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Company sued for performing background checks on employees

A class action lawsuit has been filed that accuses a national pizza chain of violating the Fair Credit Reporting Act by running background checks on employees without obtaining the necessary authorization to do so, and not sharing those reports with employees or applicants. The suit also alleges that the company took adverse action against employees and applicants, including denial of employment and wrongful terminations.

The company has denied the allegations in the class-action lawsuit and said it does conduct criminal background checks on employees and applicants.

For the first time in more than 25 years the Equal Employment Opportunity Commission will be revising its guidelines on pre-employment screenings and how employers should properly evaluate criminal records in making hiring decisions. The new guidelines will not affect how credit reports are used in the screening process.

Three different universities conducted research studies which showed there was no link between a poor credit report and the probability of an employee behaving poorly on the job. Consumer advocates have been saying for years that credit ratings provide very little, if any significant value in predicting an employee's potential job performance.

This latest research has prompted several states to limit the use of credit background checks to only positions in which the information applies to the specific duties of that job. For example, someone who handles a company's money, assets or accounts, should be required to pass a credit background check. The Colorado state senate passed similar legislation in February.

Consumer background reports are an important tool in helping employers identify potential hires as safety threats to a company's assets or employees, however it can have serious legal implications if not performed in compliance with the state and federal employment laws. Consulting with an employment law attorney can help your company ensure compliance with state law as well as defend or protect your company from claims of employment discrimination or wrongful termination.

Source: The News Tribune, "Background checks in legal spotlight," Tony Pugh, Mar. 21, 2012

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