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Why check job candidate’s financial history?

JOB DOC

THIS STORY APPEARED IN

January 18, 2012|By Patricia Hunt Sinacole

Q. I don’t understand the reason why some potential employers would check a candidate’s financial background. People need jobs to be responsible for their financial state of being.

A. There are legal issues and limitations associated with requesting a financial background check on a candidate. However, there are some legitimate reasons why some employers conduct financial background checks.

Employers most often conduct financial background checks for jobs in schools, hospitals, financial institutions, airports, or government. The employer wants to minimize risks associated with hiring a new employee. The concern is that an employee with a precarious financial history or a large debt may be more likely to engage in fraud or embezzlement, or vulnerable to bribery or undue influence.

I contacted Jeffrey A. Dretler, a partner in the employment law group at Prince Lobel Tye LLP in Boston. Dretler explains, “Using financial background checks as part of the hiring process is governed by a federal law called the Fair Credit Reporting Act and various state laws. Usually, an employer does not conduct the check itself, but engages a third party who specializes in gathering such information, a consumer reporting agency. The [law] requires an employer utilizing a consumer reporting agency to conduct a financial background check to obtain a candidate’s authorization before doing so.’’

Under the law, employers must provide candidates with a notice of their rights. Employers also must provide candidates a copy of the final report and must notify candidates if they intend not to hire them based on the financial background check. The candidate should be given a chance to clarify or explain this information because, although rare, mistakes can occur.

Dretler says, “Recently, in response to the economic crisis, a number of states [but not Massachusetts] have enacted laws which prohibit an employer from making an adverse hiring decision based on a candidate’s financial situation, except in certain limited situations such as applications for positions with financial institutions, certain managerial roles, positions with access to highly confidential data, and positions where federal law requires a company to examine credit history data.’’