The pluses and pitfalls of background checks

A decade ago when Scottsdale, Ariz., police uncovered a local fraud ring, they learned that breached information came from an unexpected source: an auto dealership finance manager.

A background check likely would have paid off for the dealership, Henry Brown Buick-GMC-Pontiac in suburban Gilbert.

But even though background checks may seem like an obvious way to protect dealerships from hiring untrustworthy employees, some dealerships don't use them. And dealerships that do rely on background checks must navigate a complex web of federal and state regulations that could lead to legal trouble if not followed properly, experts warn.

Henry Brown Buick-GMC-Pontiac's finance manager had 17 felony convictions for crimes such as burglary, credit card theft and drug violations. Management knew that he had been in prison but was unaware of the extent of his convictions, the detective and chief of the county's fraud and identity theft bureau said in 2011.

"This guy is the most magnanimous person you would meet," Maryann McKessy, chief of the Fraud and Identity Theft Bureau of the Maricopa County Attorney's Office, said of the finance manager at the time. "He's a spin master. That's why he's so good at his job."

Especially for positions that involve handling money and customer information, background checks can be valuable, Amanda Turner, human resources administrator for Worden Martin Inc., a dealership group in Champaign, Ill., told Automotive News late last year.

With so much information given to the store, customers trust the dealership to keep it safe, she said. But without a background check, some dealers are letting private information end up in the wrong hands.

For example, last year a Connecticut dealership, Lee Partyka Chevrolet, learned its finance manager embezzled $80,000 from the store. The embezzlement was not the manager's first brush with the law. He also stole $1.4 million from his former employer. He avoided jail time by cooperating with the state attorney's office in the murder trial of a former high school classmate.

Employers that use background checks, depending on the state, must take multiple factors into account if they receive a negative report on a candidate, Kathryn Carlson, vice president of human resources management products at KPA, an F&I compliance services company in Lafayette, Colo., wrote in an email to Automotive News. They must consider time since conviction, age at the time of conviction, efforts at rehabilitation and applicability of the offense against the position requirements.

"Many states require that background checking must be done after an interview so that employees do not filter out candidates only on the basis of the background check," Carlson wrote. Job candidates must give potential employers permission to conduct a background check, and if the candidate is rejected on the basis of that background check, he or she "must also receive a copy of the report and be given the opportunity to dispute the results," Carlson said.

Carlson encourages clients to retain legal counsel to review policies on background checks in the employment process and to provide training on the use of the information to any individuals at the company who have access to it.

"Having a job description for each position so that the skills, experience and job duties are clearly defined is the next step," Carlson wrote. "It is very important to have a consistent process for hiring that may include tools such as background checking, reference checking, skills assessment, personality assessment."

"Looking at it purely from a selection science standpoint, the fact that someone has committed a misdemeanor, or even a felony, does not mean they're not going to be able to perform at a high level for the role you're hiring them for," he said.

That same sentiment has propelled states to pass laws banning or severely limiting the use of criminal history and credit history in the employment process.

For example, at least 33 states have adopted a policy that prohibits employers from removing applicants before they are considered for an interview.

If a dealership decides to do a criminal background check, it's imperative to verify hits in the national databases against a local search at the courthouse level, Robinson said.

In many cases, national criminal databases are inaccurate, Robinson said, but local searches are generally more expensive and take longer to complete.

"If I want to hire this salesperson tomorrow, but it's going to take me six days to get a courthouse result back, most dealers don't want to wait six days," he said.

"So they don't do the local search. That's when you can get into legal trouble if employment is denied, and the candidate goes, 'I was never convicted of a crime — that was expunged.' "