Checking References - Legal Issues and Potential Employer Liability

R. Mark Fletcher, LL.B

Grosman, Grosman & Gale LLP
© Leader Quest Inc. and R. Mark Fletcher

Introduction

Hiring the right individual for the job is not an easy task. The interview process is fallible and, from time to time, applicants lie to prospective employers. The costs for an employer who hires the wrong employee can be significant. Even where the employer has taken steps to minimize its potential liability exposure by implementing an employment contract that limits an employee’s entitlements upon dismissal, the time and money wasted, together with the potential harm and disruption to the organization, make hiring the right individual the first time paramount.

Employers, not surprisingly, have been adopting more stringent and sophisticated hiring screening processes, such as conducting extensive “background checks” and contacting former employers and references in an effort to learn more about the individual candidate. This article will explore some of the legal issues that may arise when a prospective employer seeks to verify the representations and backgrounds of job applicants and will offer some practical recommendations to employers in the not-for-profit sector.

Human Rights Issues

Employers should be cautious to ensure that their efforts to verify a job applicant’s background and personal information do not lead to inquiries prohibited by human rights legislation. For instance, a prospective employer may be interested in information about a candidate’s work ethic from the individual’s previous employers. If the prospective employer discovers that the employee regularly takes time off work owing to various family responsibilities, and determines that the individual would therefore not be well suited for the role, the prospective employer could face a human rights complaint from the candidate on the grounds that he or she was not hired owing to his or her “family status”.

It makes no difference at law whether the prospective employer obtains the information directly from the candidate or the information is derived from an alternative source. It is the prospective employer’s use of the personal information in the hiring decision-making process and its potentially discriminatory effect on the prospective employee that matters from a human rights standpoint. Employers and prospective employers will not be able to avoid liability simply because the irrelevant personal information was obtained or collected by a third party source, particularly where the prospective employer actively sought the information. It is reasonable for the prospective employer to perform a background check on a candidate provided that the investigation is restricted to information relevant to the responsibilities and bone fide requirements associated with the position and to the representations made by the employee. Employers are cautioned to avoid soliciting personal information about the candidate that is irrelevant to the position and that could taint or influence the hiring decision based on a prohibited ground.

Privacy Issues

In tandem with human rights compliance, employers should also ensure that any background check of a candidate conforms to the applicable privacy legislation and individual privacy rights, which are currently evolving at common law. While not all employers fall within the ambit of the Federal Personal Information and Electronic Documents Act (“PIPEDA”), the Act provides guidance for the collection and use of personal information.

There are ten (10) privacy principles identified in PIPEDA. For the purposes of this article, three principles are particularly important, including:

  1. Consent;

  2. Limited Collection; and

  3. Limiting Use, Disclosure and Retention.

The “consent” principle requires that organizations first obtain an individual’s informed consent in order to collect, use, or disclose the individual’s personal information. In practice, this principle requires that an employer or prospective employer obtain an individual’s consent to the employer’s collection of personal data. There is merit to the suggestion that a job applicant has impliedly authorized the prospective employer to collect the individual’s personal information so that the prospective employer can assess the individual’s candidacy.

Resumes, transcripts, and reference letters are provided by applicants in support of job applications and each contain personal information. While most individuals would consider it reasonable for the prospective employer to verify such information by conducting an independent background check, it is recommended that prospective employers take an additional step and request that the applicant sign a consent form which discloses to the individual the type of background check to be conducted and the reasons for the collection of additional personal information. This will help to minimize the employer’s risk of a potential privacy complaint or civil action following a background check. It will also assist the employer in collecting the information from third parties.

The “limited collection” principle requires that employers only collect information reasonably required to assist them in making the hiring decision. For instance, if the prospective employer contacts a past employer for the purpose of confirming the individual’s position, responsibilities and performance, the employer should not go beyond that by requesting disclosure about the costs of the employee in relation to the benefits plan or information about the individual’s use of vacation days. Collection of the individual’s credit information and history would not be required unless the information was necessary to assess the candidate’s suitability for the position its associated responsibilities. While it is probably reasonable to collect personal credit reports for applicant’s to a position with responsibility for the organization’s finances (i.e. Treasurer or Controller) such information may be totally unnecessary for an applicant to a position where the prospective employee does not have any financial responsibilities. Whether it is reasonable to collect certain types of information depends on the requirements of the position and the facts of the individual case.

The third principle “limited use, disclosure and retention” requires that the personal information collected be used only for the collection purpose identified to the employee and that it not be disclosed to third parties for another purpose. For instance, the employer should not sell the candidate’s personal information or use it for some other purpose not contemplated when consent was obtained. In addition, the employer should only retain the personal information collected for as long as necessary for the purpose for which it is used.

It is recommended that organizations adhere to the above-mentioned privacy principles and seek further privacy compliance advice from a lawyer familiar with privacy legislation to ensure that policies and practices conform to the law.

Practical Tips

  1. It is recommended that not-for-profit organizations limit the background check to information that is reasonably necessary to properly assess the candidates’ abilities to competently perform the position with the additional caveat that irrelevant personal factors and information identified in human rights legislation should not be collected;

  2. It is recommended that not-for-profit organizations obtain a candidate’s written and informed consent to perform a background check. The consent should identify the organization’s purpose for collecting the information and indicate how the information is to be collected. The consent will also include an authorization for third parties to disclose the individual’s personal information; and

  3. Information collected should not be used by the organization for ancillary purposes, which are separate and apart from the purpose for its initial collection.

Conclusion

Not-for-profit organizations need to critically assess the information provided by job applicants. Employers are advised to be skeptical about representations made by job applicants without independent verification. The interview process alone is insufficient. Background checks and reference verification are necessary to protect the employer’s interests but must be conducted in a balanced and sensible manner.

This article may be reproduced for distribution as a learning tool for organizations in the not-for-profit sector provided attribution is made to R. Mark Fletcher, LL.B. of Grosman, Grosman & Gale LLP, Toronto; and to Leader Quest Inc.

This article contains material of general interest only and is not intended to provide legal advice or to replace a consultation with a legal professional on any particular matter. R. Mark Fletcher can be reached at mfletcher@grosman.com or 416-364-9599.