Q: Is it acceptable to request an applicant to supply his/her social security number on an application for employment?
A: Each digit in the social security number is coded and provides extensive information about the person to whom it was issued, such as age, region of birth, etc.; therefore, if you have the key to the code, you can discover information about a candidate that can be used in a discriminatory manner. The keys to these codes can be purchased. By not asking for this information, you will not be in a position to defend yourself and prove that you did not use such information in a discriminatory manner. For this reason, we advise employers not to ask for this information until a candidate has become an employee. Exceptions to this would include the necessity of conducting a criminal history check.
Q: Can I run credit checks on prospective employees?
A: It is not without reason that employers want to look at prospective employee credit reports. An individual’s credit can give employers a “snap-shot” into their payment history and trends, giving the viewer insight into a person’s habits, level of financial responsibility, and sometimes their trustworthiness. This is particularly relevant in a position that requires the handling of proprietary information.
There are strict guidelines for employers who want to pull credit. Federal and State regulations have been put in place to protect individuals and companies from discrimination and unfair employment decisions being made based on credit.
Individuals in the market for a new job should understand the credit reporting laws of the state they reside in (or are looking to work in) and the federal credit reporting laws of the United States. Most states have their own set of laws that takes federal legislation a step further in protecting employees
The Fair Credit Reporting Act (FCRA) is a piece of federal legislation.
If an employer’s state law permits the pulling of credit on employment candidates they must follow the FCRA which requires employers to:
- Have the applicant’s written consent to pull credit reports.
- Provide the employee with the name, address, and phone number of the company that supplied the credit report.
- Notify applicant that employment may be contingent on information in their report.
- If the candidate is rejected based on their credit, an official notice must be provided along with a copy of their “Summary of Your Rights Under the Fair Credit Reporting Act” from the Federal Trade Commission, and a copy of their report that was pulled.
State law trumps federal law
Each State has their own set of laws and protections for credit screening of job applicants. Some states prohibit the majority of employers from pulling credit at all and others limit how employers can use the reports or limit credit employment decisions to certain professions. Employers must follow the law of state they reside in.
These 12 states have the tightest laws in place that protect job candidates from credit screening:
- District of Columbia (DC)
As of April 2015, New York City, is the only city to pass the strictest legislation in regard to employment credit screening. According to an article by CNN Money, this bill is another step in protecting job seekers from discrimination based on their credit history because in order for one to improve their credit, they need a chance in landing a job.
Most recently, the New York City Council voted to ban employers from seeking salary history information from job applicants. This is another move by the NYC Council to help protect employees/job seekers from being stuck in low-paying jobs. This measure is set to go into effect October 2017.
There are exemptions and some jobs that are required by law to pull credit
Many states have lengthy provisions, exemptions, and multiple amendments to their employment credit screening laws.
Some common exemptions are:
- Positions of fiduciary trust.
- Certain managerial or executive positions, where employee is given the power to enter into contracts, hold business credit/debit cards or account information, or manage payroll.
- Financial positions where employees manage, handle, or have frequent access to confidential consumer information.
- Some states only allow credit report screening after a conditional employment offer has been extended. In other words, employers cannot ask about credit during their initial interviews, but may inform employees that final approval of employment will be based on credit screening.
- Some states allow credit screening of public service officers, a position with the state department, or other positions where federal laws requires screening of credit history.
Credit Report vs. Credit Score
Employers do not pull your credit score, if your employer is authorized to pull credit they will be viewing your credit report. It will not be the same copy that lenders use to make credit decisions; it’s a different version intended for employment purposes.
Your credit score is a numerical representation of your risk level as a customer. For instance, your FICO Mortgage Score is commonly used by lenders in making credit decisions. Many lenders have a threshold that your credit must meet in order to be approved, usually that score is around a 620 – 640, the higher your score the lower your risk and the lower your interest rate. The score is tabulated based on the information in your reports and employers have no need to see this number.
Your credit report provides a list of all the accounts and lines of credit that you have in your name. As well as, your payment history, debt balance history, public record information, collection/delinquent accounts, bankruptcies, property or tax liens; basically any information that gets reported back to the personal credit reporting bureaus and is pertinent to your risk level as a borrower, is included in your reports.
According to the FCRA, each consumer credit bureau is required to provide a free credit report every 12 consecutive months, as requested by the individual. While these reports can be very informative and educational, be aware that they do not include your credit scores. If you have plans to apply for a loan, financing, mortgage, open a line of credit, or even start a business, it’s best to review your Mortgage FICO credit scores. These must be purchased but are closest to what your lender will use to access risk.
Q: What is a confidentiality agreement and who does it protect?
A: A confidentiality agreement sets forth the understanding and agreement between the employer and employee about information that is considered confidential or secret and may not be disclosed to competitors, future employers, and others. This agreement protects the organization and its clients.
Q: Is it acceptable on an employment application to inquire about a candidate’s ability to speak or read foreign languages?
A: This is another instance in which asking yourself, “Is this question job-related?” is key. This question should only be asked when it is a Bona Fide Occupational Requirement (BFOQ). This means only ask it if this is a skill required for the job (and, of course, then noted in the job description). Asking for this information for jobs which do not require it can provide you with information about an applicant’s national origin or race. Even if this information is not used in a discriminatory manner, it may be up to you to prove you did not use it in this manner if you are taken to court. Therefore, it’s better not to have it as a standard question. Use it only when required. Then you won’t have to prove you didn’t discriminate.
Q: How can I maximize the chance of having a non-compete agreement enforced by court?
A: Though there are a few states like California that do not enforce non-compete agreements, most courts will enforce one if it is reasonable in terms of duration, scope and geographic region. The first issue to consider is whether or not there is a legitimate business need to have a non-compete agreement. Courts have viewed such things as protection of trade secrets, relationships with specific customers, patients or clients, ongoing goodwill associated with businesses, geographic location or marketing/trade areas as providing legitimate business need for an agreement. Some courts have allowed non-compete agreements in cases where an individual received specialized training.
If there is legitimate business need, the reasonableness of the agreement will then come into consideration. Most courts view one year, no more than three (though one is more accepted), agreements are fair if they are not too limiting as to where the individual can go to find employment. This ties into the geographic scope. Limiting the individual by saying you cannot work anywhere in the United States would not be enforceable. Though there is no set mile radius, any area as small as the town to as large as the whole state has been found to be enforceable. Finally, a reasonable scope gets into what specific work is not allowed to be done by the individual bound by a non-compete. If an individual could go to work for a competitor without divulging anything, restricting this employee would probably not be considered reasonable.
The reasonableness in time, scope and geographic location ultimately maximizes your chances of having your covenant not to compete enforced by courts. Ultimately, legal counsel should be used to protect yourself should you choose to use a non-compete.
Though any level of employee can be required to sign such an agreement, when it comes to enforcing one in court, those employees who could truly affect the company’s trade secrets, should be required to sign one. For instance, your receptionist has probably not been exposed to company secrets, nor is providing a unique function for your company that could damage your business if the individual were to leave. Requiring this individual to sign an agreement and then trying to enforce it would not be reasonable. However, anyone who is key to the success of the company should be required to sign such agreements. Key employees should definitely be issued a non-compete agreement to prevent them from going to work for a competitor.
Q: May I refuse to hire an employee if I receive an unfavorable reference check?
A: The answer is a tentative yes, if the unfavorable information you have received is job-applicable. For example, you have a candidate who was convicted for domestic violence and has applied for a counseling position in a women’s shelter, or the candidate has a poor employment history of resigning after a short period of time on the job, and has had excessive absences (not covered by any protected leaves).
However, if the unfavorable information you have received is not job-applicable, or is information you should not have, you may not be able to base your decision solely on the background check. For example, in the course of your check you discover the candidate has filed numerous worker’s compensations claims. It is illegal to discriminate based on the filing of Workers’ Compensation claims and refusing to hire this candidate solely for this reason would expose the organization to a risk of a discrimination claim. This is information you should not be asking and cannot use for your decision.
When conducting background checks make sure the questions are job-related and non-discriminatory. Furthermore, it is important to have the candidate provide a written release. This protects former employers from being sued for providing accurate information. The bottom-line is if the information you have is job-related, legal information to have and may result in a negative impact to the organization, you can refuse to hire that individual.