Watch Your Back - Sedgwick LLP

VOL. 34, NO. 3 WINTER 2008 

Employee Relations 

L A W J O U R N A L 

Watch Your Back: Smart Hiring 

and Proper Background Checks 

Leonora M. Schloss and J. Gregory Lahr 

Although nothing can guarantee that an employee will not commit an act of violence 

or other crime in the workplace, the authors note that employers can substantially 

decrease the risk of such occurrences by methodically following a lawful process that 

thoroughly screens all applicants, and by recognizing warning signs indicating that 

a candidate is not an appropriate hire for the workplace. 

Perhaps now more than ever, employee hiring can be a difficult, 

stressful, and lengthy process that is fraught with potential pitfalls 

if not handled properly, and if not armed with the right information 

to make educated decisions. 1 In view of numerous stories relating to 

résumé fraud, fictitious academic qualifications, violence in the workplace, 

harassment and discrimination, corporate scandals, and employee 

theft, employers must be vigilant and well-informed when making hiring 

decisions. If not, liability issues may arise in a variety of instances, 

involving current employees, prospective employees, and clients. 

Irrespective of the size of your business, pre-employment screening is 

a necessary hiring practice to avoid lawsuits and costly hiring mistakes. 

Indeed, perhaps the most important step employers can take to ensure 

the safety of their workplace, and limit liability, is to conduct background 

checks of all new hires, and sometimes on existing employees. 

Undoubtedly, the most efficient and effective way to handle problem 

employees is before they are offered a job, and careful consideration of 

Leonora M. Schloss is a partner in the Los Angeles office of Sedgwick, 

Detert, Moran & Arnold LLP, specializing in wage/hour and leaves of 

absence issues and litigation, drafting policies, advising employers, 

conducting wage/hour classification audits, and defending discrimination, 

harassment, and whistleblower lawsuits. J. Gregory Lahr is an associate 

in the firm’s New York office litigating commercial disputes, preparing 

coverage opinions, and litigating and providing counseling on a variety 

of employment matters. The authors may be reached at leonora.schloss@ 

sdma.com and gregory.lahr@sdma.com , respectively.

Smart Hiring and Proper Background Checks 

an individual’s background can help guide this very important decisionmaking 

process. 

By utilizing a thorough employment application, conducting detailed 

interviews and reference checks, and, where necessary, investigating an 

applicant’s background, problematic issues may be revealed to indicate that 

the candidate should not be hired. Although a careful screening process 

may be achieved through an application, interview, and reference check, 

conducting a further investigation of the applicant may disclose issues that 

are not apparent on an application or during an interview. Unearthing 

potential problems in the pre-employment stage may decrease the number 

of personnel problems later on, as well as reduce the possibility of 

employer liability for lawsuits brought by employees and customers. 

Fortunately for employers, background checks are becoming much 

more commonplace, even for respected lateral transfers with reputable 

credentials. Thus, the likelihood that a candidate will be “appalled” by 

the thought of being investigated has diminished. Irrespective of how a 

candidate may react to a background check, it is simply good policy for 

an employer to perform a background check to eliminate or substantially 

decrease its exposure to a lawsuit. 

Many employers now conduct background checks into an individual’s 

creditworthiness and criminal background before making decisions 

about hiring, promotion, reassignment, or job retention. Such an investigation 

can reveal criminal prosecutions, bankruptcies, overdue payments, 

overdrawn credit, and debt collection activity. To the extent 

negative information is discovered, it may demonstrate that the candidate 

is not suited for a position handling the company’s cash, corporate 

finances, or clients’ personal property. 

Federal and state law, however, do not permit indiscriminate scrutiny 

of a job applicant’s personal background solely in the interest of security 

or merely to avoid future liability. In that regard, employers must be 

aware of the permissible scope of inquiry of an applicant’s background, 

and in particular with the procedural requirements of the Federal Fair 

Credit Reporting Act (FCRA) and any state equivalents, before conducting 

background checks or acting upon information provided by such an 

investigation to make employment decisions. 

Discussed herein are significant issues that employers face when 

deciding whether and how to conduct an investigation into a candidate’s 

background, and what may result if an employer elects to do nothing 

to research a candidate. 

WHY CONDUCT A BACKGROUND CHECK 

Negligent Hiring 

An employer generally is not liable for the intentional tort of its 

employee unless the employee is acting within the scope of his or 

Vol. 34, No. 3, Winter 2008 2 Employee Relations Law Journal


her duties and in furtherance of the employer’s business. However, 

even where the employer is not vicariously liable for the torts of its 

employees, it may be directly liable under the theory of negligent hiring 

and/or retention. Most states’ law recognize claims against an employer 

that hires an employee with dangerous tendencies who injures 

someone— i.e. , a coworker, client, vendor—at work. 2 An employer may 

be liable for negligent hiring if it knew, or should have known, that 

the employee posed a threat to others. Moreover, an employer may be 

liable for negligent retention when it continues to employ an individual 

despite knowing his or her dangerous propensities. 3 

In addition, when an employer hires an employee who will have a 

unique opportunity to commit a crime in the performance of his or her 

duties, the employer may have a duty to exercise reasonable care in 

hiring the employee, and a continuing duty to exercise reasonable care 

in retaining the employee. 4 Courts have found the employer to have 

breached its duty when it failed to inquire adequately about the employee’s 

criminal history. 5 However, the employer may not be negligent 

where it conducts a reasonable background investigation and where 

the wrong committed was not foreseeable based on the nature of any 

previous criminal conduct by the employee. 6 

To prove negligent hiring, the injured third person must prove 

that: 

• The injury was caused by the tortious conduct of a coworker; 

• The employer knew or should have known by the exercise of 

diligence and reasonable care that the coworker was capable 

of inflicting harm of some type; 

• The employer failed to use proper care in selecting, supervising, 

or retaining that employee; and 

• The employer’s breach of its duty was the proximate cause of 

the plaintiff’s injuries. 7 

The injured third party also must prove that, although negligent in 

hiring or retention, the employer’s negligence makes it liable for the 

tort actually committed by its employee. 8 For example, the failure of 

the employer to discover that its employee had a conviction for stealing 

checks in the mail does not extend to the employee’s crime of arson, 

and the failure to discover that an employee pleaded guilty to theft, does 

not extend to sexual assault. 9 

Safety of Employees and Clients 

Concomitant with the possibility of being liable in a negligent hiring/ 

retention lawsuit, an employer must consider the safety and security of 

Employee Relations Law Journal 3 Vol. 34, No. 3, Winter 2008


its employees. Indeed, in view of the fact that most employees spend at 

least one third of their day at the workplace, there naturally is a need for 

employees to feel safe, and not concerned that one of their coworkers 

may act out in a violent manner. 

There are a variety of federal and state laws that govern the safety 

of the workplace of which employers must be aware. For example, 

Section 5(a)(1) of the federal Occupational Safety and Health Act 

(OSHA), sometimes called the “General Duty Clause,” requires that 

“each employer shall furnish to each of his employees employment and 

a place of employment which are free from recognized hazards that 

are causing or are likely to cause death or serious physical harm to his 

employees.” In two Opinion Letters, OSHA has opined that failure to 

provide a violence-free workplace, or to take acts designed to minimize 

the possibility of violence in the workplace, could subject an employer 

to citation under the General Duty Clause. 10 Therefore, employers that 

fail to conduct background investigations may face exposure for failing 

to comply with this requirement. 

Similarly, employers subject to the Federal Employer’s Liability Act 

(FELA) or the Jones Act may face liability for injuries to employees 

caused in whole or in part by the negligence of the injured employee’s 

coworker. Under FELA, Congress created a statutory means for employees 

in certain industries, most notably the railroad industry, to obtain 

relief for injuries caused by their employers’ negligence. Although specific 

standards of care are not indicated in the statute, certain employer 

duties have become integral parts of FELA, including the duty to provide 

a reasonably safe place to work 11 and the duty to protect an employee 

from intentional torts committed by another employee. 12 

The Jones Act, which provides a cause of action in negligence for any 

seaman injured in the course of his employment, 13 applies the standard 

of liability provided by the FELA. 14 Thus, a ship owner may become 

liable for injuries to a seaman resulting in whole or in part from the 

negligence of another employee. 

Although it is possible that no amount of investigation into some 

candidates’ backgrounds would reveal a propensity to violence, a 

thorough investigation is likely to reveal questionable aspects of a 

candidate’s background that may indicate a problem in hiring that 

candidate for a certain position, or placing that candidate in a certain 

setting. The awareness of employees that their employer is conducting 

background checks may help to assure employees that their workplace 

is safe. 

Similarly, clients may be less inclined to initiate or continue a business 

relationship with a company if the client is aware of prior criminal or 

intentional tortious conduct that has occurred at the company’s workplace. 

In some businesses, conducting a sufficient screening of employees 

may be a business development tool for generating and maintaining 

clients. 



Well-Being of the Company 

Aside from the employees’ security, the well-being of a company 

or organization may hinge upon conducting adequate background 

checks. Although insurance coverage is available for employee theft, 

and torts committed by employees, many companies are uninsured or 

underinsured such that a company could become financially inoperable 

due to the criminal or tortious conduct of one of its employees. 

Thus, spending a reasonable amount of resources to conduct a proper 

investigation of an applicant may prevent a company from later being 

exposed to an expensive lawsuit that may detrimentally affect the financial 

viability of the company. 

Employers should be aware that fidelity insurance policies—which 

generally provide coverage for employers for employee theft, dishonest 

or fraudulent acts by a disclosed agent, malicious destruction of property, 

and forgery or alteration of negotiable instruments—usually provide 

that the policy terminates as to acts by a particular employee as soon 

as the employer learns of any dishonest or fraudulent act committed by 

that employee. Thus, in the event that an employer becomes aware of 

criminal or dishonest acts by one of its employees, it should consider 

how that knowledge may impact its insurance coverage. 

HOW TO CONDUCT A PROPER BACKGROUND CHECK 

Employment Application 

A well-devised and detailed employment application can provide 

an abundance of information about an applicant and the applicant’s 

employment history. Gaining not only information as to the applicant’s 

qualifications, an application can expose suspicious gaps in employment 

and questionable short-term positions that may have been the result of a 

termination for cause. An employer, however, must be aware that there 

are inquiries into an applicant’s personal life that are not permissible 

under state and federal law. 

For example, although it is not unlawful for employers to obtain 

information on an applicant’s criminal background, under federal 

and most state laws it is unlawful to inquire about an applicant’s 

arrest record. 15 In the Equal Employment Opportunity Commission’s 

(EEOC) compliance manual, it advises that using arrest or conviction 

records as an absolute bar to employment disproportionately 

excludes certain racial groups. Thus, unless there is a business need 

for their use, these records should not be used in pre-employment 

screening. Unlike a conviction, an arrest is not reliable evidence that 

an applicant has committed a crime. As such, an exclusion based 

upon an arrest record is justified only if it appears that the conduct 



is job-related and relatively recent, and where the applicant or 

employee actually engaged in the conduct for which he or she was 

arrested. 

State laws vary with respect to the type of criminal information that 

can be obtained. The EEOC advises that, where job-related, an inquiry 

may be made into felony convictions, and some states limit criminal 

record checks to felony convictions only. 16 Most states require that 

conviction records not preclude an applicant from employment unless 

the conviction is job-related. 17 Thus, if an applicant was applying for a 

job as a company’s treasurer, and the applicant had a prior conviction 

involving monetary theft, the conviction likely would be viewed as a 

job-related conviction and serve as the basis for disqualifying the applicant 

from consideration. 

Many states require that a disclaimer be placed on the employment 

application to advise the applicant that a criminal record will not necessarily 

preclude employment. Most states also require the employer 

to consider a number of factors before excluding an applicant on the 

basis of a conviction. These factors include the nature of the conviction 

relative to the job applied for, the age of the applicant at the time of 

the conviction, how much time has elapsed since the conviction, and 

what the individual has done since the conviction as to counseling and 

rehabilitation. 

No matter how thorough and inquisitive an application may be, it is 

only as good as the veracity of the individual completing it. As such, the 

necessity of conducting an interview and checking references cannot be 

overemphasized in most situations. 

Interview 

Conducting a face-to-face interview of the candidate, or at least a 

telephone interview, is an opportune time to inquire about any peculiarities 

in the candidate’s application or résumé, and listen to the applicant’s 

explanation for any necessary follow-up questions. In addition, 

having a candid dialogue (on permissible areas of inquiry) with the 

applicant may provide an employer with a sense of the candidate’s 

veracity. 

During the interviewing phase, an employer must be careful not to 

violate provisions of relevant anti-discrimination laws with respect to 

questions asked of the candidate, particularly as they pertain to a candidate’s 

potential protected classification. 

For example, before making an offer of employment, an employer 

may not ask applicants about the existence, nature, or severity of a 

disability. Candidates may be asked about their ability to perform job 

functions, and an employment offer may be conditioned on the results 

of a medical examination, but only if the examination is required for all 

employees in the same job category. In addition, medical examinations 



of employees must be job-related and consistent with business 

necessity. 

The EEOC has advised that certain questions may not be asked with 

regard to a candidate’s possible disability: 

• Have you ever had or been treated for any of the following 

conditions or diseases? (Note: this question would be followed 

by a list of specific diseases.) 

• Have you ever been hospitalized? If so, for what conditions? 

• Have you ever been treated by a psychiatrist or psychologist? 

If so, for what condition? 

• Is there any health-related reason you may not be able to perform 

the job for which you are applying? 

• Have you had a major illness in the last five years? 

• How many days were you absent from work because of illness 

last year? (Note: pre-employment questions regarding illness 

may not be asked because they may reveal the existence of a 

disability; however, an employer may provide information on 

its attendance requirements and inquire whether an applicant 

can meet these requirements.) 

• Do you have any disabilities or impairments that may affect your 

performance in the position for which you are applying? (Note: 

the candidate may be asked about the ability to perform specific 

job functions, with or without a reasonable accommodation.) 

• Are you taking prescription drugs? 

• Have you ever been treated for drug addiction or alcoholism? 

• Have you ever filed for workers’ compensation insurance? 

As in most situations in dealing with employees, common sense 

should prevail, and questions that directly or indirectly are meant 

to discover information about a candidate’s age, race, creed, color, 

national origin, sex, disability, martial status, sexual orientation, alienage, 

or citizen status should be avoided. An employer should focus on 

the candidate’s ability to perform the job, not on the possibility that 

the candidate is in a protected class. Anti-discrimination statutes are not 

designed to prevent spontaneous, free-flowing conversations between 

an employer and a candidate. However, it is important to avoid any 

specific inquiries in the interviewing process that may establish a 

discriminatory intent. 



References 

By contacting former employers and other references, potential 

employers may gain valuable insight into an applicant’s personality, 

work ethic, communications skills, and ability to cooperate with others. 

Contacting these individuals also may enable employers to discover discrepancies 

on employment applications and resumes. If discrepancies 

or other suspicious notations are found on an applicant’s employment 

application or resume, the employer should seek an explanation from 

the applicant as to these items. 

In addition, conducting reference checks can give an employer 

valuable insight into an applicant’s abilities, and may help to shield 

the employer from possible claims of negligent hiring. 18 Even if the 

applicant’s former employer refuses to provide any information, merely 

documenting that the prospective employer has attempted to check the 

applicant’s prior work history may be helpful. The failure to perform a 

background investigation for an applicant may serve as the basis for a 

negligent hiring claim. 19 

For an employer to have the greatest chance of gaining valuable and 

useful information, potential employers should consider (a) contacting 

the applicant’s former supervisor directly, and (b) obtaining a signed 

authorization and release from the applicant. Employers may obtain an 

authorization and release more easily by attaching the form to employment 

applications. 

A potential problem with gathering references is that companies called 

upon to provide references for former employees may fear lawsuits for 

slander, defamation, or other civil claims and, therefore, an applicant’s 

prior employer may be hesitant to disclose more than the applicant’s previous 

job title and employment dates. A cause of action for defamation may 

be made simply by alleging that a false statement was made to a prospective 

employer, and that the statement likely would harm the applicant’s 

reputation or deter other persons from hiring the applicant. 20 In addition, 

the prospective employer or third parties may raise claims of misrepresentation 

or negligent referral if accurate information is not provided. 

Other potential claims include invasion of privacy under two theories: 

(a) the former employer placed the applicant in a “false light” before the 

public; and (b) the former employer disclosed private information about 

the applicant. Actionable misrepresentation can be either negligent or intentional. 

Interference with prospective employment arises when an employer 

intentionally interferes with a former employee’s right to employment by 

giving false information to prospective employers, resulting in the loss of 

an employment opportunity. Moreover, the anti-retaliation statutes of Title 

VII and many state statutes prohibit employers from retaliating against 

former employees who complain about discrimination. 

Additionally, in some states, such as California, employers can face 

statutory liability for “blacklisting” a former employee. Under California 



Labor Code Section 1050, it is a misdemeanor for any person who, after 

having discharged an employee or after the employee has voluntarily 

left employment, prevents or attempts to prevent the former employee 

from obtaining employment by any misrepresentation. Treble damages 

are also available in a civil action based on such misrepresentation. 21 

Although employers are not liable for truthful statements about the 

reason for an employee’s termination or the quality of an employee’s 

work, it can be difficult to establish the truth of a subjective opinion 

about the applicant’s abilities. Many states, however, recognize a “qualified 

privilege” with respect to employment references. 22 

With any inquiry involving an employee, but particularly with checking 

references, the key phrase is job-relatedness. When contacting references, 

to gain the maximum relevant information about an applicant 

without creating liability for invasion of privacy, it is important to limit 

the questions to elicit information related directly to job performance. 

Internet Search 

One often overlooked research tool is the Internet. With the advances 

in technology of most major search engines, and the plethora of publications 

and other information that are posted on the Internet, it is likely 

that a search of the candidate’s name will reveal useful information 

about his history. Although an employer should be cautious about relying 

on information located on the Internet because of the possibility that 

it could pertain to another individual or simply be false, many sites—in 

particular newspaper Web sites, organization Web sites, government 

agency Web sites, and company Web sites—offer information that is reliable 

and useful in shedding light about an applicant’s background. 

Similarly, increasing numbers of applicants have profiles on Facebook 

and MySpace. Employers are able to obtain useful information from 

these sites, but naturally should be wary of using anything they uncover 

to discriminate against applicants— i.e. , refusing to hire an applicant 

after learning that she is pregnant from her Facebook or MySpace profile. 

Employers also may wish to utilize the Internet Archive to obtain 

previous versions of Web pages in order to learn if applicants recently 

removed information from their MySpace or Facebook profiles just prior 

to applying for the job. In the event questionable information is located 

about a candidate, an employer should consider raising this in the interview 

to obtain an explanation from the candidate. 

Candidate Investigation 

For many employment positions, simply relying on an application, 

interview, and reference checks will not be sufficient, and it may be 

necessary to conduct a more thorough investigation of the candidate, 



perhaps even using an outside vendor or private investigator to conduct 

the research. In fact, for some employment positions, it may be 

mandatory to perform such an investigation to ensure the safety of 

children, elderly, or other individuals who may be at a greater risk of 

exposure to criminal conduct. In some states, employers are required 

to do specific reference, criminal, or background checks depending on 

the position involved; for example, positions that involve working with 

children or the elderly, positions in correctional facilities, and certain 

banking industry positions. 23 Failure to conduct a proper investigation 

could result in legal liability and, therefore, employers must balance 

the benefits and risks involved in the use of pre-employment investigations 

and background checks, mandatory requirements based upon 

the nature of the position, and the risks in failing to screen applicants 

properly. 

Criminal Conduct 

In view of growing concerns about negligent hiring claims and other 

tort claims, many employers are reluctant to hire an individual with a 

criminal record, or simply prohibited to do so. The apprehension shared 

by employers in this regard must be balanced against certain societal 

concerns, like rehabilitating individuals with criminal records so they 

may productively re-enter society by becoming gainfully employed. 

Thus, employers should be cautious when considering the hiring or 

rejection of an individual with a criminal record. 

Nevertheless, employers should consider investigating an applicant’s 

criminal record. As shown above, employers may question applicants 

about convictions, but not about arrests, as courts have found that mere 

arrests do not carry the same indications of reliability as do convictions. 

Also, rejecting applicants merely because they have been arrested has 

been shown to have an adverse impact on some minority groups, an 

issue that particularly concerns the EEOC. Many jurisdictions mandate a 

written guarantee to the applicant that a conviction will not be an absolute 

bar to employment. 

Criminal conviction information should be relied upon only to the 

extent the information is job-related and consistent with business necessity. 

As such, considerations including the age and time of the offense, 

the seriousness and nature of the violation, the relationship between the 

conviction and the job, the nature and number of convictions, and rehabilitation, 

should be considered when making the employment decision. 

All background checks should be authorized by a written consent 

signed by the prospective employee. Some states have laws that provide 

that an employer conducting a background check of an employee 

or prospective employee after having obtained his written consent is 

immune from civil liability for claims arising out of the disclosure of the 

background information. The immunity extends to liability for failure to 



hire, wrongful termination, invasion of privacy, as well as to claims of 

third persons for negligent hiring or negligent retention. Consequently, 

employers should capitalize on the broad immunity accorded by these 

statutes and obtain consent from all employees and prospective employees 

to perform a background check, and conduct and document a background 

check for each, regardless of how cursory. 

Financial and Other Concerns 

Some employers also may want to investigate financial problems 

and credit worthiness of an applicant, or obtain information relating 

to general reputation, lifestyle, and character and, therefore, may 

commission an investigative consumer report. Such a report might 

be relevant to the appointment of a top executive, the hiring of 

sensitive security personnel for dignitaries, or government officials, 

or for a corporate spokesperson whose background must be above 

reproach. 

However, employers should be aware that rejecting an applicant 

based solely on certain financial or lifestyle information, like a credit 

rating, may have an adverse impact on certain minority groups and, 

therefore, could be held unlawful. 24 Accordingly, employers must have 

a valid business necessity for using a poor credit rating to reject an 

applicant. 

In addition, an applicant may not be discriminated against because he 

has filed for bankruptcy. 25 If an employer obtains an applicant’s credit 

report that reflects a bankruptcy filing, the employer will need to have 

an independent basis for any adverse employment decision. Additionally, 

depending upon the nature of the inquiries regarding an applicant’s 

background and credit, the FCRA, discussed in more detail below, may 

apply. 

Motor Vehicle Record 

For some employment positions, a clean driving record may be a 

valid prerequisite to employment. In such a case, an employer should 

strongly consider obtaining information about the applicant’s motor 

vehicle record to ensure that he has a valid driver’s license, and there 

are not other problems with his driving history that may make him 

unsuitable for the position. 26 

But employers must be cautious when seeking and using information 

contained in motor vehicle records. These records contain a significant 

amount of information, including an applicant’s full name, date of birth, 

Social Security number, physical description, and information about 

medical conditions that affect an individual’s driving license or status. 

Much of this information is deemed private and/or confidential under 



the federal Driver’s Privacy Protection Act of 1994, which provides that, 

with certain exceptions, a state department of motor vehicles “shall not 

knowingly disclose or otherwise make available” personal information 

contained in motor vehicle records. 27 

POTENTIAL LIABILITIES FOR AN IMPROPER BACKGROUND 

CHECK, OR IMPERMISSIBLE USE OF A PROPER 

BACKGROUND CHECK 

Fair Credit Reporting Act 

In conducting a background check on a candidate or current 

employee, employers must be aware of the Fair Credit Reporting Act 

(FCRA), 28 and any state law equivalents. Indeed, in enacting FCRA, 

Congress determined that “consumer reporting agencies have assumed 

a vital role in assembling and evaluating consumer credit and other 

information on consumer,” and that there “is a need to insure that 

consumer reporting agencies exercise their grave responsibilities 

with fairness, impartiality, and a respect for the consumer’s right to 

privacy.” 29 

Generally, FCRA defines a background check as a “consumer report.” 

Before an employer may obtain a consumer report for employment 

purposes, it must notify the candidate in writing and get written authorization 

to obtain the report. If an employer decides not to hire the candidate 

because of this report, it must provide a pre-adverse action disclosure 

which includes a copy of the report and a copy of the candidate’s 

rights. The employer also must provide notice that it has decided not to 

hire the candidate, and include the name and address of the consumer 

reporting agency and information on the candidate’s right to dispute 

the report. 

Although it may appear that FCRA applies only to credit reports and 

credit reporting agencies (CRAs), it certainly applies to background 

checks that an employer conducts on an applicant, and even independent 

contractors. 30 In fact, a “consumer report” is broadly defined 

to include written, oral, or other communication of any information 

pertaining to an individual’s credit worthiness, credit standing, credit 

capacity, character, general reputation, personal characteristics, or mode 

of living. Thus, FCRA governs such reports as driving records, criminal 

history checks, and credit reports. 

FCRA, which is primarily enforced by the Federal Trade Commission 

(FTC), generally allows employers to obtain information on prospective 

employees; however, it imposes requirements on how an employer 

proceeds in obtaining such information, and what an employer must do 

if an adverse action is taken— i.e. , a denial of employment or any other 

decision for employment purposes that adversely affects any current or 

prospective employee. 



Reports and Entities Covered by FCRA 

As suggested in FCRA’s statement of purpose, it is designed to promote 

accuracy, fairness, and privacy of information in the files of every 

CRA. FCRA defines CRAs as entities and persons that regularly engage in 

the practice of assembling or evaluating consumer credit information to 

provide to third parties. Thus, most CRAs are credit bureaus that gather 

and sell information about individuals to creditors, employers, landlords, 

and other businesses ( e.g. , credit scores, timeliness of bill payments, 

or bankruptcies). FCRA provides candidates with specific rights, and 

regulates employers’ procurement and use of “consumer reports” and 

“investigative consumer reports.” 

It is important to note that consumer reports are not limited to those 

involving credit information, but as indicated above include reports in 

which information on an individual’s character, reputation, and characteristics 

is obtained through personal interviews with neighbors, friends, 

or associates of the individual being reported on, which is used or 

expected to be used or collected in whole or in part for the purpose 

of serving as a factor in establishing the consumer’s eligibility “for . . . 

personal, family, . . . [or] employment purposes.” 31 As such, the more 

frequent types of consumer reports are motor vehicle record checks, 

criminal background checks, educational records checks, previous 

employment record checks, and credit history checks. 32 An employer 

should expect that a report containing any information that a candidate 

likely would consider personal, private, or confidential and is obtained 

from a consumer reporting agency, will be a consumer report, although 

it appears that it does not include drug tests. In addition, employers 

should be aware that, if an outside organization performs a harassment 

investigation for an employer, it may be considered an “investigative 

consumer report” within the meaning of FCRA, and would be subject to 

disclosure obligations to the employee. 33 

Reports May Be Used for Employment Purposes 

Consumer reports may be used by employers only in certain situations, 

such as to determine whether to hire or fire employees, or for 

other “employment purposes” such as reassignment, or promotion. 34 

With respect to using a report for an employment purpose, the report 

must relate to a decision about a prospective or current employee. 

Disclosure Requirements 

FCRA Section 1681b delineates the permissible uses of consumer 

reports, and in particular creates conditions that must be satisfied before 

consumer reporting agencies may provide such reports for employment 

purposes. There essentially are three separate disclosures to consider, 



including a disclosure that a consumer report may be requested, a disclosure 

regarding the nature and scope of the investigation requested, and 

a disclosure that the consumer report may be obtained for employment 

purposes. In addition, there is a requirement to obtain authorization 

from employees or potential employees prior to procuring consumer 

reports. 35 

A consumer report cannot be obtained for employment purposes 

unless a “clear and conspicuous disclaimer” is made to the candidate 

before it is obtained. The disclaimer must be made in a document that 

consists solely of the disclosure ( i.e. , having it in the application is not 

sufficient), and must advise the candidate that the consumer report may 

be obtained for employment purposes. 36 A disclosure advising that a 

consumer report may be requested, as well as the nature and scope of 

the investigation, is permissible. For example: 

• A consumer report may be obtained on you for employment 

purposes. It may be an “investigative consumer report” that 

includes information as to your character, general reputation, 

personal characteristics and mode of living. You have a right 

to request disclosure of the nature and scope of the report, 

which involves personal interviews with sources such as your 

neighbors, friends, or associates. 

• Although a disclosure notice may be combined with an 

authorization obtaining the applicant’s permission to obtain 

the report, it may not include a waiver of the applicant’s rights 

under FCRA. 37 

• The candidate must provide authorization in writing for the 

report to be obtained. In the event that the candidate refuses 

to provide authorization, the employer is not prohibited from 

declining to hire the candidate on that basis. 

• Finally, the employer must certify to the consumer reporting 

agency that the disclosure to the candidate has been made, 

consent has been received, and the report will not be used for 

an illegal purpose. 

Disclosure to Candidate Regarding Denial of Employment 

Where an employer abides by FCRA’s requirements, and uses the 

report as grounds to take an adverse action against the candidate, the 

employer must provide advance notice to the employee about the action 

before taking such action, and supply a copy of the report and a summary 

of the candidate’s rights under FCRA. 38 

FCRA does not indicate if an employer must delay the adverse action 

after providing the required information to the candidate; however, the 



purpose of the advance notice requirement is to permit the candidate to 

discuss the report before action is taken. An exception to the pre-action 

notice rule is where an employer’s contact with the candidate is only 

by mail, telephone, or electronic means. Here an employer may deny 

employment based upon information in a report without the pre-action 

notice, but must mail the notice to the candidate within three days. 

Irrespective of whether the notice must be provided in advance of the 

denial of employment, or within three days, the notice must provide the 

following information: 

• The denial of employment was based upon a report received 

from a consumer reporting agency; 

• The name, address, and telephone number of the CRA; 

• That the agency did not make the decision to deny employment, 

and cannot provide the candidate with the specific reasons 

why employment was denied; and 

• That the candidate may request a free copy of the report and 

dispute the accuracy or completeness of any information in the 

report. 39 

Remedial Measures for FCRA Violations 

As set forth in FCRA, an employer can be liable for negligent and/ 

or willful violations. If a violation is negligent, the employer may be 

required to pay any actual damages caused by the violation, as well as 

the plaintiff’s attorneys’ fees and court costs. For willful violations, the 

penalties essentially are the same, but a $1,000 statutory penalty also 

may be awarded if actual damages in excess of that amount cannot be 

demonstrated. In addition, punitive damages can be awarded when 

there has been a “conscious disregard for a consumer’s rights,” and it is 

not necessary to prove actual malice or evil motive. 

Discrimination 

Irrespective of the nature and extent of the investigation into the 

applicant’s background, the employer should ensure that any investigations 

are uniformly applied to all applicants. An employer may invite a 

charge of discrimination if applicants with protected classifications are 

investigated more thoroughly, or otherwise differently, than others. 

Although it may seem sensible to apply a blanket prohibition against 

hiring applicants who have been arrested or convicted for criminal 

offenses for positions with substantial authority, such a policy generally 

will violate federal law (Title VII), as well as many state laws. Such a 



hiring policy may constitute a disparate impact on those groups that are 

disproportionately the subject of reported criminal conduct. Thus, it is 

the employer’s burden to establish a connection between the policy in 

question and job performance. 

In the case of a policy that excludes applicants solely on the basis of 

an arrest record, a nexus to job performance can be difficult to establish, 

particularly because arrests (in the absence of a conviction) generally 

are considered to have little, if any, probative value in demonstrating 

that the candidate has engaged in any misconduct. The denial of 

employment based on prior arrests generally will not survive a challenge 

under Title VII. 

However, the actual conduct giving rise to the arrest may justify a denial 

of employment where the employer obtains sufficient information regarding 

the conduct, and the conduct is sufficiently job-related. It can be difficult 

to determine whether sufficient grounds exist to determine that the 

candidate engaged in such conduct to support the denial of employment. 

Nevertheless, an employer does not need to perform an extensive investigation 

to determine a candidate’s guilt or innocence; however, the employer 

must allow the candidate to have a meaningful opportunity to explain the 

situation involving the arrest, and make a reasonable effort to determine 

whether the explanation is credible before denying employment. 

Blanket policies excluding all candidates who have been convicted 

of crimes also will not survive scrutiny under Title VII unless there is 

a showing of business necessity. Although the mere fact of a criminal 

arrest may not be used to reject a candidate, prior criminal convictions 

may support a denial of employment. The legitimacy of such hiring 

policies generally turn on the question of job-relatedness, as well as 

the nature and character of the criminal offense, the job requirements 

and responsibilities, and the amount of time that has passed since the 

criminal conduct. The greater the level of trust and confidence required 

by the position, and the more serious the criminal conduct, the more 

likely it is that an employer can demonstrate that the hiring policy in 

question is related to job performance. Moreover, the similarity of the 

nature of offense with the job requirements must be considered. 

A denial of employment which is based upon a prior criminal conviction 

must be considered on a case-by-case basis, assessing the relevance 

of the criminal conduct and the requirements of the job at issue. For 

example, if the position sought by an applicant is security sensitive, 

especially if it involves law enforcement or crime prevention, a court 

will be more understanding of a denial of employment due to evidence 

of prior criminal conduct. 

Negligent Hiring 

As indicated above, a primary basis to conduct a background check 

is because of the potential for employer liability if someone is injured 



as a result of workplace violence or other tortious conduct. Victims may 

assert claims against the employer for negligent hiring, negligent retention, 

and failure to warn. 

A claim for negligent hiring is based upon the principle that an 

employer that conducts its activity through its employees is subject to 

liability for harm resulting from the employee’s conduct if the employer 

is negligent in the hiring of an improper candidate, thereby creating 

an unreasonable risk of harm to others. Liability is based upon the 

employer’s negligence in placing a candidate—with known propensities, 

or propensities that should have been known through a reasonable 

investigation—in an employment position in which, due to the 

circumstances of the position, it should have been foreseeable that the 

candidate would pose a threat of injury to others. 

Thus, the employer’s duty to exercise reasonable care in making a 

decision to hire a candidate includes the obligation to conduct a reasonable 

investigation into his or her work experience, background, 

character, and qualifications. An employer’s liability hinges on whether 

the employer exercised reasonable care considering the totality of circumstances 

involving the hiring decision. The existence of this duty 

depends upon whether the risk of harm from a candidate to a third 

person, such as a coworker or client, was reasonably foreseeable as a 

result of the employment; that is, in the exercise of ordinary care, where 

an employer knew or should have known that the candidate may have a 

propensity towards violence, or has destructive or dishonest tendencies. 

However, where there is no evidence that the candidate had any propensity 

toward violence, or that the employer knew of that propensity, 

the employer should not be liable. 

Invasion of Privacy 

Where an employer conducts a background check of a candidate and 

it results in the denial of employment, it is possible that the candidate 

may claim that the employer invaded his or her privacy by investigating 

the candidate’s background. 40 Thus, it must be emphasized that employers 

should have the applicant execute a release (preferably notarized) 

in which the applicant: (a) authorizes any individual with information 

about, or access to records relating to, the applicant to provide that 

information and/or those records to the employer; (b) waives any and 

all rights to privacy or confidentiality for the purpose of this authorization; 

and (c) releases all individuals who provide such information and/ 

or records from any and all liability. 41 

If conducting a background check is not feasible for some reason, 

one alternative is to have the applicant provide certified records, such as 

transcripts or military documents, or specific information, such as a pay 

stub, termination agreement, or a recent evaluation. However, a release 

should still be obtained so that the employer may follow up with prior 



employers or educational institutions on any documentation provided 

by the applicant. Indeed, an applicant who would misrepresent facts in 

an employment application is equally capable of forging documents. 

SUMMARY AND PRACTICE TIPS 

To avoid the significant potential for workplace calamities involving 

violence, theft, fraud, or other criminal or tortious conduct, an employer 

must be vigilant in the hiring process and adhere to a strict practice of 

fully evaluating candidates for employment. 

In the employment application, be sure to obtain the following 

information: 

• Whether the candidate is over age 18; 

• Whether the candidate can provide verification of his legal 

right to work in the United States; 

• The full name of schools attended, major, number of years 

attended, diploma, or degree earned; 

• Prior and/or current employer contact information, name of 

supervisor, position held, dates of employment, starting and 

ending salary, and reason for leaving last five jobs or last ten 

years of work history, whichever is longer; 

• Whether the candidate has been convicted of a felony, and 

if so, obtain details, but advise the candidate that a felony 

conviction or pending criminal charges will not necessarily 

disqualify him or her from employment; 

• Whether the candidate, with or without reasonable accommodation, 

can perform the essential functions of the job applied 

for; and 

• Signature certifying that the information is true and correct and 

that any misrepresentation, falsification, or material omission 

may result in failure to receive an offer of employment or, if 

hired, in dismissal from employment. 

Along with the application, be sure to have the candidate sign a consent 

form permitting a reference check and releasing both the hiring 

employer and former employers from liability resulting from the ensuing 

exchange of information. (The release should be drafted broadly so 

that it includes not only those references listed in the application, but 

all pertinent contacts.) 

When checking references, advise the reference of any applicable 

immunity statutes, particularly now that many states have enacted 



reference- checking immunity laws protecting employers from civil liability 

when giving references in good faith. A reference will appreciate 

knowing that he or she is protected from liability by providing honest 

information regarding the candidate’s company history, and may be 

more open and revealing with the information he or she provides about 

the candidate. 

During the reference-checking process, document all contacts and 

attempts, even if unsuccessful. Always try to reach the direct supervisor 

rather than the Human Resources (HR) department, but if the supervisor 

is not available at least contact HR to verify factual information. When 

speaking to the reference, sound conversational and not as though a 

checklist is being followed, and take notes during the conversation, but 

do not advise that you are doing so—the reference likely will be more 

forthcoming if the conversation feels casual. Be sure to not ask about any 

protected information, and always conclude by asking if there is anything 

else the reference can share about the candidate’s work background. 

When conducting a more comprehensive background check and using 

a vendor to do so, be sure to obtain written consent from the candidate 

and provide him or her with a clear and conspicuous written disclosure 

that a background report may be requested. If a consumer report is generated 

and adverse action will be taken as a result of the contents of the 

report, provide the candidate with a copy of the report and a statement 

of his or her rights prepared by the FTC. If the candidate contends that 

the report is inaccurate or incomplete, he or she has the opportunity to 

contact the employer and the CRA to dispute or explain what is in the 

report. If the adverse employment decision is final, send the candidate 

a Notice of Adverse Action informing him or her that a final decision 

has been made and containing information required by FRCA, including 

a copy of the report, a summary of his or her rights, and a cover 

letter. After a reasonable period of time has expired (approximately one 

week), the adverse decision may become final. 

CONCLUSION 

Although nothing can guarantee that an employee will not commit an 

act of violence or other crime in the workplace, employers can substantially 

decrease the risk of such occurrences by methodically following a 

lawful process that thoroughly screens all applicants, and by recognizing 

warning signs indicating that a candidate is not an appropriate hire for 

your workplace. 

NOTES 

1. In a 2002 Fact Sheet published by the US Department of Labor, Occupational Safety 

and Health Administration, it indicated that approximately two million American workers 

are victims of workplace violence each year. 



2. Oakley v. Flor-Shin, Inc., 964 S.W.2d 438 (Ky. Ct. App. 1998) (indicating that most 

jurisdictions recognize the tort of negligent hiring). 

3. See, e.g., Borden v. Capital Dist. Transp. Auth., 763 N.Y.S.2d 860 (N.Y. App. Div. 3d 

Dep’t 2003) (liability for negligent hiring exists where the employer hired the employee 

with knowledge of the propensity that caused the injured party’s harm (citing Detone v. 

Bullit Courier Serv., Inc., 528 N.Y.S.2d 575 (N.Y. App. Div. 1st Dept. 1988)). 

4. See, e.g., Welsh Mfg., Div. of Textron, Inc. v. Pinkerton’s, Inc., 474 A.2d 436 (R.I. 1984) 

(employer had checked the employee’s criminal record before hiring him as a security 

guard, but did not contact character references, thus the security company’s cursory 

investigation provided it with little current information on him and could support an 

inference of negligence in hiring for such a sensitive assignment as the guarding of 

gold); Carlsen v. Wackenhut Corp., 868 P.2d 882 (1994) (denying summary judgment 

to employer for claim by teen-age girl who was sexually assaulted by security guard 

at rock concert because there was a material issue of fact as to the reasonableness of 

employer’s conduct in failing to conduct any background investigation of applicant, 

especially given the nature of employment position and incomplete and inconsistent 

nature of his responses on job application). 

5. Carlsen , 868 P.2d 882 (1994). See also Brown v. Youth Serv. of So. Dakota, Inc., 89 F. 

Supp. 2d 1095 (D.S.D. 2000) (Although background check on employee did not reveal 

any propensity for any type of child abuse or neglect, employer did know that employee 

lacked any experience in counseling teenagers, and one of the references indicated that 

she was not sure how employee would handle adolescents thereby triggering duty to 

conduct a more thorough background check or other screening procedures to determine 

whether employee had a propensity for child sex abuse). 

6. See, e.g., Argonne Apartment House Co. v. Garrison, 42 F.2d 605 (C.A.D.C 1930) (The 

fact that an investigation made by the police after the jewelry had been stolen showed 

that the employee some time prior thereto had been convicted of intoxication does 

not suggest that such a person was dishonest, and, even though the employer had 

knowledge that an employee had been convicted of such a charge, that would not in 

itself put the employer on notice as to the dishonesty of such employee.); Guillermo v. 

Brennan, 691 F. Supp. 1151 (N.D. Ill. 1988) (plaintiff could not rely upon defendant’s 

failure to look into employee’s criminal record to support negligent hiring claim because 

nothing hinted that pre-hiring convictions substantially related to the circumstances of 

his employment with defendant); Stubbs v. Panek, 829 S.W.2d 544 (Mo. App. Ct. 1992) 

(no evidence to show that employer knew or should have known that employee was 

possessed of dangerous proclivities which would make him a risk to abduct, assault and 

murder, although there was evidence that employee had a charge of for petty larceny 

and a conviction for illegal trash dumping). 

7. See Bryant v. Better Bus. Bureau of Greater Md., Inc., 923 F. Supp. 720 (D. Md. 1996). 

See also Shoemaker-Stephen v. Montgomery County Bd. of Comm’rs, 262 F. Supp. 2d 866 

(S.D. Ohio 2003) (it is typically stated that the plaintiff must prove (1) the existence of 

an employment relationship; (2) the employee’s incompetence; (3) the employer’s actual 

or constructive knowledge of such incompetence; (4) the employee’s act or omission 

causing the plaintiff’s injuries; and (5) the employer’s negligence in hiring or retaining [or 

supervising, etc.] the employee as the proximate cause of plaintiff’s injuries). 

8. See, e.g., Sea River Maritime, Inc. v. Indus. Med. Serv., Inc., 983 F. Supp. 1287 (N.D. 

Cal. 1997) (court held that employer failed to use reasonable care to discover doctor’s 



unfitness to practice because it did not inquire into his qualifications and experience 

before hiring him, did not personally interview him, did not check his references, did 

not verify information in his curriculum vitae, and did not inquire into why he left a 

residency program prematurely). 

9. See, e.g., Argonne Apartment House Co. v. Garrison, 42 F.2d 605 (C.A.D.C 1930). 

10. OSHA Standard Interpretation and Compliance Letters Dated May 13, 1992 and 

December 10, 1992. In a letter dated December 18, 2003, OSHA explained the elements 

for a violation of the General Duty Clause by indicating that employers can be cited for 

violation of the Clause if a recognized serious hazard exists in their workplace and the 

employer does not take reasonable steps to prevent or abate the hazard, and setting forth 

the following elements: (a) the employer failed to keep the workplace free of a hazard to 

which employees of that employer were exposed; (b) the hazard was recognized; (c) the 

hazard was causing or was likely to cause death or serious physical harm; and (d) there 

was a feasible and useful method to correct the hazard. 

11. See, e.g ., Bailey v. Central V. R.R., 319 U.S. 350, 352–353 (1943). 

12. See, e.g., Lancaster v. Norfolk & W. Ry., 773 F.2d 807, 818 (7th Cir. 1985). 

13. 46 U.S.C. § 688(a). 

14. See, e.g., Chandris, Inc. v. Latsis, 515 U.S. 347, 354 (1995). 

15. For example, the following states have enacted laws pertaining to the procurement 

and use of criminal record information: 

(a) Colorado: Colo. Rev. Stat. § 24-72-308(3)(f)(I), indicating that an employer 

cannot require an applicant to disclose any information contained in a sealed 

criminal record, and an applicant does not need to provide a reference to, or 

information concerning, the sealed information and may state that no such action 

ever occurred. In addition, employment may not be denied solely because the 

applicant refuses to disclose sealed information. 

(b) Connecticut: Conn Gen. Stat. § 46a-79-81(b), and § 31-51i, which generally 

provide that employers may not deny employment to an applicant solely on the 

basis that the individual has a conviction for which the records have been legally 

erased, nor may an employer require such conviction to be disclosed. 

(c) Massachusetts: Mass Gen. Laws ch. 151B § 4(9); ch. 276 § 100A, which provide 

that an employer or its agent cannot seek information in connection with an 

employment application (or the terms, conditions, or privileges of employment, 

or the transfer, promotion, bonding, discharge, or any other matter relating to the 

employment of any person) regarding: 

1. An arrest, detention, or disposition regarding any violation of law in which no 

conviction resulted; 

2. A first conviction for certain misdemeanors, including drunkenness, simple 

assault, speeding, minor traffic violations, affray, or disturbance of the peace; or 

3. A misdemeanor conviction when the date of conviction or completion of any 

resulting incarceration whichever date is later, occurred five or more years 

before the date of the person’s employment application or the employer’s or 

agent’s request for information. 



In addition, an employer or its agent cannot request or keep a record of 

the information, use an application form requesting the information, or 

exclude, limit, or otherwise discriminate against any person because of the 

applicant’s failure to furnish the information through written application, 

oral inquiry, or otherwise. An application for employment that seeks 

information concerning prior arrests or convictions of the applicant must 

include a statement that an applicant with a sealed record may answer “no 

record” with respect to an inquiry relative to prior arrest, criminal court 

appearances, or convictions. 

Finally, an employer may not ask about or make employment decisions based on: 

1. First conviction for misdemeanors for drunkenness, simple assault, speeding, 

minor traffic violations (does not include reckless driving, driving to endanger 

or motor vehicle homicide), or affray or disturbance of the peace; 

2. Convictions more than five years old, if no subsequent convictions within 

those five years; 

3. Any record sealed under state law; 

4. Any information pertaining to a juvenile record, including delinquency and 

child in need of services complaints, unless juvenile was tried as an adult in 

Superior Court. 

(d) Michigan: Mich. Comp. Laws Ann. § 37.2205a(1), provides that an employer 

other than a public law enforcement agency, with respect to an application 

for employment or in connection with the terms, conditions, or privileges of 

employment, cannot request, make, or maintain a record of information regarding 

an arrest, detention, or disposition of a violation of law in which a conviction did 

not result 

(e) New York: N.Y. Exec. Law § 296(15)-(16), providing that, unless specifically 

required or permitted by statute, no person, agent, bureau, corporation, or 

association, including the state and any of its political subdivisions, can ask an 

applicant for employment or a license about, or act on adversely to an individual, 

their prior arrests, youthful offender adjudications, sealed convictions, and not 

currently pending criminal accusations against them, where they were followed by 

terminations favorable to them. These provisions do not apply to an application 

for employment or membership in any law enforcement agency. 

The N.Y. Correct. Law § 752 prohibits the denial of employment on the basis 

of an applicant’s criminal conviction record unless there is a direct relationship 

between a specific offense and the employment sought, or unless the granting of 

employment would pose an unreasonable risk to property or human safety. 

(f) Virginia: Va. Code Ann. § 2.1-716; § 19.2-392.4(A). 

16. See, e.g., Cal. Labor Code § 432.7: (a) No employer, whether a public agency or 

private individual or corporation, shall ask an applicant for employment to disclose, 

through any written form or verbally, information concerning an arrest or detention that 

did not result in conviction, or information concerning a referral to, and participation 

in, any pretrial or posttrial diversion program, nor shall any employer seek from any 

source whatsoever, or utilize, as a factor in determining any condition of employment 

including hiring, promotion, termination, or any apprenticeship training program or any 

other training program leading to employment, any record of arrest or detention that did 

not result in conviction, or any record regarding a referral to, and participation in, any 



pretrial or post-trial diversion program. As used in this section, a conviction shall include 

a plea, verdict, or finding of guilt regardless of whether sentence is imposed by the court. 

Nothing in this section shall prevent an employer from asking an employee or applicant 

for employment about an arrest for which the employee or applicant is out on bail or on 

his or her own recognizance pending trial. 

17. See, e.g., El v. Southeastern Pa. Transp. Auth., 297 F. Supp. 2d 758 (E.D. Pa. 2003) 

(Under the Pennsylvania Constitution and the Pennsylvania Criminal History Record 

Information Act (18 Pa. C.S.A. § 9125(b)), it is against public policy to summarily reject an 

individual for employment on the ground that the individual has a prior criminal record 

unless in doing so the employer is furthering a legitimate public objective.). 

18. See, e.g., Scott v. Blanchet High Sch., 747 P.2d 1124 (1987) (finding that the hiring 

process employed by the school suggests it took reasonable care in hiring teacher who 

subsequently was accused of becoming sexually involved with a student; the employer 

contacted the teacher’s previous employers and conducted two personal interviews with 

the applicant prior to hiring him). 

19. See, e.g., Ponticas v. K.M.S. Inv., 331 N.W.2d 907 (Minn. 1983) (Tenant who was 

raped by manager of apartment complex brought action against owner and operator of 

apartment complex alleging negligence in hiring of manager despite his criminal record, 

held that: (1) employer has duty to exercise reasonable care in hiring individuals who, 

because of nature of employment, may pose threat of injury to members of public; 

(2) evidence supported finding that owner and operator of apartment complex were 

negligent in failing to make reasonable investigation of apartment manager’s background; 

and (3) negligence was proximate cause of injuries to tenants.). 

20. See, e.g., Gibson v. Overnite Transp. Co., 671 N.W.2d 388 (2003) (former employee 

was awarded $283,000 in damages in his defamation claim against his former employer 

after manager there made negative statements to a firm doing a background check on 

him because the court found that the former manager’s negative statements were made 

from spite or ill will). See also Socorro v. IMI Data Search, Inc., 2003 U.S. Dist. LEXIS 

7400 (N.D. Ill. 2003) (candidate indicated on the application form that he had never 

been convicted of a felony or misdemeanor, and employer’s investigator mistakenly 

reported that the candidate had been convicted of a misdemeanor and had served six 

months in jail, thus court held that the plaintiff could proceed with his defamation claim 

against employer and investigator because both companies suggested that he committed 

a criminal offense, which was actionable as per se defamation). 

21. See, e.g., Cal. Lab. Code § 1054. See also Marshall v. Brown, 141 Cal. App. 3d 408 (1983). 

22. For example, in California, Civil Code § 47(c) entitles a current or former employer 

to communicate to a prospective employer the job performance or qualifications of an 

applicant for employment, based upon credible evidence, made without malice, upon 

the request of the prospective employer. The statute provides that “a communication 

concerning the job performance or qualifications of an applicant for employment, based 

upon credible evidence, made without malice, by a current or former employer of the 

applicant to, and upon request of, the prospective employer” is privileged. An employer 

may still be sued for an untruthful statement or for disclosure of private facts if the 

response was prompted by malice. Moreover, the qualified privilege does not apply if 

the reference reflects an intentional misrepresentation or a misleading omission. 

In Hawaii, Haw. Rev. Stat. Ann. § 663-1.95 (employers’ job reference immunity), provides 

that (a) an employer that provides to a prospective employer information or opinion 



about a current or former employee’s job performance is presumed to be acting in good 

faith and shall have a qualified immunity from civil liability for disclosing the information 

and for the consequences of the disclosure; (b) the good faith presumption shall be 

rebuttable upon a showing by a preponderance of the evidence that the information or 

opinion disclosed was knowingly false, or knowingly misleading. 

The Illinois Employment Record Disclosure may preclude civil litigation against an 

employer who provides truthful, performance-related information about an employee 

or former employee in response to a reference check. All Illinois employers are covered 

by the law, which creates a presumption that the employer (or someone acting on the 

employer’s behalf) was acting in good faith provided that the information (a) was given 

in response to an inquiry from a prospective employer, (b) is truthful (or believed, in 

good faith, to be so), and (c) concerns only the employee’s job performance. 

In Louisiana, La. Rev. Stat. Ann. § 23:291, provides that any employer that, upon 

request by a prospective employer or a current or former employee, provides accurate 

information about a current or former employee’s job performance or reasons for 

separation shall be immune from civil liability and other consequences of such disclosure 

provided such employer is not acting in bad faith. An employer shall be considered to 

be acting in bad faith only if it can be shown by a preponderance of the evidence that 

the information disclosed was knowingly false and deliberately misleading. Also, any 

prospective employer who reasonably relies on information pertaining to an employee’s 

job performance or reasons for separation, disclosed by a former employer, shall be 

immune from civil liability including liability for negligent hiring, negligent retention, 

and other causes of action related to the hiring of said employee, based upon such 

reasonable reliance, unless further investigation, including but not limited to a criminal 

background check, is required by law. 

23. For example, in Pennsylvania, the Child Protective Services Law explicitly permits 

an inquiry into the criminal history of applicants for jobs in any child care facilities, or 

juvenile detention centers or children’s drug or alcohol rehabilitation programs, and 

allows the employer to refuse to hire someone convicted of certain crimes within the 

last five years. See 18 Pa. Stat. Ann. § 9125(b)(c); 23 Pa. Stat. Ann. § 6344. In addition, 

the Older Adults Protective Services Act prohibits employment in elder-care facilities 

by those convicted of certain criminal offenses. 35 Pa. Stat. Ann. § 10225.503. However, 

a court has held that this provision violated the state constitutional protection of right 

to work, in that it was arbitrary and bore no rational relationship to the governmental 

purpose of providing protection to older adults. See Nixon v. Commonwealth, 29 A.2d 

376 (2001). 

24. Good credit requirements have been challenged under the job discrimination laws 

mainly on an adverse impact theory. Thus, an employer’s requirement that applicants 

and employees have a good credit record may have to be justified by business necessity 

if it is challenged by minority employees. See, e.g., Robinson v. City of Dallas, 514 F.2d 

1271 (5th Cir. 1975). 

25. Individuals who seek the protection of bankruptcy laws are protected from job 

discrimination. The federal Bankruptcy Code prohibits both public and private employers 

from discriminating against an individual in employment solely because that person is 

or has been a bankrupt or a debtor in bankruptcy, or has been associated with such a 

bankrupt or debtor. 11 U.S.C. § 525. See also Anderson v. Weinberger ( In re Bruce C. 

Anderson ), 84 B.R. 426 (Bankr. E.D. Va. 1988) (Court did not find improper the Marine 

Corps’ consideration of the circumstances that led to the debtor’s bankruptcy petition 



when arriving at future promotion or retention decisions, because it found analogous 

case law involving the hiring and firing of police officers which had concluded that, for 

police jobs, consideration of the fact of prior bankruptcy was lawful.); Marshall v. District 

of Columbia Gov’t, 559 F.2d 726, 729 (D.C. Cir. 1977) (court held that Bankruptcy Act 

does not prohibit employers from using the fact of bankruptcy in considering whether 

the past record of a job applicant merits his consideration for employment); Detz v. 

Hoover, 539 F. Supp. 532 (E.D. Pa. 1982) (in deciding whether to hire police officer, local 

governments may properly consider the fact that an applicant, who has sought protection 

under Bankruptcy Act, has been unable to manage his financial affairs); White v. 

Kentuckiana Livestock Market, Inc., 397 F.3d 420 (6th Cir. 2005) (cause of action exists if 

employee’s bankruptcy filing was only reason for adverse employment action, and not 

if other factors also played role in employer’s decision, but here the employer had not 

terminated employee from position as secretary-treasurer based solely on his Chapter 7 

filing). 

26. For example, the California Vehicle Code § 1808.1 provides that employers face 

criminal penalties for employing as a driver any individual who has lost his or her driving 

privilege or any required driver’s certificate. Employers whose employees operate motor 

vehicles requiring certain types of licenses and special certificates must participate in the 

“pull notice” program administered by the DMV, under which the Department provides 

the employer with the employee’s driving record. Similarly, the California Information 

Practices Act governs the disclosure by governmental agencies of “personal information,” 

including, but not limited to, an individual’s “name, social security number, physical 

description, home address, home telephone number, education, financial matters, and 

medical or employment history.” The California legislature has also specifically prohibited 

the disclosure of social security numbers, home addresses, and medical disability 

information contained in motor vehicle records. Veh. Code §§ 1653.5, 1808.21, 1808.5. 

27. 18 U.S.C. § 2721(a). 

28. 15 U.S.C. §§ 1681-1681u. 

29. 15 U.S.C. § 1681a(3)-(4). 

30. See, e.g. , opinion letter dated Feb. 23, 1998, from the Federal Trade Commission 

(FTC), Division of Credit Practices, Bureau of Consumer Protection. 

31. 15 U.S.C. § 1681a(d)(1). 

32. See, e.g. , FTC opinion letters dated June 9, 1998, and March 25, 1999, advising that 

consumer reports includes criminal histories, education, and licenses held by consumers, 

as well as reference checks. 

33. See FTC opinion letter dated Apr. 5, 1999. 

34. See 15 U.S.C. § 1681b(a)(3)(B). See also Wiggins v. Philip Morris, Inc., 853 F. Supp. 

470 (D.D.C. 1994). 

35. See, e.g., Kelcher v. Sycamore Manor Health Ctr., 305 F. Supp. 2d 429 (M.D. Pa. 2004). 

36. See FTC opinion letter dated March 25, 1999. 

37. See FTC opinion letter dated June 12, 1998. 

38. 15 U.S.C. § 1681b(b)(3)(A). 

39. 15 U.S.C. § 1681b(b)(3)(B). See also FTC opinion letter dated Feb. 14, 2000. 



40. See., e.g., Jensen v. Prudential Fin., 130 Fed. Appx. 914 (9th Cir. 2005) (employer did 

not commit an unauthorized intrusion into plaintiff’s privacy by completing a background 

check prior to hiring him as a life insurance salesman, because he authorized the 

background check and released employer from any and all liabilities, claims, or lawsuits 

with regard to the information obtained). 

41. See, e.g., Bardin v. Lockheed Aeronautical Sys. Co ., 82 Cal. Rptr. 2d 726 (Cal. 

Ct. App. 1999) (in former employee’s action for tort and breach of contract against 

former employer, the employer had absolute privilege shielding it from tort liability 

for communications made to police, and contract claims were extinguished by release 

signed by former employee in connection with grant of permission for police to 

question previous employers); Ramos v. Equiserve, 146 Fed. Appx. 565 (3d Cir. 2005) 

(court noted plaintiff’s acknowledgment that he consented to the background check 

by EquiServe, he knew that EquiServe was required by law to conduct a criminal 

background search because of the type of work he did for them, and he had authorized 

EquiServe and Adecco’s exchange of information with each other regarding his criminal 

background). 

Reprinted from Employee Relations Law Journal Winter 2008, Volume 34, 

Number 3, pages 46-71, with permission from Aspen Publishers, Inc., 

Wolters Kluwer Law & Business, New York, NY, 1-800-638-8437, 

www.aspenpublishers.com

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