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April 7, 2004
Safe Hiring: Get Applicant Consent Before Checking References

The old joke is that the assets of the agency go up and down in the elevator every day. In other words, people (along with clients and reputation) are an agency's most important asset, and hiring and keeping key talent has never been more important.

Because many applicants are great "salesmen," you, as the hiring executive, may feel the need to call for references from people not provided by the candidate. This makes sense: You thoroughly research prospective clients, client competitors, consumers and entire industries. Why wouldn't you give an equal effort to researching your own people? But can conducting reference checks with people not provided by the candidate subject an agency to liability?

Calling on references not provided by a candidate raises two legal concerns.

Two legal risks to avoid:

1) Invasion of privacy.

State laws protect a person's privacy, and an applicant could bring an invasion of privacy action if you contact references not provided by the applicant. To reduce the risk of invading a person's privacy, make sure your questions are job related. Ask if Mr. Applicant was a good Chief Marketing Officer. Or if he usually showed up to work on time. Or if he gave good Powerpoint presentations to management. But don't ask what bars he went to. Or whether he was sexually promiscuous. And avoid other impermissible questions—questions you couldn't ask the prospect directly—such as questions about age, religion, sexual orientation and similar "protected classes."

2) Fair Credit Reporting Act.

You wouldn't think reference questions could implicate the Fair Credit Reporting Act (FCRA), but they can. The act provides that any written, oral or other communication by a consumer reporting agency bearing on a consumer's [person's]—character [or] general reputation—used for the purposes of serving as a factor in establishing the consumer's eligibility for "employment" is subject to FCRA. If the collection of such information is subject to FCRA, then (i) the consumer must authorize the collection of the information in writing in a separate document signed by the consumer, (ii) the consumer must be given a written statement as to the consumer's rights, and (iii) before any adverse action on the basis of the report is taken, the consumer must be provided a copy of the report and additional statement of the consumer's rights, which specifically includes the right to challenge the accuracy of the report.

As you can see, being subject to the FCRA could make it very difficult to collect relevant information about an applicant, and cause providers—such as former employers—to hesitate to give out unfavorable information.

Fortunately, an advertising agency will almost never be deemed a consumer reporting agency, so the collection of applicant information by the Agency will usually not be subject to FCRA. But if a research firm collects the information, the report may be covered by FCRA. And some states, like California, have state laws similar to FCRA that may cover an agency's efforts to collect information about applicants.

What if the Agency uses a recruiter, like Talent Zoo, to find and research a candidate? A recruiter acting on behalf of an Agency is subject to a less burdensome portion of FCRA. If the recruiter (i) is reporting on a prospective hire, (ii) the candidate consents orally or in writing to the background check and (iii) the recruiter advises the applicant that he has the right to be advised of the information provided to the Agency, the recruiter and the Agency should generally meet the requirements of FCRA applicable to recruiters. Another advantage of using a recruiter is that the recruiter isn't required to tell the applicant the source of any comments. Result: references may be more responsive.

Applicant consent reduces legal risks.

Even if you scrupulously avoid asking improper questions or violating the Fair Credit Reporting Act, there is still some risk of a claim. So the safest approach is to get an applicant's consent before you start to call for references. This consent can take the form of an Authorization to the Employment Application. It authorizes the Agency to make broad inquiries about the candidate and includes a release of claims against any third parties providing such information (encouraging references to provide information).

Here's some model language I drafted:

"I hereby authorize the Agency and its employees, agents and representatives to obtain any and all information from former Employers (including from any employee, agent, representatives or former employee, agent or representatives of such Employers) whether or not I provided such individuals as a reference. This information may include, but is not limited to, performance, achievement, attendance, disciplinary information, reason for termination, and work history.

I authorize the Agency to provide a copy of this document to any such former Employer (or current or former employee or agent thereof) and direct such party to release such information to an authorized employee of the Agency regardless of any agreement between us to the contrary or any other policy to the contrary.

I release any former employer and any individual, including records custodians, from all liability of any type or nature, arising as a result of compliance with, or attempts to comply with, this Authorization."

While the Release may not provide 100% protection or cause all former Agencies to release information, it should go a long way to assist you in your efforts to get a fuller picture of the applicant. If you're wondering, yes, you may refuse to hire an applicant based on his or her refusal to sign this kind of authorization form.

Good luck and happy hiring.

Disclaimer: This Article provides general coverage of its subject area and is not meant to provide legal advice. Your situation will depend on specific facts and legal analysis. Please consult with your attorney.

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Gavin McElroy is a partner with Frankfurt Kurnit Klein & Selz, PC, a leading media and entertainment law firm. Gavin advises executives and companies in the advertising, marketing, and PR industries on employment, transactional, advertising, and intellectual property issues.
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