with members of the public or vulnerable individuals, would gain access to a family’s home and the opportunity to sexually abuse a child.”

The Court further ruled that the employer “could not reasonably foresee that hiring Sykes would lead to his interaction with the Doe children absent the presence of the parents or another supervisory adult.  There is no evidence that defendants (employer) should have known that it could have controlled Sykes behavior off-site or that it should have recognized the necessity of doing so.”

The plaintiffs also argued that Sykes used the goodwill and reputation of FedEx Kinko’s to gain the trust of the family, and was aided by the fact that Sykes wore a company uniform and used the FedEx phone to contact the victim’s family.  However, the Court noted that the telephone and uniform were not directly involved in causing the sexual abuse.  Further, as a general rule, an employer is not responsible for off-duty conduct where it is not foreseeable that harm could occur, and the use of a company uniform or telephone was too attenuated to provide an exception.

According to news reports, the plaintiff has filed an appeal.  As a federal district court case, this decision has limited value as a precedent but illustrates some of the issues involved with negligent hiring.

Although lawsuits for negligent hiring are generally considered to be on the rise and statistics show that the employer loses the majority of such cases, this case illustrates one of the three major defenses that employers can assert in such a case:

• That the perpetrator had no criminal record that could be discovered or reported, so that the lack of a background check was not the cause of the harm.
• That the employer exercised due diligence in the hiring process, but despite reasonable efforts, a bad hire fell through the cracks.
• That the harm was not foreseeable, or the employer’s actions or failures were too far removed from the harm to have been the proximate or legal cause of the harm.

For a copy of the federal district court decision, please contact Jared Callahan, Director of Business Development at 415-898-0044 or by e-mail at jcallahan@esrcheck.com.