Be Careful When Checking Contractors' Credit

By Debbie Fledderjohann, Top Echelon Contracting President

If your client requests a credit check on a candidate for a professional contract assignment, you should do it, right? Not necessarily. You could actually be breaking the law if you comply with this simple client request!

Nine states (California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont, Washington, and Colorado) have laws restricting the use of credit information in employment decisions. Colorado is the latest to pass legislation, which goes into effect on July 1, according to Littler.

In general, these state laws restrict what types of positions can be subject to a credit check (usually those in financial, executive, or law enforcement roles) and how that information can be used once obtained.  It is important that you read and understand the specific requirements in any state in which you place contractors. If you run your own back-office, you are responsible for complying with these laws as the W-2 employer of your contractors. If you outsource your back-office, you should make sure your contract staffing back-office provider is aware of the laws and is in compliance.

Even if the states in which you place don't currently have laws restricting credit checks, that doesn't mean they won't in the future.  The recession damaged the credit scores of many Americans, and the concern is that credit checks could keep them from finding jobs to help them dig out of their financial problems.  Several states, including New Jersey, New York, and Pennsylvania, are considering legislation limiting the use of credit checks, according to Littler. The Equal Employment Opportunity Commission (EEOC) has also been investigating employers' use of credit checks and is expected to issue updated guidance on the issue.

And remember, no matter where you are placing contractors, you must comply with the federal Fair Credit Reporting Act (FCRA) when conducting credit checks. Credit checks are subject to the FCRA because the information for those checks comes from consumer reports. The FCRA requires that:

• The candidate sign a written authorization allowing their credit to be checked. The candidate must also be provided with a notification stating that a consumer report will be used. The notice and authorization can be electronic.  
• A pre-adverse action disclosure is provided to the candidate if you plan to rescind a job offer due to the findings of a credit check.  If the candidate doesn't take steps to correct inaccurate information in a reasonable amount of time (usually seven days), you can then withdraw the job offer.
• An adverse action notice be provided to the candidate once the offer has been rescinded. The notice must include the name and contact information of the vendor that provided the report, a statement that the reporting agency did not make the decision for adverse action, and a notice of the individual’s right to dispute the information from the background check. 

It is also best practice to wait until a job offer has been extended before you conduct a credit check. Additionally, the Society for Human Resource Management (SHRM) recommends that credit checks are only conducted if they are job related.  This is to protect against possible discrimination claims. So while you may not be in a state that limits credit checks, you may want to institute a policy that you will only check the credit of potential workers in certain types of positions.

The bottom line: proceed with caution when it comes to credit checks. Make sure you are following all state and federal laws and that you are not at risk for discrimination claims. Remember, if you are running your own back-office for contractors, you will be the one held liable in an employment lawsuit.

This article is for informational purposes only and should not be construed as legal advice.

Update: How to Conduct Legal Background Checks - Notice Revised

By Debbie Fledderjohann, Top Echelon Contracting President

As the Consumer Financial Protection Bureau (CFPB) takes over the enforcement of the Fair Credit Reporting Act (FCRA), employers will be required to use a new version of the FCRA Summary of Rights when conducting background checks, according to an article by Littler Employment & Labor Law Solutions Worldwide.

Criminal background checks are subject to the FCRA because the information for those checks comes from consumer reports. If you are a recruiter who places contractors and runs your own back office, you must comply with the FCRA when running background checks on your contractors. The FCRA requires you to provide the candidate with a “pre-adverse action disclosure" before you take adverse action based on the findings of the background check. The disclosure must include a summary of their rights under the FCRA and a copy of the results.

The summary of rights has changed slightly due to the transfer of enforcement responsibilities from the Federal Trade Commission to the CFPB. Employers must start using the new version no later than January 1, 2013. 

With this in mind, it seems like a good time to go over the basics of conducting background checks on contractors:

• It is best practice (and the law in some states) to wait until a conditional job offer has been extended to run a background check.
• An arrest does not prove criminal conduct, so you should not disqualify a candidate based solely on an arrest record, per recent guidance by the Equal Employment Opportunity Commission (EEOC).
• The new guidance also states that you should not have a blanket prohibition on any conviction and you should have a job-related reason for denying employment based on a conviction.
• Many states limit your ability to use criminal history in employment decisions, so make sure you know the laws in the states in which you have contractors.
• Before conducting a background check, you must get the candidate’s authorization in writing and provide them with a notification stating that a consumer report will be used. This notice and authorization can be electronic.  
• Before you can take an adverse action, you must send the candidate the pre-adverse action disclosure as described above.  If the candidate doesn't take steps to correct inaccurate information in a reasonable amount of time (usually seven days), you can then withdraw the job offer, but you must provide the candidate an "adverse action notice." The notice must include the name and contact information of the vendor that provided the report, a statement that the reporting agency did not make the decision for adverse action, and a notice of the individual’s right to dispute the information from the background check. 

Clients often require that background checks be conducted on contractors placed with them, so if you do not currently conduct background checks, you probably will at some point. You can outsource this and other administrative tasks to a contract staffing back-office, such as Top Echelon^®Contracting.  Our standard background checks include:

• Social Security Number verification
• Statewide misdemeanor and felony check
• Sex offender
• Address history
• County level specific checks for the places the contractor has lived

For more information, call us at (888) 627-3678.

This article is for informational purposes only and should not be construed as legal advice.

 

New Guidance for Conducting Contractor Background Checks

By Debbie Fledderjohann, Top Echelon Contracting President

If you are conducting background checks on contractors,you may want to check out the new Enforcement Guidance the Equal Employment Opportunity Commission (EEOC) recently published on the use of criminal records in employment decisions.

The guidance does not necessarily contain any new rules, but it consolidates over 30 years of court and EEOC precedent for Title VII discrimination claims into one document. You can read the entire guidance at http://www.eeoc.gov/laws/guidance/arrest_conviction.cfm

Infinisource, our third party administrator for COBRA, also does a good job of summarizing the main points, so you may want to take a quick look at their article on the subject. Here are some main things they say to keep in mind when conducting contractor background checks:

• An arrest by itself does not prove criminal conduct, so you should not automatically disqualify candidates with arrest records. However, you can consider the arrest if other criminal conduct exists.
• You should not have a blanket prohibition on any conviction. Doing so could be seen as having a disparate impact on certain races and nationalities.
• If you are going to take adverse employment action based on a conviction, you must show that the reason is job-related.  
• Before taking adverse action, you should consider the nature of the offense, the amount of time that has passed since the crime took place, and the nature of the job the contractor is being considered for.

In addition to the EEOC guidance, you must also comply with the Fair Credit Reporting Act (FCRA), which has certain notifications and procedures that must be followed when conducting background checks.  Also, the states in which you have contractors may have additional laws that you must follow.

Many clients require that background checks be conducted on contractors performing work for them, so if you do not currently conduct background checks, you will probably have to at some point.  But you can outsource this and other administrative tasks related to contractors to a contract staffing back-office, such as Top Echelon Contracting.  Our standard background checks include:

• Social Security Number verification
• Statewide misdemeanor and felony check
• Sex offender
• Address history
• County level specific checks for the places the contractor has lived

For more information, call us at (888) 627-3678.

This article is for informational purposes only and should not be considered legal advice.

Learn about Contractor Background Checks in 4 minutes!

By Debbie Fledderjohann, Top Echelon Contracting President

Many recruiters choose to have background checks run on their contractors to help protect themselves from liability and to maintain their reputations.  But background checks should not be taken lightly.  As we discussed in a recent blog post, as background checks become more popular, they are being subject to increased scrutiny by state and local governments.

Top Echelon Contracting (TEC) runs background checks on all of the contractors run through our back-office. Our own Jen Grimes, who conducts all of our background checks, recently shared our procedures and some tips for recruiters with Matt Deutsch, communications coordinator for our sister company, Top Echelon Network.

If you are conducting or considering conducting background screenings on your contractors, it is worth your time to check out this 4-minute video!

To find out how we can help you with background screenings for your contractors, contact us at (888) 627-3678.

Background Checks Becoming Catch-22 For Employers

By Debbie Fledderjohann, Top Echelon Contracting President

Should an employer conduct background checks on its potential employees? Should a recruiter conduct them on their contract candidates?

Well, on one hand, background checks can protect the employer from negligent hiring lawsuits, which arise when an employee hurts someone and the employer should have known they were a risk based on their background. If you are a recruiter who serves as the Employer of Record for your contractors, the risk for negligent hiring lawsuits falls onto you.

But checking a potential employee's criminal record could also get employers in trouble.  Many states and localities are limiting employers' ability to gain previous conviction records, and background checks are being scrutinized on the federal level.

San Francisco is considering a law that would prohibit employers from asking candidates if they have prior convictions, according to the LA Times. The law would only allow an employer to inquire about a candidate's criminal history after they have otherwise been qualified for a job.  And if an employer does uncover a past conviction, they would only be allowed to withhold the job if the conviction was "substantially related" to the job. Hawaii, New York, Masschusetts, Philadelphia have already passed similar laws. Other states and localities have laws with various restrictions on the use of arrest and conviction records.

Meanwhile, the Equal Employment Opportunity Commission (EEOC) held a hearing to discuss the fairness of background checks, one in a series of hearings it's held examining possible barriers to employment. The concern is that employers refuse to hire people with criminal records, even years after they have served their sentences and regardless of how minor the crime, according to Human Resources Executive Online. 

It is unclear whether or not this hearing will result in more legislation surrounding background checks. But according to the Wall Street Journal, even if no additional restrictions are waged on the federal level, companies can invite EEOC lawsuits with their background screenings because minorities are arrested at a disporportionate rate.

If you or a client are using background checks, it is important to do the following things:

1. Wait until after the job offer is extended to conduct the background screening.
2. Be aware of any state or local laws that many limit your ability to inquire about or use criminal history in employment decisions.
3. Comply with the Fair Credit Reporting Act (FCRA) as it applies to background checks.

How to Conduct Legal Background Checks on Contractors

By Debbie Fledderjohann, Top Echelon Contracting President

It is standard operating procedure for many, if not most, employers to check the criminal backgrounds of their new direct-hires.  But as contractors increasingly are filling vital roles in organizations that require them to have access to sensitive information, it is important that their criminal backgrounds also be checked . . . and that the proper procedure is followed when those checks are conducted.

When an employer uses an outside vendor to conduct background checks, the information provided comes from consumer reports, so the employer must comply with the Fair Credit Reporting Act (FCRA) that was created to protect the privacy and accuracy of information found in consumer reports.  If you are a recruiter who places contractors and runs your own back-office, you are responsible for following the FCRA procedure when conducting background checks.  If you outsource the back-office responsibilities, it is important that you make sure that the back-office is 1.) Conducting background checks; and 2.) Complying with the following FCRA procedure.

Written Notice and Authorization
Before running a background check on a contractor, the candidate’s authorization must be obtained in writing and they must receive a notification stating that a consumer report will be used. This notice and authorization can be electronic.  

Taking Adverse Action
If the background check reveals information that disqualifies the candidate for the contract position, there are two steps that must be taken:

Step 1:  The contract candidate must be sent a “pre-adverse action disclosure” before the official decision to withdraw the contract offer is made.  This includes a summary of their rights under the FCRA and a copy of the consumer report.  This gives the candidate a chance to make any corrections to the information if it is wrong. 

Step 2:  If the candidate does not take steps to correct inaccurate information after a period of time (usually five to seven days), the contract offer can officially be withdrawn. The candidate must be provided with an “adverse action notice,”  which can be oral, written, or electronic.  The notice needs to include the name and contact information of the vendor that provided the report, a statement that the reporting agency did not make the decision for adverse action, and a notice of the individual’s right to dispute the information in the credit report.  The reporting agency that provided the check can assist with this process.

For more details, the Federal Trade Commission has a good article on its website called Using Consumer Reports:  What Employers Need To Know.

This article is for informational purposes only and should not be construed as legal advice.

Don’t Let Your Clients Fall Victim to Worker Theft

By Debbie Fledderjohann, Top Echelon Contracting President

As if it isn’t hard enough for businesses to stay in the black these days, a recent article by The Gainesville Sun points out that some companies may be letting money literally walk out the door due to the increasing prevalence of employee theft.

The article focuses on one particular business owner, Freddie Wehbe, who owns eight Domino’s Pizza franchises.  Wehbe recently found that one of his employees stole from him by manipulating the way pizzas were accounted and paid for, costing the business more than $10,000.  Since then, he has begun background and drug testing employees, and he has hired an auditor.

Wehbe is not alone. The article noted that the FBI has identified employee theft as America’s fastest growing crime, and The Association of Certified Fraud Examiners statistics show that businesses lose seven percent of their gross revenue due to internal theft.  In fact, they have determined that the average business loses $9 per employee per day!  And the U.S. Chamber of Commerce attributes almost a third of all business failures to employee theft.

As Top Echelon Contracting mentioned in a previous blog post, while many employers are diligent about screening their own employees, they may overlook checking the backgrounds of their contractors who are employed by staffing agencies that don’t always conduct background checks.  But if you use Top Echelon Contracting as your back-office service provider for the contractors you place, you can assure your clients that ALL contractors we employ are background screened and that we conduct drug testing on all of our healthcare candidates.

Background Screenings – Not Just For Permanent Employees Anymore!

By Debbie Fledderjohann, Top Echelon Contracting President

Gone are the days when temporary/contract workers could only be found in low-level clerical jobs. Contractors are now working in nearly every industry and level of employment, all the way up to C-suite executives.

As mentioned in a recent www.recruitingblogs.com article titled “Screening Temporary Employees – A 2010 Hiring Trend Makes It More Important Than Ever,” that means that contractors working in these higher-level positions may now be privy to private company and employee information previously only accessible by permanent (direct-hire) employees.  So where companies may have previously only conducted background screenings on their permanent staff, it is now becoming important for them to ensure that contractors are screened as well.  After all, they don’t want to find out the hard way that their newest contract IT programmer, who has access to all of the company’s computer files, previously did time for identity theft!

In addition to access to private information, there is just the simple safety of the company’s other workers and customers to consider.  Take for example Los Angeles county where officials learned that a long-time contractor working in one of its health care clinics was a convicted rapist.  This discovery led the county to suspend its contract with one of its largest staffing agencies.  The officials had no idea how many, if any, of the more than 2,000 temporary workers in their hospitals and clinics had been screened or how many may have criminal backgrounds!

So who is responsible for conducting these checks?  Many companies assume that their staffing agencies will handle it, but as illustrated in the above example, assuming is not enough. The article advises companies that it is their responsibility to make sure checks are conducted on all employees, temporary or permanent.

If you use Top Echelon Contracting as the back-office service provider for the contractors you place, you can assure your clients that ALL contractors we employ are background screened.  In addition, we conduct drug testing on all of our healthcare candidates.  So with Top Echelon Contracting, clients can feel more comfortable about the people they are bringing into their workplaces!

Avoid Negligent Hiring of Contract Candidates

By Debbie Fledderjohann, Top Echelon Contracting President

If an employer knowingly  hires someone that is likely to put themselves, the company, or other workers at risk, that employer could find themselves on the business end of a negligent hiring lawsuit.  Why should you care?  Well, if you are a contract recruiter who runs your own back-office, you ARE the employer and could be held liable. 

So what can you do?  Risk Control Services (RCS) , a risk control management firm we work with, recommends asking the following questions in candidate interviews to reveal potential red flags:

• Have you ever been fired or asked to resign from a job?
• Do you work well under pressure?
• How well do you get along with your current supervisor/co-workers?
• How do you think your current supervisor will respond to my request for a reference?
• What are your strengths/weaknesses?

RCS also recommends that reference checks, education checks, along with background checks and drug testing, be conducted on candidates, but remember that it is important that any screenings required of a candidate are linked back to a business need to limit the risk of discrimination claims.

To further reduce your liability, you can use a back-office service provider, such as Top Echelon Contracting,  to employ your contractors and handle the administrative details, such as background checks, associated with those contractors.

This article is for informational purposes only and should not be considered legal advice.

Newest Government Target: Background Screenings

By Debbie Fledderjohann, Top Echelon Contracting President

The federal government has already increased it’s enforcement on misclassifying employees as Independent Contractors and on illegal immigration.  Now it appears it is setting its sights on background screenings.

On this blog, we have advocated background screenings for contract candidates.  Well, some pending regulations and laws may make it a little harder for employers to use background screenings and credit checks, according to the Society for Human Resources Management (SHRM). 

The organization recently reported that Acting Equal Employment Opportunity  Commission (EEOC) Chairman Stuart Ishimaru wants his agency to issue some new regulations on nondiscriminatory background screenings within the next 12-18 months.  It is expected that those regulations would require employers to provide “empirical evidence” when using business necessity as a defense in discrimination cases.

SHRM also reported on a recent EEOC lawsuit against a Dallas-based company that claims that the company used credit histories to discriminate against black, Hispanic, and male applicants.  The EEOC is asking the U.S. district court to forbid the company from using credit and criminal background checks, and they want the court to require the company to hire the rejected applicants with back pay dating back to the date they were rejected!

Then there is the Equal Employment for All Act that has been introduced in the House that would prohibit most employers from using credit reports in hiring and employment decisions, even if the employee signed a consent form for the credit check.  There would be a few exceptions for certain government and financial jobs.

Does this mean background checks should not be conducted on contractors?  No.  But SHRM recommends that employers are especially careful with credit checks to ward off discrimination claims.  Credit checks should not automatically be required of all employees.  If a discrimination case were to arise, the employer must explain why a credit check was needed to predict job performance and how it is related to the specific function of the job the candidate was being considered for.

It is important to the review the Fair Credit Reporting Act before conducting any screenings and be aware of any upcoming changes!