Time To Re-evaluate Your Use of Credit Reports?
January 6, 2010
Our good friends Pam Devata and Caitlin Senff from Seyfarth Shaw have written a great article on the need for employers to consider how they use credit reports to make informed hiring decisions. While it is perfectly legal to run credit reports in the background screening process, employers should take note that both state and local governments are taking steps to limit their use.
- Evaluate Pre-employment Inquiries and Hiring Procedures- HR leaders should review key documents and processes to make sure they comply with the various state laws and the EEOC’s E-RACE initiative. Include in the review all documents beginning with employment applications and throughout the pre-employment/background-screening process. For example, employers should evaluate when credit information is being sought and how it is being applied. Of course, employers obtaining and evaluating such information must also continue to ensure that the requisite disclosures are provided to the employee/applicant under the FCRA and applicable state laws.
- Consider Using Credit History More Narrowly- To comply with the new limits set by state laws and prepare to defend employment practices in the event of EEOC investigation, employers should reconsider the manner in which they are using credit. For instance, reliance on credit history may be a substantial concern for a high-level financial executive, while its application to a clerical position who does not handle cash may be more attenuated.
- Review Background Check Criteria with Counsel- The most critical proactive measure employers should take is to have their background-screening policies, employment applications and hiring criteria reviewed by counsel. Without doing so, employers are vulnerable to the possibility that the EEOC will become the first set of eyes to review them — and then it will simply be too late.