Background checks seem to be a hot topic in state legislatures these days. In the past six months, for example, several states — including Illinois, Massachusetts, Oregon, and most recently California — have enacted laws bearing upon the process of checking the backgrounds of job applicants and employees. Under the new California law (pdf), effective January 1, 2012, background check authorizations must include the “Internet Web site address . . . where the consumer may find information about the investigative reporting agency’s privacy practices.” This seemingly trivial change is endemic to the challenges that employers confront in the area of background check compliance.

No case of which we are aware addresses the question whether an employer’s background check procedures must comply with only the law of the state(s) in which the employer is located, only the law of the state where the applicant or employee resides, or both. The question is far from academic. Even employers located in a single state routinely advertise positions on a company-sponsored web site, or through third-party web sites, accessible to applicants in all fifty states. Further, given the high unemployment rate and the general mobility of the U.S. workforce, job applicants for virtually any position could reside in any state.

In light of these factors, the most conservative employer — even if located in a single state — would conduct background screening in a manner that complies with the laws of all fifty states. However, as noted above, state legislatures are enacting new restrictions on, or requirements for, pre-employment background checks at an accelerated rate. In addition to the challenge of remaining up to date with this surge of legislation, employers face the difficulty of generating compliance forms that are not encyclopedic and that applicants of all educational levels can easily comprehend.

Some employers have responded to this compliance challenge simply by relying upon the forms received from their background check company. These employers should keep in mind that background check laws impose compliance requirements on employers themselves, independent of the requirements applicable to background check companies. Consequently, the employer, not the background check company, could be liable if the forms received from the background check company do not comply with applicable law. In addition, background check companies routinely warn their employer-clients that the background check company cannot provide legal advice, so employers should rely on their own legal counsel to vet all forms received from the background check company.

An alternative approach for smaller employers that do not have in-house legal resources and may have limited budget for outside counsel would be to identify the states from which the employer receives the lion’s share of job applications. The employer can then focus on tracking legal developments in those states as well as in the states where it is located. Although this approach would not be foolproof, it should substantially reduce the risk of liability from non-compliant forms, practices, or procedures without sapping resources out of proportion to risk.

Large, multi-state employers who conduct hundreds, if not thousands, of background checks annually may have no realistic alternative, given the potential for class action litigation, to regularly monitoring state legislative activity in this area on a national basis and routinely updating background check forms, practices and procedures to address material changes in the law.
 

This entry was written by Philip L. Gordon.