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Supreme Court offers guidance on background checks in NASA v Nelson

January 23rd, 2011  |  Sheryl Allenson

Although background checks are often central to negligent hiring cases, last week’s US Supreme Court decision focusing on the investigations did not foray into this hotbed of litigation. Instead, the Court last week analyzed whether certain portions of a background check violated individuals’ Constitutional right to “informational privacy.” The Court ruled in favor of allowing the federal government to conduct background investigations on federal contract employees, which included such questions as whether the individuals had received counseling or treatment for illegal drug use within the past year and asked open-ended questions of employees’ references (NASA v Nelson, January 19, 2011, Alito, S). The High Court held that the background investigation did not violate the federal contract employees’ Constitutional right to “informational privacy” where the inquiries were reasonably related to the government’s interest, and where the documents produced were protected from disclosure by the Privacy Act. However, although the Court did not directly address negligent hiring, its dicta may well be relied upon for guidance in determining not only certain employers’ rights with respect to background checks, but their responsibilities as well.

The NASA background checks at issue were twofold. One set of questions was directed to the employee, and requested information on whether the employee had, “used, possessed, supplied, or manufactured illegal drugs” within the past year. As a follow up, the background check asked questions regarding counseling or treatment received for illegal drug use. Thereafter, the employees’ references were forwarded a form to complete, which included questions that asked whether the reference had any “adverse information” concerning areas relating to the employees, including “violations of the law,” “financial integrity, “ “abuse of alcohol and /or drugs” “mental or emotional stability,” “general behavior or conduct, “ or “other matters” The inquiry provided space for explanations for any affirmative answers, as well as for any additional positive or negative information.

The employees at issue in NASA were federal contract employees of CalTech, which was a federal contractor that operated NASA’s Jet Propulsion Lab. Interestingly, civil service employees were always subject to the background checks, while federal contract employees were not. However, following a mandate to bring all employees under the same security clearance, a group of the CalTech employees brought suit alleging that their Constitutional rights to informational privacy were violated. While the district court upheld the use of the background investigations at issue, the Ninth Circuit overruled that decision, holding that the while questions regarding recent drug use were allowable, the “treatment or counseling” inquiry did not further any legitimate interest. Further, the questions posed to references were not narrow enough to meet only the government’s interests in ensuring security.

The Supreme Court disagreed, considering the government in the context of its role as “proprietor and manager of its “internal operation,” Noting that investigations similar to those at issue in this case have been required of civil service candidates for decades, the Court stated that “[t]his history shows that the Government has an interest in conducting basic background checks in order to ensure the security of its facilities and to employ a competent, reliable workforce to carry out the people’s business. The interest is not diminished by the fact that respondents are contract employees”

The High Court ruled that the challenged questions regarding illegal drug use were reasonable, employment-related inquiries that further the Government’s interests in managing its internal operations, and that in context, the “treatment or counseling” question is also a reasonable employment-related inquiry. It is a mitigating factor in credentialing, the Court noted, and important for the employer to separate out individuals who are taking steps to “address and overcome” their problem. Similarly, the reference form’s open-ended questions are reasonably aimed at identifying capable employees, the Court held. The test of the reasonableness of the broad questions, the Court opined, can be garnered from their “pervasiveness” in both the public and private workforces.

The Government “has a strong interest in conducting basic background checks into the contract employees minding the store at JPL,” the Court wrote. Such analysis could have bearing in the realm of negligent hiring. With the Supreme Court’s statements arising out of NASA, the Court makes clear employers’ sound hiring decisions may rest upon background investigations; thus the Court’s dicta may find its way into negligent hiring cases seeking to hold employers to a standard of conducting at least basic background checks.