This  week it was announced that Pepsi Beverages has agreed to pay $3.1 million to resolve racial discrimination claims steaming from their employee background check practices.  The Pepsi settlement is a great intro to a discussion about background checks.  As the settlement shows, background checks can be a huge legal nightmare.   Despite the legal nightmares, the practice of doing background checks is widespread and even required in some industries.  In the franchise world,  Franchisors commonly require their franchisees to complete background checks on their employees.

So, what are the nightmares?   When completing background checks it is important to know and follow the laws.  There are laws governing the proper procedure for obtaining and using background checks.  Discrimination laws such as Americans with Disabilities Act [ADA], and gender/ racial discrimination laws form boundaries how background checks can be used.  The Fair Credit Reporting Act [FCRA]  governs the mechanics of background checks policies.  Information about FCRA requirements can be found  in our resource library by clicking here.

The Equal Employment Opportunity Commission [EEOC] has published Best Practices for Testing and Selection.  A paraphrasing of the best practices are listed below:

  • Uniformly apply all background checks and other screening processes to all applicants.
  • Specifically tailor background checks and other screening processes to the position offered.
  • Complete a review of your background checks and other screening processes  to ensure that the processes are not unfairly disqualifying minorities and other protected persons.
  • Review job descriptions regularly to ensure that the background checks and screening processes are specifically tailor to the duties.
  • Educate your employees about the effective use of background checks and other screening processes.

In the Pepsi case the EEOC alleged that Pepsi’s background check practices were not tailored to effectively screen job duties.  Rather the background check screenings broadly and  disparagingly disqualified black and other racial minorities from available positions without a direct connection between applicants’ criminal background and the duties of the  positions.

LESSON FROM THE COURT:   When screening employees, watch who you ask, how you ask, and how you use it.

Lessson from the Court: I have an arrest record, but I CAN do the job.

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