Tell me a little about yourself: Emerging liability issues with pre-employment background checks

Last updated on May 9th, 2022 at 08:56 pm

More and more employers are choosing to conduct background checks on potential hires, including checks for criminal and credit history. There are a number of legitimate reasons for doing so, including compliance regulations in certain industries, concern about liability for negligent hiring, and simply a desire to ensure that employers are selecting the right person for the job. Employers must be mindful, however, that administrative agencies at both the state and federal levels are scrutinizing these practices like never before, and that many states (like Wisconsin) have laws on the books that regulate how employers are permitted to use background check information.

When it comes to conducting a background check on an applicant’s criminal history or credit history, what exactly is an employer allowed to ask? And what is an employer allowed to do with that information once it gets it? If you’re interested in conducting more thorough candidate background checks, you may visit sites like for more information.

Criminal Record Information
Notably, the Wisconsin Fair Employment Act contains specific rules regarding the use of criminal record history information for both applicants and employee. Under the law, an employer is allowed to ask: (1) whether an employee has ever been convicted of any crime; and (2) whether the employee has ever been arrested for any currently pending charges. However, WFEA specifically restricts what the employer is allowed to do with this information.

The key factor that the employer is required to consider is whether the offense giving rise to the arrest or conviction in question is “substantially related” to the circumstances of the particular job. Unfortunately, the statute does not define “substantially related.” However, that term has been analyzed by Wisconsin courts and administrative agencies, and the consensus is that the “substantially related” test looks at the circumstances of an offense (where it happened, when it happened, etc.). The more similar the circumstances, the more likely it is that a substantial relationship will be found. There are certain de facto substantial relationships (i.e., crimes involving children and caregiving jobs), but in most cases, an employer will be required to do a case-by-case analysis.

Using that framework, WFEA sets several rules that Wisconsin employers must follow:

• An employer may ask whether an applicant has any pending charges or convictions, as long as the employer makes it clear that these will only be given consideration if the offenses are substantially related to the particular job.

• An employer cannot make a rule that no persons with conviction records will be employed. Each job and record must be considered individually.

• An employer may only refuse to hire a qualified applicant because of a conviction record for an offense that is substantially related to the circumstances of a particular job.

• An employer may not refuse to hire or discharge a person with a pending charge or conviction simply because other workers or customers don’t want the person with the conviction there.

Co-worker or customer preference is not a consideration.
Although there is no federal law that prohibits discrimination on the basis of arrest or conviction record, the federal Equal Employment Opportunity Commission has taken a special interest in this issue, and has begun to investigate and prosecute cases where the EEOC believes that such discrimination might have a “disparate impact” on certain racial or ethnic groups.

Credit History Information
Unlike criminal record information, Wisconsin law does not specifically prohibit the use of credit history information in making decisions regarding employment. However, as with criminal record information, the EEOC has taken the position that arbitrary use of credit history information may be a violation of federal law.

In addition, there is proposed law at the federal level, and state laws currently in place in a number of different states (including Illinois), that prohibits the consideration of credit history information except in certain specific circumstances.

Those laws generally make it illegal for an employer to inquire about an applicant’s or employee’s credit history, to obtain such a report from a consumer reporting agency, or to use such information in making an employment-related decision, unless: (1) the employee or applicant would be working for a bank or other financial institution or in law enforcement; or (2) a satisfactory credit history is deemed to be a “bona fide occupational qualification” for such position.

In light of all the above, there are some straightforward best practices that an employer can follow if it decides to conduct background checks on applicants and employees.

Conduct pre-employment background checks only when there is a good business reason to do so. Consider the responsibilities of the position, and whether there is any special risk.

Develop and follow a procedure for the use of credit and criminal background check information. Avoid bright-line rules that would exclude “all convictions,” or “all felonies,” or a minimum credit score for a position. Use judgment and discretion in analyzing background check results. Make sure there is always a case-by-base analysis done, and train decision-makers to consider individualized factors.

Conduct background checks in the same manner for all similarly situated applicants. Race-, gender-, or age-based differences in procedures (even if not intentional) will create problems for employers.

Document the decision-making process. If you make a decision based on background information, record exactly why (and when). You don’t always have to be “right,” but you do have to follow the rules.

Erik Eisenmann, J.D., is an attorney at Whyte Hirschboeck Dudek S.C. in Milwaukee and a member of the firm’s Labor & Employment team.

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