Businesses are under fire over background checks

Companies that conduct background checks on job applicants are increasingly facing scrutiny, and need to be careful that they are following the law. A growing number of companies have been routinely conducting credit checks and criminal background checks, in part because new technology has made it easier to do so.

However, the federal Equal Employment Opportunity Commission recently released a legal advisory letter warning that the use of credit checks to screen job applicants could be illegal if it leads to the disproportionate exclusion of women, minorities or other protected groups.

The Commission is stepping up its investigations of credit checks, criminal background checks, and other hiring policies that may have a negative impact on certain groups.

Many states are also cracking down on background checks. For example, a new law in Illinois prohibits employers from asking about an employee’s or job applicant’s credit history, and from using credit history as a basis for an employment decision.

The law exempts some employers, including banks, insurance companies and police departments. It also exempts high-level managers and employees with unsupervised access to large amounts of cash or to customers’ financial information.

Oregon recently adopted a law limiting credit checks by employers in an effort to ease unemployment, and Hawaii, Louisiana and Washington have passed similar measures.

In Massachusetts, many employers must overhaul their job applications to comply with a new law that prohibits most businesses from inquiring about an applicant’s criminal history on an initial job application. However, an employer may still make decisions based on criminal history information obtained from other sources. The law exempts certain employers, such as schools and day care providers.

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