Hiring the wrong employee can be costly, particularly in a healthcare environment where theft, disclosure of personal health information, or workplace violence can have a devastating effect on patient care and a healthcare institution’s reputation. If an employee who engages in wrongdoing is later terminated and files a lawsuit, the resulting litigation can add significant additional cost. It is all the more important, then, for healthcare employers to properly screen and evaluate potential hires. Yet, the law places numerous limitations on the questions employers may ask during the hiring process and the information they may consider in making a hiring decision. 

A popular tool for making hiring decisions is an applicant’s credit report. The use of credit checks in employment, however, has recently become subject to increased scrutiny by the EEOC and state lawmakers. In 2011, 29 states proposed legislation prohibiting or restricting the use of credit reports in hiring new employees. Currently, seven states have such legislation on the books (California, Connecticut, Hawaii, Illinois, Maryland, Oregon, and Washington). In addition, any employment decisions based on credit reports, including hiring, retention, promotion or reassignment, must comply with the Fair Credit Reporting Act (FCRA).

Employers should exercise caution before requesting and using credit reports, but state laws generally do allow for exceptions for “substantially job-related reasons” or if the information sought from the employee through the credit report has a “bona fide job related purpose.” Healthcare employers whose employees have access to sensitive patient information may be permitted to use credit reports as part of their background checks (provided, of course, that the employer complies with the federal FCRA). For example, California provides than an employer may consider a credit report for an applicant seeking a job that “involves regular access to specific personal information.” Other state law exceptions may apply more specifically to healthcare workers who handle patient data.

While a credit report may reveal an applicant’s financial history, employers should also be cautious in drawing adverse inferences from a credit report. In the midst of recent national economic challenges, many people have had their credit reports adversely affected through the loss of a job, a home foreclosure, or mounting bills. Opponents of credit checks contend that applicants and employees are in a “Catch 22.” They do not have a job to pay their bills and this negatively affects their credit history. Prospective employers then reject unemployed candidates with poor credit reports, making it more difficult for the candidate to get a job, perpetuating the cycle of unemployment and financial difficulties.  Indeed, federal legislation to prohibit discrimination on the basis of an applicant’s unemployment status currently has been introduced and is being considered by Congress.

Healthcare employers must carefully screen applicants to ensure that they hire the most qualified and best person for the job. There are many methods of inquiring into an applicant’s background, but the employer must do so within the boundaries of the law, including the FCRA and state credit report laws. Healthcare employers must carefully evaluate the position to be filled to ensure that a credit check is lawful or that the position otherwise meets any state law exceptions before running a credit report check on an applicant. 

Photo credit: Pawel Gaul