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Published Articles by David Balovich

Title: Verifying Job Application (Without Getting Sued). . .
Published in: Creditworthy News
Date: 8/18/05

In reply to our column "I Don't Have The Time", awhile back that asked, “what are you doing with your time” we received the following.

My company has downsized to the point we no longer have a human resources department and the responsibility for recruitment and hiring is now the responsibility of each division. I have been delegated the responsibility of checking and verifying the background information of the job applicants. This is not only very time consuming but also frustrating because I’ve found that references whether they be former employees, schools or personal references are reluctant to provide any information beyond we know the person for fear of being sued. Do you have any suggestions that could help me so that I could spend more hours on the tasks that I was originally hired to do? Thank you. Scott S.

                      MANY department heads today are faced with not only hiring qualified applicants but also conducting employment background and reference checks. This is due, to a large part as Scott wrote, with organizations reducing or eliminating altogether the H.R. function and delegating the H.R. role to division and department managers.

                     EMPLOYMENT background checks should be a vital part of the interview process for employers attempting to hire qualified applicants for any position regardless of its importance. Prudent employers should not only contact an applicants previous employer for information regarding job performance but also contact personal references; check school transcripts and run credit reports to make certain the applicant is not only who he/she claims to be but also qualified for the position applied for. Because failure to conduct thorough background checks can subject employers to negligent hiring suits, many state governments have mandated through legislation that state, county and city employees be subjected to a thorough background investigation prior to being offered employment or continued employment is subject to a satisfactory background check.

                     RARE is the case of a prospective employer being sued for investigating the job history or references while conducting a background investigation of a job applicant.  There are, however, volumes of cases where former employers, managers and employees have been sued for libel, defamation and/or slander after providing information about former employees. Because of this many firms have adopted strict policies as to the information provided to prospective employers who inquire about former employees. Usually, the information provided is no more then: dates of employment, job titles, beginning and ending salary and whether the individual is eligible for rehire. Firms fearful of liability by providing information about former employees usually instruct their employees not to release company files or make any personal comments.

                     MANY prospective employers, therefore, believe that it is pointless to conduct a background check on job applicants because the information provided is not relevant to what they are trying to ascertain. According to Ruark Mershon, an attorney with Hammerle Finley this is unfortunate because there are practical methods employers may use to obtain as much background information as possible without incurring liability on either the past employer, educational institution, reference or the prospective employer.

                     “COMPANIES who want to obtain detailed information on job applicants, says Mershon, should require the applicant to sign an authorization giving the prospective employer permission to obtain information from previous employers, educational institutions and other references”. The authorization should specifically permit the prospective employer, or any investigator working on its behalf, to obtain information from the applicant’s former employers and their employees, schools, residential property managers, acquaintances, customers or vendors relating to any of the applicant’s activities. It should authorize those persons to release all such information upon receipt of a copy of the authorization. The authorization should include release language specifically releasing all persons or entities for revealing or receiving information in connection with asking for or responding to questions about the applicants job performance, work habits, personal background, educational records, criminal background, etc. The form should contain a place for the applicant to sign and the document witnessed, preferably by a notary, verifying the applicant’s signature

                     “OBTAINING a properly worded authorization from an applicant can protect both former and current employers from liability for invasion of privacy, libel, defamation, slander and other claims by the applicant”, says Mershon. A properly executed authorization form assists a prospective employer in obtaining as much information about an applicant as possible, while insulating the company from liability, at less risk and improving the quality of the employees hired.

                     MERSHON says there is case law to support that obtaining a signed authorization can protect both the inquiring and responding company from a lawsuit by a disgruntled applicant. In Smith v. Holley, 827 S.W. 2d 433 (San Antonio 1992), the 4th Court of Appeals held that such an authorization absolved the former employer from liability when the applicant, Smith, sued her former employer and supervisor because the references given to her new prospective employer were unfavorable. The Court ruled that the authorization she signed was an absolute bar to the suit. Smith is particularly significant because the court held that any comments made within the scope of the authorization were not liable, even if the negative comments or information provided was made with malicious intent. The Court held that any comments and information were privileged under the terms of the authorization. Even the 9th U.S. Circuit Court of Appeals, widely considered by legal practitioners as liberal and pro-employee, has upheld Smith and opinioned that a properly worded release provides an absolute privilege, defeating any claims from libel, defamation or slander. See Cox v. Nasche, 70 F.3d 1030 (1995).

                     CREDIT checks can also be an important part of investigating job applicants or employees seeking promotions. The Fair Credit Reporting Act, 15 U.S.C. §1681-1681(t) regulate an employer’s access to and use of credit reports. Under these regulations an employer must provide a job applicant or employee with a clear and conspicuous disclosure, obtain the applicant’s or employee’s written authorization for obtaining the report, provide the applicant/employee a copy of the credit report and provide a written description of the rights that the applicant has pursuant to the FCRA. Having said that, courts have held that the use of credit reports to evaluate an applicant for employment is not a discriminatory employment practice, see Pettus v. TRW Consumer Credit Service, 49 F.3d 728 (5th Circuit 1995) and courts have further held that it is not discriminatory for an employer to obtain a credit report for the purpose of evaluating whether to discharge an employee. It is strongly recommended that employers carefully review the FCRA before obtaining or using credit reports.

                     FINDING and hiring qualified employees is not an easy assignment. By following the suggestions above, employers should be able to investigate and obtain valuable information about potential employees without fear of lawsuits from rejected applicants and in the case of Scott S. return to the tasks they were originally hired to do.  

I wish you well.  

The information provided above is for educational purposes only and not provided as legal advice. Legal advice should be obtained from a licensed attorney in good standing with the Bar Association and preferably Board Certified in either Creditor Rights or Bankruptcy.  

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