By Michael Cormier, Attorney at Law

Would you reject a job candidate who has filed for bankruptcy? Would it color your opinion of that candidate’s reliability? Sense of obligation? Morals?

If you answered “Yes”, then I suggest you read on to the end of this article. The list of five people you would have rejected might surprise you.

The intention here is not to trip you up with trick questions. It’s only to get you to think hard about the real implications of a person’s financial standing vis-à-vis his qualification for employment. You see, in this age of instant information there’s a lot we can find out about prospective employees. But in the back of our minds we should always be asking, “Do I want to?” Better yet, “Do I need to?”

Nothing illustrates this better than credit checks. They’re so easy to obtain. As long as we have the candidate’s signature on a permission form, and a social security number, it’s just a few clicks away.

But do we really need to?

We Americans consider the privacy of our personal finances to be nearly as sacrosanct as what we do in the privacy of our bedrooms. Most of us don’t think twice about agreeing to a drug test for an employer; but when asked to lay open our naked financial picture for prying eyes to view in all its glorious (or gory) detail, we hesitate.

Yet we also live in a country where credit drives our economy—and our lives—more than ever before. And since it’s such an important part of our lives, a personal credit report can be seen as a window on a prospective employee’s personality. Hence, from the employer’s perspective it may be a necessary evil, much like those full body scans at the airport.

Considering the conflict between privacy and risk, it’s no wonder the debate rages on. In fact, the topic has generated enough concern that most states have considered bills designed to at least restrict the use of credit checks. For example, Massachusetts House Bill HB3518 would severely limit an employer’s right to reject a candidate based on his credit, “unless the information in the individual’s credit history or credit report directly relates to a bona fide occupational qualification.”

What does this language mean? Probably under HB3518 a financial services company seeking to hire a financial planner—especially one who would have access to client and company funds—would be justified in doing a credit check. The reasoning is that a person whose personal finances are in jeopardy might be tempted to steal. By the same reasoning, the CIA would not hire someone who is careless with money, as he might be tempted to sell government secrets. The “bona fide occupational qualification” in both of these scenarios is trustworthiness.

But what about the low-level clerk with no access to company funds or secrets? Is a credit check really necessary? You might end up discarding a highly qualified employee who poses no real risk to the company.

This is how the debate shakes out: It’s always prudent—and sometimes vitally necessary—to reduce the risk of hiring someone whose personal life will impact their job performance. A credit check can sometimes help determine that. Other times it may not help at all, or might even cause the rejection of a highly qualified prospect who poses no risk whatsoever.

Some HR experts would say go ahead with a credit check if it’s deemed necessary, but then be prepared to give the applicant a chance to explain anything negative on the report. Some say not to even bother asking for explanations. If something goes wrong, this reasoning goes, having hired that person with knowledge of his financial background could lead to a negligent hiring lawsuit.

These are all things to consider when thinking about running credit checks. Here’s another one: if you decide to investigate employee credit, don’t go it alone. There are many other considerations, like running afoul of the Fair Credit Reporting Act (FCRA), possible discrimination charges by prospects who feel they were singled out, and ever-changing state laws that might impact what you can and can’t do with the information.

It’s best to discuss your options with a reputable, full-service background investigation firm like Hire Authority. It’s easy to do. Just call (508) 230-5901, or go to www.hireauth.com.

And finally, as promised, here is that list of people who we all might agree did pretty well in their chosen field in spite of a bankrupt past:

1. Abraham Lincoln;
2. Mark Twain;
3. Harry S. Truman;
4. Henry Ford;
5. Walt Disney.

The foregoing should not be construed as legal advice. Employers should always consult their own legal counsel for advice on labor and employment matters.