Checks and Balances

Published: Progressive Grocer

Date: April 1, 2006

The shrink reports issued by the National Supermarket Research Group of Scottsdale, Ariz. serve as perennial reminders to supermarket operators that they should look closely at prospective employees. According to the latest survey, 57 percent of retail inventory losses in 2003-04 were attributable to theft by employees, nearly three times higher than the damage inflicted by shoplifters.

The risk of a terrorist attack is, unfortunately, another reason to do thorough prehire checks. In 2003 the FBI issued a bulletin warning that terrorists might try to poison the nation`s food supply, citing a previous intentional food-poisoning case in which a disgruntled grocery store worker in Michigan laced ground meat with insecticide.

Given the potential for such employee crimes, retailers can`t underestimate the value of background checks. Properly used, they can help employers screen out candidates with a propensity for criminality or lesser degrees of misconduct on the job. However, investigations improperly carried out can subject an employer to costly liability claims for illegal invasions of privacy.

Employers-and the attorneys advising them-are concerned that job applicants are now more likely to challenge the accuracy of background investigations, particularly criminal histories. An increased use of waivers covering ad-verse hiring decisions based on mistaken, inac- curate, or incomplete public records is evidence of that concern. And the potential for error is real, since there`s no national database accessible by non-law enforcement personnel that combines federal, state, and county criminal records.

At the same time, an employer who fails to make hiring and retention decisions based on information from a background investigation-or, even worse, fails to do a background check or negligently undertakes one-faces litigation from a different source: the customers.

In two recent cases, major retailers were sued after customers claimed that employees sexually assaulted them while on duty. According to these lawsuits, the retailers were negligent because if prior convictions had been discovered prior to employment, the employee would either not have been hired or the stores would have increased workplace supervision.

A well-designed policy should, at the outset, articulate the specific reasons that the employer intends to investigate applicants. Those reasons can range from a desire to weed out those who pose a threat of workplace violence, to a basic interest in assuring the veracity of resumes, as a way of picking the best candidate.

Know your rights, and theirs

The employer also must ascertain that the procedures won`t violate privacy rights. Privacy laws vary from state to state, and are scattered among various legislative enactments. Protec- tions are found in state constitutions as well as statutes, regulations, and court decisions.

An employer`s conduct that`s perfectly legal in one state may, in the state next door, land it in hot water. To guard against the law of unin- tended consequence, employers must have poli- cies reviewed initially, and then annually, by com- petent employment counsel in each state where they conduct business.

Once a lawful policy has been adopted, em- ployers must assure that it`s correctly imple- mented. That, too, is easier said than done. State and federal laws vary widely in terms of proce- dural requirements designed to safeguard job applicants.

First, in each case the employer must obtain the applicant`s written authorization before com- mencing the investigation. The notice to appli- cants must be clear and conspicuous. If the em- ployer will seek medical information, the authori- zation form must specifically state so, and ex- plain why. The authorization must state that the investigation may assess the applicant`s charac- ter and lifestyle. It should list state and federal laws that have a bearing on the jobscreening process. Also, it must identify any outside agency conducting the investigation.

Unless they have signed a written waiver, applicants have a right to obtain copies of credit reports, criminal histories, and public-record searches gathered in the investigation. And if the employer uses the final report as the basis for a refusal to hire, or any other adverse action, it must provide a copy to the applicant explaining how the applicant can challenge the information. A prudent employer should allow the applicant a limited period of time to correct any errors before final action is taken.

Once the information is obtained, employers may not use it for any reasons other than those stated in the notice. This is particularly true re- garding criminal records.

Under federal law there`s no restriction on how an employer may consider prior convictions. But some states impose restrictions on use of old convictions. This underscores the importance of ensuring that attorneys are competent in the state where they`ll review policies.

After the hire

The legal implications of background checks don`t end with a decision to hire. An investigation may put an employer on notice about issues that could arise post-hire, such as domestic violence restraining orders, or lawsuits alleging discrimi- natory behavior. While this isn`t a sufficient basis for refusal to hire, once the employer has been made aware of such information, there may be a heightened duty to monitor. Failure to do so may equate to liability if a workplace problem arises.

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