3 legal problems in this common hiring practice
March 23, 2009 by Sam NarisiPosted in: Background checks, In This Week's E-Newsletter, Latest News & Views, Law
Checking a job candidate’s credit is a common part of the background screening process for some jobs. But as more people begin to suffer in that area, the practice is likely to come under greater legal scrutiny.
For companies that do use credit checks when hiring, here are some mistakes that can lead to expensive lawsuits:
- Not getting authorization – The Fair Credit Reporting Act requires companies to get applicants’ consent before obtaining a credit report. Also, applicants must be notified when they’re rejected because of a credit report.
- Ignoring a possible disparate impact – The EEOC has said legitimate screening practices can be discriminatory when they accidentally weed out members of a protected class. That means if, for example, most of the applicants rejected by a credit check are minorities, a company might be sued even if the bias was unintentional.
- Using it too much – One way to limit liability of using a credit check to screen job applicants: Only use it when you have to. Most employers just look at credit checks for financial jobs.
Beyond legal issues, some experts say companies should stop taking credit scores into account in the current economy. Bad credit is on the rise, which means many otherwise qualified candidates could be turned down because of situations outside their control.
Has your company ever used credit checks as part of the screening process? Why or why not?
Tags: Background checks, credit checks, Fair Credit Reporting Act
March 23rd, 2009 at 7:48 am
Sam,
We run Employment Credit Reports for clients who are screening applicants for positions with financial responsibility.
An Employment Credit Report differs from a traditional credit report, in that it is tailored for use in an employment situation. It does not include account numbers or a credit score. These reports provide an objective overview of how financial obligations are handled over a period of time.
April 7th, 2009 at 3:35 pm
We use the same type of credit reports as Chris mentions, but our credit reports are ran on all candidates – not because we are a financial institution or due to financial responsibilities, but because we employee service technicians whom repair ATMs and cash registers – both which allow access to cash and increased opportunities for theft.
For those in the corporate office, we run the checks because of access to company assets – office equipment including laptops, computers, office supplies, calculators, etc. You wouldn’t believe how many times in the past our company-owned items have shown up on eBay!
April 29th, 2009 at 4:04 pm
WHY? as far as working in a financial industry, what does that have to do with your having a credit card debt THAT YOU ARE PAYING ON EVERY MONTH? Nothing. We are talking about people who have significant credit card debt from lengthy unemployment! If you wont give them a job how do you think they are going to pay it off?!
Your ability to do a job requiring finances has absolutely nothing to do with school loan debt, debt from hospital bills, and thosethat had no choice but to use credit as a mean to pay for necessities: we mean food and shelter! You may be discriminating against people with an excellent accounting background and it is not acceptable. Do not assume until you ask the candidate. Yeah right, and I am sure that all those working at banks or in a financial area have excellent credit and no debt. They have mortgages.. that is a debt!
April 29th, 2009 at 4:07 pm
‘Renee ‘and others above: Well that is very sad that all have to suffer because of the terrible behavior of some. All employers must bear that in mind. Self-employment is the only way to go, and this is yet another example why. I assist workers and the un-employed in all these matters and show them how to stop relying on someone else ( a company, an agency) to pay you and work for yourself.