Katherine

Pre-Employment Background

Investigations

By

Richard Hodsdon

Attorney at Law

Box 825

Stillwater, MN 55082

651-341-8202 voice

[email protected]

2013

PRE-EMPLOYMENT BACKGROUND INVESTIGATION LEGAL ISSUES

With a growing body of cases holding employers liable for negligence in the hiring and supervision of personnel every employer should carefully navigate between the risks of such a suit on one side and the risk of a civil rights or human rights complaint on the other side for violation of antidiscrimination laws in the hiring process. This chapter is intended to help the hiring authority travel through this risky passage. By now every employer should recognize the need and obligation to conduct appropriate and thorough background checks before hiring a new employee. The nature and scope of a background check will vary depending on the nature, duties and responsibilities of the position. Properly used and conducted background checks and investigations can provide employers with a tremendous amount of useful information about a prospective employee and fitness for employment in a particular position or agency. Background investigation tools and hiring processes and procedures used incorrectly can result in costly and time-consuming litigation and liability for claims of discrimination under the federal law. The scope of a background investigation is typically dictated by the nature of the position and what duty the employer owes to its own employees and the public to hire appropriately qualified and fit employees.

Employers may protect themselves from negligent hiring or retention claims by conducting background investigations that are reasonable and appropriate for the position and the circumstances.

Like nearly every other jurisdiction in the United States, Minnesota has recognized an employer may be liable to an injured third party on a basis of negligent hiring, retention or supervision. See, Udofot v. Seveneights Liquor, 2010 WL 5071313 (Minn. App. 2010); Johnson v. Peterson, 734 N.W.2d 275 (Minn. App. 2007); Yunker v. Honeywell, Inc., 496 N.W.2d 419 (Minn. App. 1993); Ponticas v. K.M.S. Investments, 331 N.W.2d 907 (Minn. 1983); D.D.N. v. FACE Festivals and Concert Events Inc., 2010 WL 1190137 (Minn. App. 2010); Travelers Indemnity Company v. Bloomington Steel and Supply Company, 2008 WL 467427 (Minn. App. 2008); Hinez v. Aandahl Construction Company, LLC, 2006 WL 2598031 (Minn. App. 2006). In such cases to establish liability a Plaintiff must prove that the defendant employer knew or with reasonable diligent investigation should have known of the propensities of the employee, the reasonably foreseeable risk that hiring the person and putting them in the position that they did would be likely to result in harm to a third party and that the harm in fact ensued. While a review of many of these cases reveals that they may rise or fall on the issue of reasonable foresee ability clear trend of case law both in Minnesota and across the United States is to find that particularly in regard to prior criminal behavior that there is a duty of care to conduct some reasonable investigation into the behavior and activities of an applicant for employment before placing the person in a position in which it is reasonably foreseeable that they could cause harm to another as evidenced by prior misconduct or criminal behavior.

Employers must carefully select prehiring screening tools that are job related and use them consistently in a nondiscriminatory manner. Information that is not relevant to the hiring decision should not be collected or used but the reality is that the more complete the background investigation the more likely it is that the investigator will acquire protected class information that creates exposure to risk of a discrimination claim. As discussed below to reduce that liability risk the background investigator should not be the ultimate decision maker in the hiring process.

Employers may face administrative charges of discrimination or civil litigation if they obtain information improperly and then use that information as the basis to reject a job applicant. In some instances improperly obtained information, even if not used against the applicant during the hiring stage, can be used against the employer at a later date and even by another candidate as part of a claim of discrimination or by the Minnesota Department of Human Rights investigation into alleged discrimination. This chapter is designed to provide employers with information about some of the most common background investigation tools and screening devices. While we will be discussing relevant legal issues, statutes and case law, this chapter departs from a purely legalistic format and is intended to also provide some practical suggestions on the subject of hearing and background investigations.

THE PURPOSE OF BACKGROUND INVESTIGATIONS

Background investigations and job related hiring tools satisfy two important objectives. They help limit exposure to litigation and they assist employers in finding qualified employees. Common law and statutory sources of liability related to hiring decisions include negligent hiring and retention, workers' compensation, occupational health and safety laws, intentional infliction of emotional distress and violations of state and federal discrimination laws. In many cases an employer can limit its exposure to such claims by conducting a thorough and job related background check. A simple check may reveal significant problems about an employee's background such as a propensity for violence, theft, or dishonesty. Having this information facilitates an informed decision about the applicant's fitness for the position before being hired. By carefully selecting screening tools an employer can maximize its investment of resources in hiring. Employers can be better assured that they are hiring individuals who meet their needs and who will meet performance expectations. In the long run these efforts contribute to the creation of a better qualified and more stable workforce and better use of tax dollars.

SOME GENERAL RULES

1. Administer the Same Tests to All Applicants: All applicants for the same position should be tested in the same manner. Using certain screening tools for some applicants but not others could result in a claim of discrimination.

2. Different Tools May Be Used for Different Positions: As a general rule employers are not required to use the same tools for all positions. An employer may have a legitimate reason for conducting a more thorough background investigation on an applicant who may have access to money or non-public data or work with children compared to a position that does not.

3. Medical Examinations: Due to requirements of the Americans with Disabilities Act (ADA) and the Minnesota Human Rights Act (MHRA) medical and psychological examinations should not be given before a conditional offer of employment has been made to an applicant. After extending such an offer the test may be given but must be limited to testing for ability to perform essential job functions.

4. Nonmedical Examinations: Nonmedical examinations may be administered before a conditional offer has been made. These tools should not be used in a discriminatory manner and they should be job-validated, which means they accurately test for work-related essential job functions, skills or abilities.

5. Check All References: Contact the references identified by the applicant. Although the information that you may obtain is frequently limited, you may discover that the applicant has lied on his or her application about such things as experience and disciplinary history.

6. Don't Solicit Unnecessary Information: Whether conducting an interview of the applicant, checking references, or obtaining information through any other party, employers should not solicit information they are not entitled to get directly from the applicant. Employers should not seek information about disabilities, past claims against employers, marital status, sexual orientation or other protected class status. Employers with knowledge regarding such criteria may be accused of using that knowledge to deny an applicant a job even if the employer acted for legitimate reasons.

THE EMPLOYMENT APPLICATION

The first place a public sector employer starts is usually with an employment application. Applications can be a potential litigation landmine for employers. The key to limiting an employer's exposure is to review the application carefully and remove all questions that are improper on their face or that are likely to reveal data about the applicant that is not necessary to have during this stage of the hiring phase such as a social security number. The purpose of an employment application should be to obtain basic data that is sufficient to allow the employer to confirm that the applicant is who he or she claims to be and that the applicant meets the minimum qualifications of the position. Public employers should include a data practices rights advisory notice to the extent they ask the applicant for non-public data such as home address or telephone number. Other investigative tools such as the interview can be used later to gather additional data about the applicant. Some examples of permissible inquiries during the hiring process include:

• Full name;

• Current address and email address;

• Past addresses if a criminal background check is to be performed;

• Educational information: schools attended, degrees or courses, whether degree or license was obtained;

• previous employment: names, addresses, telephone numbers, supervisors names, job titles, dates of employment, salary, and reasons for leaving;

• Job-related criminal convictions: date, place and nature of the offense, and a statement that applicant will not be automatically disqualified based on this answer, depending on the position;

• Whether the applicant is currently using illegal drugs or has done so in the recent past;

• Personal references that are neither family or past employers; and

• Professional licenses or certifications obtained and the name of the entity. Issuing the license, the address and dates of issuance.

To protect the employer and ensure that additional investigation tools can be used if necessary later in the hiring process the employer should also include on a separate document that is not used or seen by the person making the hiring decision:

• an additional Data Practices Rights Advisory and data practices consent form for an investigation of employment, educational, personal, and licensing information about the applicant;

• A separate disclosure statement and consent to perform a criminal background check (a sample is included at the end of this chapter),

• And a verification paragraph and signature line for the applicant.

The hiring decision maker should not seek data relating to protected class status. Questions about the applicant's age, sex, marital status, national origin, race or any disability are improper and could lead to liability under state and federal discrimination laws. To the extent the employer needs this information for bona fide work-related purposes it can be obtained either after an offer of employment has been made and accepted or by a separate background investigation process using a packet similar to one included at the end of this chapter. The general guidelines discussed below with respect to interview questions should also be followed with respect to the applicants. If a question should not be asked in an interview it also should not appear on an employment application.

EMPLOYMENT INTERVIEWS AND PROHIBITED QUESTIONS

One of the most common preemployment investigative tools is the employment interview. It can also be a common way for an unwary employer to walk into a lawsuit. An applicant who has been or believes that he or she had been wrongfully denied a job because of race, age, sex, sexual orientation, disability or other protected class factors may bring a lawsuit to challenge the employer's selection process. Improper questions can provide an applicant with the evidence necessary to establish an inference that such information was used illegally during the hiring process.

One of the first considerations that employers should make is to ensure that the interview site is accessible to the disabled and that proper accommodations are extended to those applicants who make reasonable accommodation requests. Failure to provide a reasonable accommodation to a disabled applicant during the hiring process can constitute a violation of the ADA or the MHRA.

Another important consideration is what questions will be asked during the interview. During this stage employers should restrict their questions to objective inquiries regarding an applicant's skills and work history that are relevant to the position sought and that will assist in making a comparison between applicants.1 In most instances, especially where numerous people will be interviewing applicants, it is advisable to develop a list of predetermined questions to be asked of every applicant. This technique ensures that interviewers are more likely to ask only permissible questions.

The interviewer may keep notes of the questions asked and the applicant's responses and some employers even record the interviews. These notes or recordings are likely classified as personnel data about the candidate under Minn. Stat. § 13.43 they will be subject to access by the applicant. For that reason the notes should not contain any reference to race, age, sex, disability, sexual orientation, marital status, etc., and should not contain the subjective comments of the interviewer. Any recording should only record the actual interview and not extraneous comments. Federal law requires employers who are federal contractors or subcontractors subject to OFCCP regulations to maintain notes that are taken during preoffer interviews.2

A difficult part of this process can be selecting permissible questions. While federal discrimination statutes with the exception of the ADA do not prohibit questions about membership in a protected class, the MHRA expressly prohibits an employer from soliciting information about a protected class category during the prehire stage unless it relates to a subject that is a bona fide occupational qualification (BFOQ).3

The following chart details some of the most commonly asked improper questions and offers some suggestions.

Permissible and Impermissible Questions

Category	You May Ask	You Should Not Ask
Address/Residence	"Can you be reached at this address? If not, would you like to leave an alternate address?" "Can you be reached at these telephone numbers? If not, would you like to leave an alternative number?"	"Do you own your home or rent?" "Do you live with your spouse?" "With whom do you live?"
Age/Health Status	Only questions that verify applicant is legally old enough to comply with state and federal child labor laws. "With or without reasonable accommodation are you able to perform the essential functions of this job?"	Any questions that imply a preference for persons of a certain age or age group. Date of high school graduation Birth date Questions about whether an applicant or current employee has any chronic medical condition or disease.
Citizenship	"Are you legally eligible to work in the United States?"	"Are you a United States citizen?" Any questions concerning race or color of skin, eyes, hair, accent, etc. Where were you born?
Disability	"With or without reasonable accommodation are you currently able to perform the essential functions of the job(s) for which you are applying?" The amount of sick time or medical leave taken at last job is permissible, but not the reasons for taking medical leave.	An employer MAY NOT make any medical inquiry or conduct any medical examination prior to making a conditional offer of employment. Questions about an applicant's medical or mental condition or or disabilities.
Drug Use	Current use of illegal drugs. Recent use of illegal drugs.	Questions about past addictions. Use of lawful drugs. Frequency of alcohol use.
Education	"Are you presently enrolled or do you intend to enroll in school?" "What subjects did you excel at school?" "Did you participate in extracurricular activities and which ones?" "What was your college major?" "Did you work an outside job while attending school? Doing what? What did you like and dislike about your part-time job during school?" "Are you interested in continuing your formal education? Why? When? Where?" “How did your education prepare you for the job you are seeking with us?”	“Who paid for your educational or living expenses while you were in school?" "Did you go to school on a scholarship?" "Do you still owe on student loans?"
General questions	Questions about essential job functions and applicant's abilities. "Do you have any special skills or knowledge that relate to the job?" "Are your skills recent?" "When did you last use a computer (or any other machine or skill used on the job)?" "Do you enjoy being active in community affairs?" "Are there any activities that have provided you with experience, training, or skills that you feel would be helpful to a position with us?" "How will your involvement in (activity) affect your work here?" "Do you have any commitments that would prevent you from working the regular hours or schedule of the position?" "Can you work overtime, if needed?" "Are you now or do you expect to be engaged in any other business or employment? What kind of business or employment is it? How much time does it require?"	"Does your physical condition make you less skilled?" Nonessential physical questions (i.e., weight, height, lifting ability if not related to an essential job function). "How many children do you have?" "Who takes care of your children while you are working?" "What does your spouse think about you working? What does your spouse do? What is your spouse's salary?" "Is it Mrs. Ms. Or Miss?" "Are you single? Married? Divorced? Separated? Engaged? Widowed?" The identity of the applicant's spouse or partner. "What is your maiden name?"
Military Service	"Have you served in the U.S. military?" "Did your military service and training provide you with skills you could put to use in this job?"	"Have you served in the military services of a foreign country?"
National Origin	To comply with the Federal Immigration Reform and Control Act of 1986, you can ask: "Are you prevented from being employed in the United States because of your visa or immigration status?"	"What is your national origin?" "Where were you born?" "What is the origin of your name?" "What is your mother tongue?" "What country do your ancestors come from?" "Do you read, write, or speak a foreign language (unless based on job requirements)?”
Organizations	About any organization memberships, excluding any organization of which the name or character indicates the race, color, creed, sex, marital status, religion, national origin, or ancestry of its members. "Do you enjoy being active in community affairs?"	For a list of all organizations, clubs, societies, and lodges the applicant belongs to.
Photographs	For a photograph after hiring or making a conditional employment offer for identification purposes.	An applicant to submit photograph before being interviewed.
Pregnancy	"As of the job’s start date will you be able to perform the essential functions of the job(s) for which you are applying?"	"Are you pregnant?" "When was your most recent pregnancy terminated?" "Do you plan to become pregnant?" Any questions about medical history concerning pregnancy, children and related conditions.
Former positions	"How did you overcome problems you faced there?" "Which problems frustrated you the most?" "Of the jobs indicated on your application, which did you enjoy the most, and why?" "What were your reasons for leaving your last job?” "Have you ever been discharged from any position? If so, for what reason?” "How many sick days did you have at your old job?” "Are you available to work on weekends or alternative shifts (if this is a part of the job)?"	"Did you file any claims against your former employer?"
Religion		"What is your religion?" "What church do you go to?" "What religious holidays do you observe?"
Sexual Orientation		"Are you gay?"

Under Minn. Stat. Chpt. 364 public employers may ask applicants questions about criminal convictions that involve behavior that would adversely affect job performance. Law enforcement and certain state agencies, school districts, businesses and other organizations that have a direct responsibility for the supervision, care, or treatment of children, mentally ill or disabled persons or other vulnerable adults may have more latitude to ask questions regarding arrests that may or may not have resulted in a criminal conviction.4

Both the MHRA and the ADA expressly prohibit pre-employment inquiries about an applicant's disability.5 This prohibition extends to inquiries that directly solicit information about a disability and those questions that are likely to elicit information about a disability. However at the initial interview stage the employer may ask the applicant whether he or she can perform the essential functions of the job with or without reasonable accommodation. An effective way to do this is to provide the applicant with a list of essential job duties and responsibilities in the form of the written job duties or position description and ask the applicant to state whether he/she can perform these functions with or without reasonable accommodation. This is a permissible way to begin a dialogue with an applicant and will provide the information necessary to make an informed hiring decision. Some other questions that may be asked include:

• Can you meet the office's attendance, work hour, and overtime requirements?

• Have you had attendance problems at previous employers?

• Do you possess the necessary skills and experience to perform the job functions?

• Do you possess the necessary licenses, training certificates, or other essential qualifications of the job?

• Do you currently use illegal drugs?

Regardless of which of the above questions are used an employer should ask the same questions of all applicants. Selective questioning could be used as evidence of intent to discriminate against certain applicants. An employer should not ask visibly disabled employees if they can perform the essential functions of the job if the employer does not ask the question of all applicants.

It is important to note that not all questions are permissible for all positions. Office workers may be required to work set hours and thus reporting to work on time is an essential function. For professional employees who do not work set hours such a requirement may not be an essential function. Before asking any question an employer should consider whether it is seeking information about a function that is essential to the specific position.

If an applicant has an apparent disability that impacts the ability to perform the essential functions of the job or volunteers information about a disability the employer has greater latitude to discuss the condition but should be careful about what questions are asked. The employer should not discuss the disability or any potential limitations associated with the disability unless the disability will impact the applicant's ability to perform the essential functions of the job. If appropriate the employer may ask the applicant to describe or demonstrate how the applicant would perform the essential functions of the job even though the employer would not otherwise ask all applicants the question. The employer should not inquire further into the nature, extent or severity of the disability.6 If the applicant indicates that an accommodation would be necessary the employer may then engage in an interactive discussion with the applicant regarding what accommodation would be necessary.

When an employer makes an employment decision based on medical information provided by an applicant or employee it is obligated to provide notice to the applicant or employee of the information upon which it relies. The MHRA requires an employer to notify an applicant or employee of any health care records or medical information that adversely affects any hiring, firing, or promotional decision.7 The employer must provide this information to the employee or applicant within ten days of the final decision.8

CRIMINAL BACKGROUND CHECKS

Some employers are required by law to conduct criminal background checks before hiring an applicant. The common law may also impose a duty to conduct criminal background checks regarding some job applicants depending upon the nature of the position.9 Other employers use criminal background checks to determine if an applicant has a history of violent or dishonest behavior. Regardless of the reason for seeking this information the following issues should be considered when conducting criminal background checks.

Under Minnesota Statute Chpt. 364, the Ex-Offender Rehabilitation Act, public employers may not use a prior conviction to disqualify an applicant from employment unless the conviction directly relates to the position sought.10 Public employers that have a blanket policy of denying employment to applicants with arrest records face a serious risk of litigation. As a general rule both public and private employers are prohibited from engaging in employment practices that have a disparate impact on a protected class of individuals. The EEOC and several courts have recognized that employment policies that automatically exclude applicants with arrest records may have a disproportionate negative impact on people of color.11 The EEOC also believes that questions about arrests may discourage minority applicants and should not be asked. This means that even public positions that are exempt from Minn. Stat. Chpt. 364 must consider discrimination issues in using criminal history records in the hiring process.

As a general policy conviction records are far more reliable as there has been a determination of guilt and responsibility for the crime. Before acting on a criminal conviction, an employer should ensure the use of the criminal record is job related. The employer should consider the nature and severity of the crime, how it relates to the position in question, the timeliness of the conviction, the age of the applicant when the offense was committed, and whether the applicant has been rehabilitated.12 An applicant who has been convicted of embezzlement may be unsuitable for a position involving receipt of funds. That same applicant may be suitable for a position where he or she does not have access to money, such as a pool lifeguard.

THE FAIR CREDIT REPORTING ACT AND ITS MINNESOTA COUNTERPART

Employment policies that reject applicants solely on the basis of a poor credit history are likely to violate both federal and state law. The EEOC has declared that rejection of applicants based solely on poor credit ratings has a disparate impact on people of color and is unlawful.13 The EEOC has also noted that such a policy could adversely affect women who do not generally have a credit history that is separate from their spouse's. The EEOC has concluded that an employer's requirement of a good credit record for applicants has a potentially disproportionate impact on such groups and that use of this selection criterion has not been shown to be job-related. It is possible that an employer may able to avoid liability in this regard by showing that a good credit record is justified by business necessity and based on something specific about the job at issue. One court held that a bank's practice of performing credit checks on tellers did not unlawfully discriminate against minority applicants where the checks were done in a facially neutral manner and served a legitimate job-related purpose for the employment of bank tellers who handle cash.14 Unless an employer can demonstrate a business necessity for the decision to search an applicant's credit history the employer may be vulnerable to a discrimination claim. Inquiries about whether an applicant has filed bankruptcy, owns a car or home, has had past garnishment of wages and other inquiries about an applicant's financial status may violate federal and state discrimination laws.

Although the trend seems to be away from the practice many employers, particularly in law enforcement, obtain credit reports on applicants to determine their fitness for a particular position. Specific state and federal statutes govern the collection of this information and notifying the applicant of the process. Failure to abide by the requirements of these statutes can result in liability. The Fair Credit Reporting Act (FCRA) governs the retrieval and use of consumer and credit information from consumer reporting agencies by employers. Since 1997 the FCRA has placed reporting and disclosure requirements on employers who seek consumer reports on job applicants.

The FCRA applies to employers who seek consumer reports or consumer investigative reports in conjunction with hiring. The Act broadly defines consumer reports as any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living where such information is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing eligibility for employment.15 In the employment setting the two most important elements of this definition are that the report must be for employment purposes and it must be obtained from and by a consumer reporting agency. A report is prepared for employment purposes when it is to be used for the purpose of evaluating an applicant for employment or a current employee for promotion, reassignment or retention.16 A consumer reporting agency is any person or entity that for monetary fees, dues or on a cooperative nonprofit basis regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing reports to third parties.17

Because the FCRA's coverage is broad many reports aside from traditional credit reports arguably fall within its scope and the use of such reports obligates employers to comply with provisions regulating permissible purposes, procedures for ensuring compliance and accuracy of report information, disclosure requirements and conditions of disclosure. At least one federal court has held that virtually any information communicated by a consumer reporting agency would be defined as a "consumer report" under the FCRA.18 Therefore any pre-employment report prepared by a third-party agency or investigators should be considered as covered by the FCRA.

Under the FCRA a consumer report may be furnished for background check purposes only in accordance with a court order, a request of a governmental agency, written consent from the job applicant to whom it relates or the request of an employer that intends to use the information for employment purposes.19 If an employer obtains a consumer report that influences in whole or in part the decision not to hire an individual or to take any type of negative or adverse employment action involving a current employee, the employer must provide to the applicant a copy of the actual consumer report that has been relied upon and the summary of consumer rights prescribed by the Federal Trade Commission.20

Any employer who denies employment or otherwise makes a decision for employment purposes that adversely affects any current or prospective employee based in whole or in part on information in a consumer report must provide the employee or prospective employee with notice of the adverse action, the name, address, and telephone number of the consumer reporting agency that furnished the report, a statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the consumer the specific reasons why the adverse action was taken and a written notice of the employee's or prospective employee's rights to obtain a free copy of the consumer report and to dispute the accuracy of the report.21

The Act also restricts the use of investigative consumer reports. An investigative consumer report is a report in which information on an individual's character, general reputation, personal characteristics, or mode of living is obtained through personal interviews with neighbors, friends, associates, or other personal acquaintances.22 Under federal law any reports that fall within this definition are investigative consumer reports except to the extent that they contain specific factual information on a consumer's credit record obtained directly from a creditor of the consumer or from another consumer reporting agency that obtained the information directly from such a creditor or from the consumer.23 If an employer procures an investigative consumer report on an employee or applicant the employer must within three days after the date on which the report is first requested clearly and accurately disclose to the consumer that an investigative consumer report including information as to character, general reputation, personal characteristics, and mode of living, whichever are applicable, may be made.24 The disclosure must inform the employee or applicant of the right pursuant to 15 U.S.C. § 1681 d (b) to a "complete and accurate disclosure of the nature and scope of the investigation requested" upon the employee/applicant's written request.25 If requested by the employee or applicant this disclosure must be made in writing, mailed or otherwise delivered to the employee or applicant within five days of the date the request for the disclosure was received or such investigative report was first requested, whichever is later. The disclosure should describe the questions asked, the number and types of people interviewed and the name and address of the investigating agency.

Federal law also prohibits the reporting of obsolete information as defined by applicable statutory provisions. Any licensed consumer reporting agency should be well informed and prepared to answer an employer's questions concerning these restrictions as well as all certification, notice and disclosure requirements of both federal and state laws. The FCRA prohibits the reporting of any adverse item of information that predates the report by more than seven years. This prohibition does not apply where a consumer credit report is to be used in connection with the employment of an individual whose annual salary is reasonably expected to equal $75,000 or more.26 If an employer takes adverse action based at least in part on the information contained in a consumer report the user must notify the consumer. This notification may be done in writing, orally, or by electronic means and must include:

l. the name, address, and telephone number of the consumer reporting agency that furnished the report to the user, including a toll free telephone number established by the agency if the agency compiles and maintains files on consumers on a nationwide basis;

2. a statement indicating that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the consumer with the specific reasons for the adverse action taken;

3. a notification of the consumer's right to obtain a free copy of the report from the consumer reporting agency used, which must indicate that the consumer has a sixty-day period in which to obtain the copy; and

4. a notification of the consumer's right to dispute directly with the consumer reporting agency the accuracy or completeness of any information in the report that was furnished to the user.27

The FCRA imposes civil liability upon users and consumer reporting agencies for willful noncompliance. The FCRA also provides for recovery of actual damages or fixed penalties for violations and permits recovery of attorney fees under certain circumstances.28 To reduce liability risks the employer may wish to follow several procedures.

(1) Do not deny employment based solely on an applicant's bankruptcy. Federal law prohibits such discrimination.

(2) Employers may want to obtain additional information about an applicant whose credit report indicates that a judgment has been filed against the applicant and has never been satisfied. If an applicant's credit report reflects several collection items, offer the applicant an opportunity to explain. Do not question the applicant about personal details such as a divorce. Focus on information necessary to evaluate the status of the collection actions. Ensure that anyone performing investigatory or consumer reporting work for you is properly licensed and has the written permission of the background check subjects or perform all such checks “in house.”

(3) Require any consumer reporting agency or private investigator participating in your background check process to confirm both an understanding of and compliance with all applicable legal requirements, each of which should be clearly identified in a written contract.

(4) Do not deny employment to an applicant who has a poor credit record if the applicant appears otherwise suitable for the position on the basis of other job-related criteria.

(5) Consider the length of time since the last incident resulting in a poor credit history or other adverse item in a consumer report. A lengthy and ongoing history of credit problems or other undesirable behaviors is likely to be more of a risk to the employer than old or infrequent problems or incidents.

(6) Before denying employment on the basis of a credit or consumer report provide the applicant an opportunity to explain the reasons for a poor credit or consumer report.

(7) Be prepared to explain the job-related reasons why the applicant's consumer or credit report history renders the applicant unsuitable for a particular position.

Minnesota has enacted the Minnesota Access to Consumer Report Act (ACRA) that is similar to the federal law in many respects. For the most part compliance with the federal requirements will also satisfy an employer's obligations under the ACRA. There are a few additional requirements for some employers. Employers must notify applicants in writing if the applicant will be the subject of a consumer report prepared by a consumer reporting agency.29 Minnesota employers must also include a "box" on the disclosure form that the applicant can check to receive a copy of the consumer report.30 Minnesota law further provides that if the employer uses an employment application and the report is requested for applicant screening purposes both the "box" and the disclosure statement must be included on that application.31

If a consumer credit report reveals that the applicant filed bankruptcy federal law prohibits employers from discriminating against that employee on the basis of that information. When an employer obtains a credit report on an applicant and the report contains a record of a bankruptcy filing the employer should ensure that if the applicant is not selected, it has a well documented and reason for making its hiring decision. If the decision is not independent from the bankruptcy information the employer could be held liable for discriminating against the applicant.

PRE-EMPLOYMENT EXAMINATIONS

Another tool used by employers to determine whether an applicant is fit for a particular position is the pre-employment examination. These examinations can include both medical and nonmedical tests. Tests cannot be used to screen out applicants on the basis of a protected class unless they relate to a BFOQ. Before a pre-employment examination is used it should be validated to ensure that it does not have an adverse impact on a protected class of individuals that cannot be defended as relating to an essential job function.

Under federal and state law some examinations are absolutely prohibited in the preoffer stage of the hiring process. Whether an examination is prohibited or allowed and when it can be given depends on the nature of the examination, the information that may be revealed by the examination and whether the examination is job related. Employers should remain aware of their obligations under the MHRA and the ADA to provide reasonable accommodations to applicants who have a disability. Some possible testing accommodations could include: (1) extending the time allowed to take the test; (2) providing a reader or interpreter; (3) ensuring that the test site is accessible; and, (4) administering the test in a different format (e.g., larger type or Braille). Whether an accommodation is reasonable and whether an employer is required to provide the accommodation must be assessed on a case-by-case basis and the undue hardship analysis similar to that used in other employment accommodation cases.

The MHRA provides that employment examinations may test only for essential job-related capabilities.32 This limitation is narrower than the ADA that does not limit testing but, rather, limits when adverse action may be taken based on test results. The ADA provides that if an employer is using disability-related criteria to screen out applicants that criteria must be "job-related and consistent with business necessity.33 Minnesota law imposes greater restrictions on employers with respect to the type of examinations that can be given to applicants.

Both the ADA and MHRA prohibit employers from conducting preoffer medical examinations.34 Medical inquiries are permitted only after a conditional offer of employment has been made to an applicant. In

Minnesota such an examination may only test for essential job functions. The MHRA specifically provides that an employer may not request an individual to take a preemployment medical examination unless the employer has made a conditional offer of employment to the applicant on the condition that he or she meets the physical or mental requirements of the job, the examination tests for only the essential functions of the job, all applicants are required to take the same examination and the information collected is maintained in a separate file.35

A medical examination is defined as any procedure or test that seeks information about an individual's health or physical or mental impairments.36 The EEOC suggests that employers consider the following factors to determine whether a test is "medical":

• whether the test is administered by a healthcare professional;

• whether the test is interpreted by a healthcare professional;

• the purpose of the test;

• whether the test is invasive (e.g., drawing blood or bodily fluids);

• what the test measures;

• whether the test is normally given in a medical facility; and

• whether medical equipment is used.37

Depending on the nature of the information sought a test such as a physical agility test could be either a medical examination or a permissible preoffer examination. If the physical agility test measures only an applicant's ability to lift thirty pounds as an essential job function the test is not a medical examination. If the employer measures the applicant's biological responses while lifting the test is a medical examination and is prohibited in the preoffer stage.

If an employer wishes to revoke the conditional offer because of the results of the medical examination the employer must be certain that the criteria used to exclude the applicant is job related and consistent with business necessity.38 Employers may not use medical examinations to simply screen out individuals with disabilities. Minnesota law obligates employers to notify applicants or employees if an adverse decision that affects hiring, firing, or promotions is based on an applicant's health records or medical information.39 The notice must be sent to the employee within ten days after the employer has made the final decision.40

Even if a test is not considered a "medical" examination federal and state discrimination laws place limits on an employer's ability to use nonmedical test results to screen out applicants. An employer cannot use a test that either is intended to discriminate against a protected class of applicants or has an adverse impact on a protected class that is not job related. Minnesota law provides that an employer may administer preemployment tests only if such tests measure only essential functions of the job, are required of all applicants, regardless of disability, and accurately measure the applicant's attitude, achievement level, or whatever factors they purport to measure, rather than reflect the applicant's impaired sensory, manual, or speaking skills unless such skills are essential and are the factors being tested.41 For some positions a physical agility or skills test may be appropriate and may not constitute a medical examination. Such tests measure an applicant's ability to perform the physical requirements of the job if applicants are required to perform simulated tasks. The tasks should mirror the real tasks to be performed on the job as closely as possible.

Some employers routinely administer examinations designed to test the honesty or integrity of applicants. Both federal and state law controls whether these tests are permissible. The most commonly recognized test of this nature is the lie detector or polygraph. Employers may not use this test with respect to applicants or employees. At the federal level the Employee Polygraph Protection Act, 29 U.S.C. § 2001-2009, imposes severe restrictions on the use of such tests. The Minnesota counterpart to this law is Minn. Stat. § 181.75. This statute provides that an employer or agent may not "directly or indirectly solicit or require a polygraph, voice stress analysis, or any test purporting to measure the honesty of any employee or prospective employee.42 The purpose of this statute is to protect an individual's expectation of privacy, to discourage an employer's ability to demand such an intrusive test in conjunction with employment, and avoid employee coercion and intimidation.43 This statutory restriction is applicable to both public and private employers unlike the federal statute this provision has no public safety exception to the absolute ban on use of such tests.

Tests other than polygraph and honesty tests are for the most part unregulated but employers should keep in mind that the general testing requirements discussed earlier must be followed. These tests are often referred to as "pencil and paper tests." Many of these tests are designed to measure organization skills, tendency for violence, tendency for illegal conduct, issues with authority, or other personality characteristics and in many instances honesty. So long as the test is limited to determining personality traits, as opposed to mental conditions, these tests will most likely be deemed nonmedical. If the examination would reveal a medically recognized mental disorder or impairment, it is more likely a medical examination and should not be given in the preoffer stage. If the examination is administered or interpreted by a medical or psychological professional the test may be deemed a medical examination and should not be administered in the preoffer stage.

DRUG AND ALCOHOL TESTING

Whether an employer may test an applicant for drug and alcohol use is controlled by both federal and state law. Where state law provides applicants with greater rights the employer must comply with the more restrictive state law requirements. Because the ADA and Minnesota law have different requirements and limitations and treat drug and alcohol use in a different manner, employers must ensure that their policy is consistent with both federal and state law. The differences between the ADA and Minnesota law are described below. Public sector employers are prohibited from conducting unreasonable searches and seizures under the Fourth Amendment to the United States Constitution. When the government compels an individual to provide samples of either blood or bodily fluids the Fourth Amendment is implicated. Public employers must be careful not to violate an applicant's constitutional rights in implementing and administering a drug testing policy.

The ADA does not treat alcohol use and drug use in a similar manner. Under the ADA drug testing is not a "medical examination" and as such is not subject to preoffer limitations described in the statute.44 The ADA expressly authorizes employers to require preoffer drug testing and permits employers to take adverse action based on the test results.45 Individuals who are current users of illegal drugs are not protected by the Act.46 Although the ADA allows preoffer drug tests Minnesota law prohibits such tests before a conditional offer has been extended and imposes additional restrictions on employers.

Alcohol use and addiction is afforded greater protection than drug use under the ADA. Under the ADA a test for alcohol use is a medical examination and cannot be administered unless a conditional employment offer has been made.47 The test must be job related and consistent with business necessity. Employees with a current addiction to alcohol may be a qualified individual with a disability and may be entitled to a reasonable accommodation to perform the essential functions of the job. An applicant who tests positive for alcohol use cannot be discriminated against because he or she is an alcoholic unless the applicant is unable to perform the essential functions of the job even with a reasonable accommodation.

The primary Minnesota statute regulating alcohol and drug testing in the workplace is the Minnesota Drug and Alcohol Testing in the Workplace Act, Minn. Stat. § 181.950-57. This statute applies to all public and private employers with one or more employees. Because the statute is more restrictive than the ADA with respect to testing applicants for drugs and alcohol Minnesota employers must comply with the more stringent state law.

The Minnesota statute does not distinguish between drug and alcohol use. Testing may not occur until a conditional employment offer has been extended to the applicant. Before a Minnesota employer can test for drug or alcohol use in the workplace the employer must have a written testing policy in place that complies with the requirements of Minn. Stat. § 181.951, subd. 1(b). All employees and applicants subject to the policy must be given timely written notice of the policy, the employer may only conduct testing under the specific conditions outlined in the statute and the test must be conducted in accordance with the reliability and fairness standards specified in the Act. An employer may "require or request" an applicant to undergo drug and alcohol testing only if the employer has extended a conditional offer of employment to the applicant and the employer requires all applicants for the position sought to take the test.48 If an applicant refuses to undergo mandatory testing the employer may withdraw the offer of employment.

MINNESOTA LAWFUL CONSUMABLE PRODUCTS ACT

The MHRA and the Minnesota Lawful Consumable Products Act (MLCPA) also control whether an employer can take adverse employment action against an applicant based on the results of drug or alcohol testing. Both statutes limit an employer's right to take adverse action. The MLCPA limits an employer's ability to take adverse action against an applicant who uses a lawful consumable product such as tobacco and alcohol during nonwork hours.49 An employer cannot take adverse action against an applicant who tests positive for off-duty alcohol use. This law does not apply to adverse action based on alcohol use on the job. The MLCPA does not on its face regulate drug or alcohol testing. It does not extend to conditions resulting from drug or alcohol abuse which prevent an individual from performing the essential functions of the job or that create a direct threat of harm to the property or safety of others.50

REFERENCE CHECKS

An important tool that can be used is to check references. Prospective employers typically ask applicants to provide personal or professional references who can vouch for the applicant's abilities. Employers also find themselves on the receiving end of reference inquiries. While many employers have grown to fear liability for such checks there are ways to convey and obtain this data with little liability to the prospective or former employee.

One of the best ways to limit the risks associated with providing references is to develop a strict policy and follow it closely. One of the keys to minimizing the risks associated with references is to centralize the flow of information as to what your agency seeks and releases. Centralizing the process helps control not only the information that you provide, but also the person who is providing the information. Supervisors and others who were close to an employee may be likely to provide irrelevant, nonfactual personal information about an employee that cannot be proven or are not subject to a signed informed consent. Stray remarks, defamatory statements, and comments designed to interfere with job prospects can produce a lawsuit.

In addition to limiting who is allowed to give or seek references it is essential to have a written policy outlining what information can be released to prospective employers. For public employers this policy will largely be governed by the Minnesota Government Data Practices Act and Minn. Stat. 13.43 discussed elsewhere in this book. Under the Act a great deal of information about a current or past public sector employee is public data. Nearly all remaining date will be classified as private data. Private personnel data generally cannot be released to a third party unless the data subject has signed an informed consent. If such a document has been provided the public employer has no legal choice but to act pursuant to that consent. Failure to do so can create liability for violation of the Data Practices Act. A sample informed consent is included in these materials.

Due to rising fear about defamation lawsuits, many employers, particularly in the private sector, have adopted a policy of providing only skeletal information, usually limited to period of employment, job title, and salary. This limited information can still be useful. A check to verify dates of employment, position and salary can help an employer detect resume fraud.

In an effort to expand the willingness of employers to provide reference checks in 2004 the Minnesota Legislature enacted Minnesota Statute §181.967. An employer or former employer who complies with this statute and provides the information in a pre-employment background investigation authorized by the statute is granted major immunity from liability. Under Minn. Stat. § 181.967, subd. 2 no civil action can be maintained against such an employer by a former employee for the disclosure of the designated information to a prospective employer or employment agency unless the employee or former employee can demonstrate by clear and convincing evidence that the information was false and defamatory and the employer knew or should have know the information was false and acted with malicious intent to injure the current or former employee. Under the remaining portions of the statute its provisions provide what data can be disclosed and the process by which it is disclosed. Subd. 3 provides that a private employer in response to request for information may disclose dates of employment, compensation and wage history, job description and duties, training and education provided by the employer and acts of violence, theft, harassment or illegal conduct documented in the personnel record that resulted in disciplinary action or resignation in the employees written response, if any, contained in the employees personnel record. When such a disclosure is made it must be done in writing with a copy sent contemporaneously by regular mail to the employees last known address. With the written authorization of the current or former employee the private employer may also provide written employee evaluations conducted before the employees separation from the employer, the employees written response if any contained in that personnel record, written disciplinary warnings and actions in the five years before the date of the authorization and any employees written response and written reasons for separation from employment. That information also needs to be contemporaneously provided to the employee or former employee.

Minn. Stat. § 181.967 also addresses disclosure of personnel data by a public employer although because of the provisions of the Data Practices Act, Subd. 4 is largely redundant. Under subd. 4 the disclosures authorized in subd. 2 also apply to all public personnel data and private personnel data as defined under Minn. Stat. § 13.43 as long as a written authorization is obtained from the current or former employee.

In some circumstances an employer could be held liable for failing to provide information about former employees. In Randi W v. Muroc Joint Unified School. Dist. 49, 14 Cal. 4th 1066 (1997), the California Supreme Court held that a former employer could be held liable in negligence for failing to provide information to a subsequent employer conducting a background check. The former employer provided only "misleading half-truths" about the prospective employee and failed to warn the prospective employer that the individual had twice been forced to resign over allegations of sexual misconduct with children. The employee was hired and molested a student. The court held that the molestation was foreseeable and that the former employer was liable for damages because it had failed to warn the prospective employer about the employee. Although Minnesota has not yet recognized this cause of action, the Minnesota Supreme Court and at least one federal court has recognized the potential liability under such a theory under Minnesota law.51

REFERENCES FOR SPECIFIC OCCUPATIONS

Psychotherapists

In at least one area of Minnesota law a former employer may be liable for not providing a sufficient or honest reference. Minn. Stat. Chapter 148A creates a potential cause of action against an employer or former employer of a psychotherapist for the psychotherapist's sexual exploitation of a patients.52 A current employer may be liable for a psychotherapist's actions if the employer knows or has reason to know that the psychotherapist engaged in sexual conduct with any patient or former patient or fails to make inquiry of a former employer that employed the psychotherapist within the last five years concerning the occurrence of sexual contacts by the psychotherapist.53 A former employer may be liable for a psychotherapist's sexual exploitation of a patient if the former employer knows of sexual contact by the psychotherapist with patients or former patients and fails to disclose the occurrence of these contacts in response to a written request by another prospective employer.54 The statute exempts an employer from liability if the employer complies with the statute in good faith.55 Arguably this would include an exemption from a defamation claim brought by the psychotherapist against an employer providing a reference. It is also worth recalling that under defamation law, while it will not prevent being sued, truth is an absolute defense to such a suit.

Peace Officers

Law enforcement agencies are required to conduct thorough background investigations on applicants for the position of a licensed peace officer. Liability concerns have caused nearly every criminal justice agency to extend this policy to other staff positions within the office, including correctional officers, dispatchers and office staff. Minnesota law requires all employers except certain state government entities to make employment information available to a law enforcement agency conducting a background investigation for a peace officer position.56 The statute defines employment information to include written information related to job applications, performance evaluations, attendance records, disciplinary actions and the eligibility for rehire.57 The law exempts an employer from liability for releasing information to a law enforcement agency under this section absent fraud or malice by the employer.58

The law enforcement agency must comply with two prerequisites before an employer must release requested employment information. The first is the request must be made in writing and must be signed by a sworn authorized representative of the law enforcement agency.59 The second is the request must be accompanied by an original authorization and release signed by the employee or former employee.60 Once the law enforcement agency satisfies these requirements the employer must comply with the request. If

the employer refuses to disclose requested information the law enforcement agency may obtain a court order directing compliance with the request.61 Failure to comply with the court order may result in sanctions for contempt of court.62

Firefighters

A fire chief or administrative head of a fire department may conduct an employment background investigation on an applicant for a fire protection service.63 An employer must disclose employment information related to an employee or former employee who is the subject of such an investigation.64 Employment information includes written information in connection with job applications, performance evaluations, attendance records, disciplinary actions and eligibility for rehire.65 If an employer fails to disclose this information a district court may order disclosure.66 Failure to comply with a court's order may subject an employer to sanctions for contempt of court.67 If the information is subject to a confidentiality agreement between the employer and employee the employer must disclose this fact to the fire department.68 The statute specifically exempts the employer absent fraud or malice from civil liability for disclosure of the employment information to a fire department.69

' Thomas v. City of Omaha, Douglas County, Nebraska. 63 F.3d 763 (8th Cir. 1995).

241 C.F.R. § 60-1.12(a).

3Minn. Stat. § 363A.08, subd. 4; McClure v. Sports and Health Club, Inc., 370 NW2d 844 (Minn. 1985); King v. Trans World Airlines, Inc., 738 F.2d 255 (8th Cir. 1984).

4 Minn. Stat. Chpt. 364.

542 U.S.C. § 12112(d); Minn. Stat. § 363A .08, subd. 4.

6 Interpretative Guidance on Title I of the Americans With Disabilities Act, 29 C.F.R. app. Pt. 1630.14(a), Enforcement Guidance: Pre-employment Disability-Related Questions and Medical Examinations. 7Minn. Stat. § 363A.20,subd. 8.

8 Id.

9 Ponticas v. KMS Investments 331 NW2d. 97 (Minn. 1983); Yunker v. Honeywell, Inc., 496 NW2d. 419 (Minn. App. 1993).

10Minn. Stat. § 364.03, subd. 1.

11EEOC Policy Guidance on the Consideration of Arrest Records, N-915-061, EEOC Compliance Manual (CCH); Reynolds v. Sheet Metal Workers Local 102, 498 F. Supp. 952 (D. D.C. 1980), aff’d702 F.2d 221(D.C. Cir. 1981).

12G reen v. Missouri Pacific R.R. Co., 523 F.2d 1290 (8th Cir. 1975).

13EEOC Practical Guidance on Nondiscrimination in Recruitment, Selection, and Hiring; Johnson v. Pike Co., 332 F. Supp. 490 (C.D. Cal. 1971).

'° EEOC v. United Virginia Bank/Seaboard Nat'l, 615 F.2d 147 (4th Cir. 1980).

1515 U.S.C. § 1681a(d).

1615 U.S.C. § 168la(h). 1715 U.S.C. § 1681a(f).

18 Hoke v. Retail Credit Corp., 521 E.2d 1079 (4th Cir. 1975).

19 15 U.S.C. § 1681b(a).

2015 U.S.C. § 1681g(c).

2115 U.S.C. § 168 lb (b)(3). 2215 U.S.C. § 1681a(e).

2315 U.S.C. § 1681a(e). 2415 U.S.C. § 1681d.

2515 U.S.C. § 1681d(b).

2615 U.S.C. § 168 lb (b)(2)-(3). 2715 U.S.C. § 168 Im (a).

2815 U.S.C. § 1681n.

29Minn. Stat. § 13C.02, subd. 1.

30Minn. Stat. § 13C.02, subd. 2.

31 Id.

32Minn..Stat. § 363A.20, subd. 8.

3342 U.S.C. 12112(d)(4), 12112(d)(2)(B); 29 C.F.R. § 1630.14 (b)(3).

3442 U.S.C. 12112(d)(2)(A); 29 C.F.R. § 1630.13(a); Minn. Stat. § 363A.20, subd. 8.

35Minn. Stat. § 363A.20, subd. 8.

36EEOC Enforcement Guidance: Pre-employment Disability Related Questions and Medical Examinations, EEOC Oct. 10, 1995.

37 Id.

3842 U.S.C. § 12112(b)(6).

39Minn. Stat. § 363A.20, subd. 8.

40 Id.

41Minn. Stat. § 363A.20, subd. 8.

42Minn. Stat. § 181.75, subd. 1.

43 Hanson v. Brothers and One, Inc., 491 N.W.2d 292 (Minn. App. 1992).

4442 U.S.C. § 12114 (d)(1).

4542 U.S.C. § 12114(d)(2); 29 C.F.R. § 1630.16(c). 4642 U.S.C. § 12114(a).

47 EEOC Technical Assistance Manual for the ADA, § 8.9. 48Minn. Stat. § 181.951, subd. 2.

49Minn. Stat. § 181.938, subd. 2.

50Minn. Stat. § 363A.03, subd. 36.

51 Smith v. Brutger Co., et. al, 569 N.W.2d 408 (Minn. 1997); Grozdanich v. Leisure Hills Health Centers Inc., 25 F. Supp. 2d 953 (D. Minn.1998).

52Minn. Stat. § 148A.03.

53Minn. Stat. § 148A.03(a).

54See Minn. Stat. § 148A.03(b).

55Minn. Stat. § 148A.03(d)

56Minn. Stat. § 626.87.

57Minn. Stat. § 626.87, subd. 7.

58Minn. Stat. § 626.87, subd. 4.

59Minn. Stat. §626.87, subd. 2.

60 Id.

61Minn. Stat. § 626.87, subd. 3.

62 Id.

63Minn. Stat. § 299F.036, subd. 1.

64Minn. Stat. § 299F.036, subd. 2.

65Minn. Stat. § 299F.036, subd. 6.

66Minn. Stat. § 299F.036, subd. 3.