Wyche at Work: December Employment Update

Prepared by Ted Gentry
December 2012

2012 in Review:  South Carolina Legislative Changes

On the employment front, 2012 will most likely be noted in South Carolina for the National Labor Relations Board’s bold initiatives to protect employees’ rights to unionize and record unemployment rates. Against that backdrop, the South Carolina Legislature passed two employment-related laws that address both issues.

We will keep you updated on any statutory developments affecting South Carolina employers in 2013.

Looking Ahead to 2013

The beginning of a new year is a great time for employers to examine current employment practices to make sure you are in compliance with state and federal laws.  One place to start is the company bulletin board to make sure that current versions of all required notices are posted. The South Carolina Department of Labor, Licensing and Regulation website is a great resource for obtaining the required posters. Note that the LLR Workplace Poster has been updated with a revision date of July 2012.

We also expect that employers will have to gear up to implement changes in health and medical benefits under the Affordable Care Act. We will address some of these issues, as they affect both small and large employers, in 2013.

Hiring Highlights

Background Checks Part I:  Complying with the Fair Credit Reporting Act

As mentioned in our October edition of Wyche at Work, we continue to highlight legal issues related to hiring trends and recent job growth. As hiring has increased so too has the use of background checks (credit checks or criminal background checks) to make hiring decisions. Employers should ensure that they are complying with the Fair Credit Reporting Act (and note that in addition to familiar obligations, there are new forms that must be used in 2013) when they are utilizing background checks on their applicants or employees.

The Fair Credit Reporting Act regulates an employer’s use of “consumer reports.” Background checks, if you contract with or use a “consumer credit reporting agency,” can be “consumer reports” and therefore fall under the jurisdiction of the Fair Credit Reporting Act. The FCRA outlines required employer action in three circumstances:

  1. before obtaining background checks,
  2. while obtaining background checks and
  3. before taking adverse employment action, including rejecting a candidate or terminating an employee, based on the contents of a background check.

Before obtaining background checks, employers must get consent (and the consent must be particular and address just the background check). While obtaining background checks, employers must disclose their intended use to the company providing the background checks. Before taking adverse employment action based on background checks, employers must send the affected potential employee a copy of the report they used as well as a copy of the potential employee’s rights under the Act.

The Federal Trade Commission used to be responsible for enforcing the Act but that responsibility now falls on the Consumer Financial Protection Bureau. In one of its first major changes to enforcing the Act, the Bureau has released a new set of disclosure forms that must be used beginning January 1, 2013. The most important form for employers is a summary of consumers’ rights under the Act, which is now listed as Appendix K to the Act. Employers must give this form to potential employees before taking an adverse employment action. Employers must also give this form to potential employees before obtaining an “investigative consumer report.” Background checks may qualify as “investigative consumer reports” if they are based on personal interviews concerning a person’s character, general reputation, personal characteristics and lifestyle.

Please let us know if we can help you determine if your background check process triggers the obligations under the Fair Credit Reporting Act or whether we can help ensure that you have the correct and updated consent and disclosure forms.

Background check at issue in recent South Carolina lawsuit

In a recent case involving negligent hiring and negligent entrustment where the plaintiff was wounded by an armed security guard hired by the defendant employer, the Court of Appeals held that the employer’s failure to make a reasonable inquiry as to the employee’s fitness as an armed security guard was not a natural and probable cause of the plaintiff’s injuries. While the court dismissed the employer, it served as a reminder that employers can be subject to claims of negligent hiring and negligent entrustment when a) the company is on notice of an issue that requires it to reasonably inquire into the fitness of a particular employee for a particular position, b) the company fails to inquire and c) that failure to inquire causes legal damage. In this case, the plaintiff failed to provide evidence that established that the failure to inquire proximately caused the shooting that caused the damage. In light of this case, though, and other cases cited by the court, employers may not be able to evade their responsibilities to co-workers, third parties, or the public by ignoring issues that did come up or could have arisen in a background check.


The National Labor Relation Board’s aggressive efforts to inform employees of their right to unionize will most likely continue in 2013. To sum up 2012, the NLRB examined employers’ handbooks and policies and established the following guidelines:

  • At-will disclaimers cannot cause employees to believe that any effort to unionize will be futile;
  • Social media policies should not be construed as limiting employees’ NLRA rights (“concerted protected activity”);
  • Overbroad work conduct provisions should also be examined to be sure that NLRA rights are not impacted; and
  • Policies that absolutely prohibit employees from discussing internal investigations should be excised and rewritten.

The NLRB’s scrutiny is not limited to unionized employers. Non-union employers should re-evaluate current handbooks and policies in light of the Board’s recent direction.

If you have any questions about these or other workplace law topics, please contact Ted Gentry.

J. Theodore (Ted) Gentry

J. Theodore (Ted) Gentry

Ted Gentry focuses his practice on counseling colleges and universities and on appellate litigation. Ted’s career handling complex litigation gives him valuable insights into the ways that today’s decisions affect tomorrow’s disputes.

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