Is There Value To Employee Background Checks?

By Alice Epstein, Sr. Risk Advisor, CNA HealthPro March, 1998

The value of and necessity to performing employee background checks have been questioned over time. The potential liability exposure of improper hiring, the corporate responsibility for job related negligence of employees and in some instances, corporate responsibility for intentional misconduct of employees, as well as the fear of allegations of defamation of character and invasion of privacy, demonstrate the complexity of this issue. More than half the states now permit recovery under the "negligent hiring" theory. (ASHRM, Risk Management Handbook for Health Care Facilities, 1990, p.343) Essentially the five elements that the claimant must prove related to negligent hiring (i.e., the failure of an employer to exercise reasonable care in hiring an individual with respect to the risk created by filling the position) are:

  • Existence of an employer-employee relationship,
  • The employee was incompetent or unfit for the job,
  • The health care organization knew or could have known with reasonable effort of the incompetence or danger,
  • The act or omission caused the injury, and
  • The health care organization's negligence in hiring or retaining the employee directly caused the claimant's injury.

Value to the institution can be perceived as an improved risk posture, positive public relations, lack of adverse publicity, assurance of qualified staff, and defensibility of negligent hiring allegations. There is no question in the minds of directors and officers that they expect that all employees hired will be appropriate for the position for which they were hired. Questions arise regarding how to choose the "best" candidate for the position, identify inappropriate candidates, the cost-benefit of the pre-employment check, the accuracy of background checks, the relationship of the information requested to the requirements of the job (as required by the EEOC) and now, the new challenge - the implications of the 1997 amendments to the Fair Credit Reporting Act.

The purpose of an employee background check is twofold:

  1. verify the information provided by the applicant, and
  2. develop additional relevant information necessary to make an informed decision regarding the appropriateness of the applicant.

There are a number of federal and state actions, some discussed here, as well as accreditation standards that impact on the issue of employee background checks within the care of the elderly and disabled industry.

Office of the Inspector General Criminal Background Survey

Even the Office of the Inspector General (OIG) of the Department of the Health and Human Services is visiting this issue. The Audit Services Office of the OIG is conducting a national survey of randomly selected nursing home facilities for the purpose, in part, of collecting detailed information related to the facilities' role in employee criminal background checks. Participation in the survey is voluntary. The Audit Services Office has verified to the American Health Care Association that all facility, staff, and resident identifying information will be removed prior to submitting the report to Congress. (AHCA, Regulatory Update, December, 1997, p.7) Nevertheless, professional organizations, including the American Health Care Association recommends that facilities consult legal counsel prior to participating in the survey. The OIG has given no assurances that the summary information collected is protected from public access.

Medicare/Medicaid Requirements

In 1992, amendments to the 1987 Omnibus Budget Reform Act were implemented that affected long term care facilities that participate in Medicare and Medicaid related to utilization and competency of nurses aides. The regulations required the creation of State Nurse Aide Registries. The registries must include any finding by a state survey agency involving abuse, negligence, mistreatment of residents or misappropriation of their property by the nurse aide. All information placed in the registries are available to the public. Long term care facilities are required to seek information from every State registry that the facility believes will include information on the applicant. (CFR, Title 42, V. 3, Part 483.75) That is, prior to permitting a person to work as a nurse aide, the facility must receive registry verification from each registry that the applicant has met training and competency requirements unless the applicant is a full time employee in training.

Violent Crime Control and Law Enforcement Act

The Violent Crime Control and Law Enforcement Act of 1994 required states to designate "qualified entities" that would be required to contact an authorized agency to request a nationwide background check for employees. Under the Act, each state must designate which "qualified entities" are to be included. Although long term care facilities are not specifically mentioned, it is generally believed by the long term care industry that they meet the definition of "qualified entity". (Provider, November, 1994, p.21) To date, there have been no federal implementation regulations or more defined definitions promulgated by the responsible agency, the Attorney General. There are some states that have passed legislation requiring certain health care providers of adult dependent care programs to conduct specific background and reference checks. (Md. Health General Code Ann. § 17,214) Several organizations including the National Association of States Attorneys General are working towards enactment of new federal legislation that would provide inexpensive access to a national criminal background check system for all health care providers.

Civil Rights Act of 1964

Use of criminal records in employment decisions has been reviewed under the Act. There are four points that have been promulgated as a result of court decisions. (Gregory v. Litton, 472 F2nd 631) The four points appear to be supported in subsequent and related law. Questions regarding prior arrests may not be asked. Questions about prior convictions may be asked. An applicant may not be categorically rejected for a position based solely on the basis of one or more prior convictions. An applicant may be rejected because of a criminal conviction if the decision is made on the facts of the case and the relevancy of the factors to the requirements of the position.

Fair Credit Reporting Act

Under the September 30, 1997 amendment to the Fair Credit Reporting Act, criminal records older than seven years, for anyone who earns less than $75,000 a year, cannot be reported to employers. Even if a private investigation vendor uncovers the information, if the conviction is more than seven years old, they may not convey that information to the employer. (USA Today, 2/24/98, p. 4B) In addition, the Act now requires among other things that prior to taking any adverse action based on a consumer report, the applicants be provided with a copy of the report and notified of their rights under the Act. The law only applies when companies purchase information from consumer reporting agencies that gather and sell information such as employment and criminal histories, credit reports, education verification, etc.

Accreditation Requirements

While accreditation requirements sometimes do not have the same legal standing as laws and government promulgated regulations, they are important in documenting that the employer has met the "standard of care". The Joint Commission on Accreditation of Healthcare Organizations (JCAHO) requires that the health care organization comply with laws and regulations regarding pre-employment verification of convictions for abuse and neglect. (JCAHO, 1998 Standards for Long Term Care, p.267)

Elements of an Employee Criminal Background Check

Application for criminal records checks vary from sate-to-state. Some states require having an authorization form on file with the State Police Department, provision of a complete set of fingerprints, and a sworn disclosure statement from the applicant regarding the existence of a criminal conviction or pending criminal charges. An alternative to a criminal record check typically performed by a private vendor includes a check of court and other records. It may not always require fingerprints or a disclosure statement.

The Violent Crime Control and Law Enforcement Act requires:

  • A set of fingerprints
  • A signed statement that: documents the name, address and date of birth as it appears on a valid piece of identification states the applicant has not been convicted of a crime, or if so describes the crime and details of the conviction
  • informs the applicant that the facility may request a background check under auspices of the Act
  • informs the applicant of the applicant's rights under the Act
  • informs the applicant that prior to the completion of the check that the facility may deny the applicant unauthorized access to patients/residents.

Notice to Applicant

The applicant should be provided with a statement of findings and a vehicle to contest them. The Federal Violent Crime Control and Enforcement Act requires that the applicant should be informed that they have a right to obtain a copy of any background check report, challenge the accuracy and completeness of any information in the report and to obtain a prompt determination as to the validity of such challenge before a final determination is made.

Accessibility of State Arrest and Criminal Records

In general, arrest records are not available to employers unless the arrest is specific to related job performance and to prosecutions resulting in related convictions. However, employers must be very careful, in that rejection of a job applicant based solely on an arrest record may be in violation of state law and Title VII of the Civil Rights Act of 1964. It is in the best interest of the employer to check with legal counsel concerning local, state, and federal laws that might affect the use of arrest and criminal records for employment screening. A criminal records search requires a search of state and federal records. Typically at the state level, criminal convictions are recorded either in a central repository or at the county level. To perform a complete criminal history check, an employer must check not only the state's central information bank, but also each county that may have had jurisdiction over the applicant over time. Experience has shown that while state information banks hold records from throughout the state, the information is often not complete. Information at the county level may be more complete, but the time consuming process of a county-to-county search may be overwhelming. The employer can only question those counties in which the applicant has been forthcoming regarding past employment and residences.

Risk Management Suggestions

  • Find out if there are state statutes and regulations governing employee criminal background checks and if so, what the requirements and limitations are.
  • Develop internal policies relative to the appropriate initiation of the background check, use and disclosure of information collected, and an appeals process for the applicant.
  • Develop an internal policy, with the assistance of legal counsel, relative to liability with regard to denying or terminating an individual's employment based upon information received from either a "criminal background investigation" or a "criminal history records check".
  • Written authorization should be obtained from the applicant that allows the employer to perform criminal background checks, check all references, verify past employment and confirm academic and professional credentials.
  • If using an outside vendor a formal contract or letter of agreement should set forth the reason for the check, the scope of the investigation, what information will be requested, how the information will be obtained, who will be responsible for responding to any accuracy challenges, specific contacts for receipt of information at both organizations, and the period encompassed by the background check. Contract elements should include, but are not limited to, compliance with related privacy and discrimination laws, pricing, time service periods, hold harmless agreements, indemnities, and evidence of professional liability and errors and omissions insurance.

While employee background checks, either reference or criminal, are not yet required in all states, the potential for litigation related to negligent hiring and corporate liability for negligent acts confirms the importance of demonstrating a reasonable effort at verifying the appropriateness of individuals hired. Establishment of a documented, comprehensive, non-discriminatory and fair employment background check program should assist in improving the risk posture of the organization and that of the governing body.

CNA HealthPro and the CNA organization accept no liability from use or reliance on the advice or contents of this article. CNA HealthPro strongly recommends that specific issues related to your organization's legal obligations be referred to an attorney. Furthermore, any advice rendered by CNA HealthPro or any CNA company is not a waiver of any rights concerning coverage for any claims tendered pursuant to any CNA policy issued. CNA is a registered service mark and trade name of CNA Financial Corporation.