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Special Report Background Checking--Digging Deeper

Many employers are going well beyond the typical criminal record check in screening job candidates—looking into civil records like lawsuits and even divorce filings. But experts say the information needs to be handled with extreme care.

March 6, 2008
Related Topics: Tools, Recruitment, Staffing Management
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When Bruce S. Fillpot applied for a job as a financial analyst at Intel Corp., his résumé did not lack distinction. A past president of the New Mexico Society of CPAs, he had helped write legislation and authored numerous articles in professional publications. During his career, he had worked for the “Big 4” accounting firm Ernst & Young, as vice president of investments for a national brokerage firm, and had most recently been chief investment officer at REDW Trust Co., an Albuquerque financial services company.

Fillpot disclosed on his application that he had sued REDW, but Intel, the semiconductor giant, offered him the job in October 2005, contingent on a background check. A month later, Intel managers called him into a meeting and it was then that things started to go awry, according to court documents.

During the November 10, 2005, meeting, Intel questioned Fillpot “at length” about issues that arose from his background check, including a bankruptcy and the REDW suit, Fillpot, 48, alleges in a discrimination suit he filed in December 2007.

On November 28, 2005, the company withdrew the job offer.

Intel “retaliated against Plaintiff for filing and participating in an EEOC charge of discrimination against [REDW],” the suit says. New Mexico court records show Fillpot sued REDW in October 2003 for violations of the state Human Rights Act, retaliatory discharge and breach of contract. After the company filed a counterclaim for conversion, which in tort law means an illegal taking of another’s property, the litigation was settled in January 2007.

Fillpot also alleges that Intel discriminated against him because he had filed a bankruptcy action. The federal Bankruptcy Act prohibits an employer from discriminating “with respect to employment” against someone who “is or has been a debtor or bankrupt” under the act. He came out of bankruptcy in February 2003.

Widespead screening
In checking out Fillpot, Intel wasn’t doing anything unusual. A 2006 survey of human resource professionals by the Society for Human Resource Management found that 85 percent of those surveyed hired outside agencies to conduct background checks of potential hires and, of those, 96 percent reported using criminal records checks—up from 51 percent in 1996.

What was out of the ordinary about Intel’s research was that it extended into civil lawsuits. A civil records check is still far less common than a criminal records check. In the 2006 survey, SHRM did not even include it as a statistical category. But many screening services now recommend it as part of the hiring process for executive-level positions. “It can be a good addition to a well-reasoned and consistently applied screening program,” says Gregg Freeman, associate general counsel at HireRight, a background screening service based in Irvine, California.

Some security consultants even advise civil records checks in the hiring of lower-level positions, such as executive secretary, that have access to corporate bank accounts. FBI statistics show more than 14,000 arrests for embezzlement in 2005, the most recent year for which numbers are available.

“If you’re hiring into a position of authority, these days corporations need to do their homework,” says Peter Turecek, a managing director of Kroll Inc.’s business investigation and intelligence division in New York.

But experts also say civil records checks are a screening tool that employers need to handle with care.

“An employer has the right to make an informed [hiring] decision based on relevant information,” says Les Rosen, president of Employment Screening Resources in Novato, California, and author of The Safe Hiring Manual. “But the employee may also have a right not to have this [civil suit] information considered.”

Courts in the U.S. have frequently addressed the issue of misuse of criminal records in hiring decisions and also the issue of in what circumstances an employer can be held liable for not doing a criminal background check. The Fillpot case could set something of a precedent because there has been little guidance from the courts about how to use—and not to use—civil records.

“It’s a question of using the right records in the right way,” Freeman says.

Crossing a line?
A survey by ChoicePoint, a screening company in Alpharetta, Georgia, found that a majority of workers were comfortable with employers doing criminal background checks, but felt that civil suit checks are an invasion of privacy.

As with criminal records, the Internet has helped fuel the supply of accessible civil records. In the federal court system, the PACER service provides access to civil records from all over the country. State courts from Los Angeles to Pittsburgh and Dayton, Ohio, to San Francisco have made the contents of civil dockets available for download.

On the demand side, employers are under ever-increasing pressure to get the hiring decision right, whether to avoid workplace violence or sexual harassment litigation or to comply with Bush administration policies affecting post-9/11 homeland security or immigration reform. A 2002 study by executive search firm Christian & Timbers found exaggerated or completely false information in 23 percent of a sample of 7,000 executive résumés.


"With civil records, you have to proceed carefully. If an applicant filed a discrimination claim against a
former employer, that's not the type of thing that should influence an employement decision."
—Gregg Freeman, associate general counsel, HireRight


Rosen says civil records searches conducted by his company have uncovered allegations of trade secrets violations and evidence that one job applicant was “a serial litigator who sued past employers with regularity.” Another had allegedly been violent. “Sometimes you come across these red flags in civil cases,” he says.

At Kroll, Turecek says his investigators would look out for any litigation involving intellectual property if the client “is hiring into a company where intellectual property is a valuable product.” Another key search area for top-level positions would be any shareholder or breach of fiduciary duty litigation in the applicant’s background.

“It’s an insurance policy [against a negligent hiring suit] and a fairly low-cost one, all things considered,” Turecek argues.

Experts could not cite any precedent for an employer being held liable for failing to do a civil records check, but the College of Physicians of British Columbia recently sued a Vancouver executive search firm, alleging Caldwell Partners did not inform the college that a job candidate had sued her last employer and had taken the matter to trial.

“If you’re hiring for a position of trust, the standard of care is higher,” HireRight’s Freeman says. “So it may be more cost-effective to do a civil records search.”

“If an employee harassed somebody or gave away trade secrets and a search of civil cases may have revealed that, the employer may have some explaining to do,” Rosen says.

According to Rosen, a basic civil records check run on a job applicant’s name costs about $25 per county, compared with about $18 per county for a criminal records check. But Rosen points to a number of practical problems with getting useful results from civil records checks, including the following:

Where to look. Unlike a criminal case, which is usually brought in the same jurisdiction as an applicant’s residence, the jurisdictional possibilities for a civil case are much more diverse.

Resources. Only a few states have statewide civil records databases, requiring investigators to conduct searches county by county, which adds to costs.

Identifiers. Civil case records do not generally provide a date of birth, address or other identifying information that can match a record to a specific applicant.

“You may have no idea whether you have the right person unless you read the first few pages” of a civil complaint, Rosen says. “You put all of these problems together, [and] that’s why we say to clients, ‘It’s not as easy as you think to do a civil search.’ ”

And it can get much more expensive if investigators have to go to the courthouse and pull court files. Under the Fair Credit Reporting Act, “You really have an obligation to pull the file,” Rosen notes. “And someone knowledgeable has to read it.”

What's the relevance?
Once the information from lawsuits is collected, the employer faces the trickiest issue of all: How to use it in making the hiring decision. Any adverse employment action based on data covered by the Fair Credit Report Act must be disclosed to the job applicant and, Freeman says, the employer “is open to the risk that the applicant will claim you improperly relied on the record.”

Freeman recommends a “rational relationship” analysis. Does the civil suit disclose something about the applicant that is reasonably related to the requirements of the position?

“It’s most likely useful when the applicant was a defendant in a case that may go to his integrity—for example, breach of contract. That’s an issue that could potentially be considered job-related,” he says.

Some screening services suggest that cases in which applicants are plaintiffs are also useful. “A search of federal and county civil court records will help identify an applicant with a history of suing others,” AccuSearch, a Phoenix-based service, says on its Web site. But Freeman and others believe using those cases is more risky because, among other things, there are laws that bar retaliation against those who exercise valid legal rights.

“With civil records, you have to proceed carefully,” Freeman says. “If an applicant filed a discrimination claim against a former employer, that’s not the type of thing that should influence an employment decision.”

In The Safe Hiring Manual, Rosen says a personal injury suit brought by an applicant “would not likely have bearing on job performance (unless the applicant was suing a past employer and had a custom and practice of doing that).” He also raises the dicey subject of divorce cases.

“Often such lawsuits will have a detailed description where the parties are bringing out all the dirty laundry,” he says. “As interesting as that might be to read from a human-interest point of view, it is likely to have little bearing upon employment.”

Divorce record searches, in particular, make the privacy lobby uncomfortable.

“With 50 percent of married people getting divorced, it seems rather pointless to check on divorce filings,” says Beth Givens, director of the Privacy Rights Clearinghouse in San Diego. “I don’t think there’s real value in it for the employer. Just because somebody gets divorced doesn’t mean they will be a bad employee.”

According to court records, Fillpot filed for divorce in 2000. While the case was pending, he and his wife filed a Chapter 7 bankruptcy petition. The employment suit against Intel says he was also required to discuss a “divorce with child support.” But he alleges only retaliation for the earlier REDW suit under Title VII of the Civil Rights Act and for the bankruptcy under the Bankruptcy Act’s prohibition on discrimination.

Rosen, who in addition to running a background checking business is also an attorney, says the basic rule for using civil records in making a hiring decision is whether the information is a “valid predictor of job performance.” Assuming Fillpot’s history did influence Intel’s decision, “The defendant may say they were looking at the underlying behavior. ... But there must be a valid business justification for why the underlying behavior is relevant. You have to be looking at the behavior, not the bankruptcy itself, and the distinction between the two is very fact-specific.”

Whatever happens with Fillpot’s allegations, Rosen adds, the case underscores the complexity of civil suits. “You need to be very cautious in using civil case records.

Workforce Management, March 3, 2008, p. 35-39 -- Subscribe Now!

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