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March 11, 2013

U.S. Strengthens Regulations on Background Checks in Light of Financial Crisis

High unemployment in the wake of America’s financial crisis is one of the likely reasons that laws limiting employee background checks are gaining momentum, said Robert B. Stulberg, who practices employment law for Broach & Stulberg, LLP.

Speaking during an _ webinar, “Background Checks on Employees and Candidates: A Global Perspective,” Stulberg noted increased state-level attention to the regulation of background checks, moving U.S. law closer to laws in the European Union, where it is difficult for employers to surreptitiously research employees and job candidates.

Maryland, California, New Jersey, Michigan, Illinois and Delaware recently passed laws that make it illegal for employers to ask current and potential employees for their passwords to the social networking site Facebook.

“There has been a political push to try and lessen barriers to people finding and keeping their jobs,” Stulberg said.  The U.S. unemployment rate currently stands at 7.7 percent, with 12 million people looking for work, according to the U.S. Department of Labor.

Nearly 80 percent of U.S. employers conduct background checks to screen potential and current employees, according to the Society of Human Resource Management.

The U.S. operates from an “at-will doctrine,” where employers are permitted to hire, to employ and to fire employees without constraint, except as prohibited by particular anti-discrimination laws. These anti-discrimination laws, such as the American with Disabilities Act and the Equal Opportunity Employment Act, were created to ensure that people are not excluded from jobs based on their medical history or race, age, gender or other status. And companies are not allowed to implement policies or practices that disproportionally exclude groups including minorities or women.

“If you have a policy, one in which you’re checking the background of all your employees, but what you’re checking has an impact on a particular classification through no reasonable job related or reasonable explanation, then you can run afoul of discriminatory impact rules,” Stulberg said.

Experts said that while regulation may make it more difficult for U.S. employers to conduct background checks, U.S. law still has a long way to go before it mirrors EU law.

“One of the key fundamental differences between the United States and the other jurisdictions is the scope of the law and where is it coming from,” Jeffrey S. Heller, associate general counsel for labor and employment at BP America, Inc. in Houston. “It is coming from a data privacy angle largely in these other jurisdictions.”

The European Union’s laws include the Data Privacy Directive, which protects citizens’ rights to privacy.

“The law is grounded in the idea that employers have no right to snoop around in employees’ lives,” said Gerlind Wisskirchen, partner at CMS Hasche Sigle in Cologne, Germany. “Employers should only do background checks if they are necessary for the job. In order to be performed, there is an obligation to retrieve the data directly by asking the candidate, and not doing the background checks in the first place.”

“Unlike the European Union or Canada, the United States jurisprudence is not grounded upon a fundamental concept of employee privacy. It is grounded on a fundamental concept of employer discretion,” Stulberg added.

This program was sponsored by the ABA Section of Labor and Employment Law, Section of International Law International Labor and Employment Law Committee and Center for Professional Development.

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