With today’s technology making a wide variety of personal information easily accessible, employers may uncover unprecedented data about applicants and employees with limited effort. Whether through a casual search or a thorough background investigation conducted by a third party, employers can obtain significant background information with the click of a mouse.

There is a growing sentiment that employers should not be permitted to use technology to unduly intrude into applicants’ or employees’ privacy. Laws and court decisions require consent to background investigations, prohibit gathering certain medical information, and restrict the use of information gathered through social networking sites like Facebook. Courts and fair employment agencies have also been wary of inquiries that may be seen as discriminatory, such as convictions for crimes unrelated to the job in question, which can disproportionately impact certain protected classes.

At the same time, employers rightly wish to hire the best qualified applicants. Information such as an applicant’s physical abilities, financial responsibility, or other habits can be relevant to whether the applicant has the qualities needed to succeed in a position. Recently, in NASA v. Nelson, the United States Supreme Court weighed in on the balance between the government’s interest as an employer in selecting the best candidates, and the privacy rights of those candidates.

NASA v. Nelson

NASA contracted with the California Institute of Technology (CalTech) to operate its Jet Propulsion Laboratory. Workers in the laboratory were CalTech employees working as contractors for NASA. For many years, the contractors were not subject to background investigations, even though federal employees working at the same facility were.

In 2004, the federal government adopted a uniform practice of requiring background investigations for all contract employees. The contractors at the Jet Propulsion Laboratory were required to complete standard forms requesting basic background information. Some of the contractors objected to a portion of a background questionnaire that asked about recent drug use and counseling services received for the drug use. They also objected to open-ended questions on a form sent to each contractor’s references. The form asked about the contractor’s “honesty or trustworthiness,” as well as whether the reference knew of any “adverse information” about the contractor.

The objecting contractors brought a lawsuit, claiming the background check violated their constitutional right to “informational privacy.” Although the federal Constitution does not contain an express right to informational privacy, the contractors argued that cases interpreting the Constitution have found such a right.

In granting the contractors a preliminary injunction, the Ninth Circuit Court of Appeals held that the follow up question about counseling for drug use, as well as the open-ended questions to references, were not “narrowly tailored” to meet the government’s interest in verifying the contractors’ identities and ensuring the facility’s security. The Ninth Circuit thus concluded these questions likely violated the contractors’ informational privacy rights.

However, the U.S. Supreme Court rejected the Ninth Circuit’s ruling. The Court assumed, without deciding, the contractors had an informational right to privacy, but held the challenged inquires were reasonable. The Court relied on the government’s legitimate interests as an employer, stating, “Like any employer, the Government is entitled to have its projects staffed by reliable, law-abiding persons who will ‘efficiently and effectively’ discharge their duties.” The government’s inquiry into counseling for recent illegal drug use legitimately sought to separate current illegal drug users from those seeking to overcome their problems. Moreover, asking references, “broad, open-ended questions about job suitability is an appropriate tool for separating strong candidates from weak ones.” The reasonableness of this approach, the Court found, was illustrated by the pervasiveness of such questions in the public and private sectors.

Finally, the Court held that the government had no duty to show its questions were “necessary.” It could ask such questions because they were a reasonable means to identify the contractors’ suitability for their jobs.

NASA v. Nelson in the Private Sector

Although NASA v. Nelson involved the federal government’s right to information under the federal Constitution, its principles are important in the private sector. While the U.S. Constitution places limits on the government, the California Constitution also limits private employers’ ability to intrude on applicant and employee privacy. In the past, California courts have relied on cases based on the U.S. Constitution to interpret the California constitution’s privacy limits. Therefore, the NASA case may help define the “reasonable” expectation of privacy and the employer’s legitimate interests in the private sector, too.

Read in conjunction with current case law, the NASA case suggests the bar is particularly low for applicants as compared to current employees. In Loder v. City of Glendale, a case involving applicant drug testing, the California Supreme Court recognized that applicants have a diminished expectation of privacy compared to employees. An employer does not have the opportunity to observe an applicant’s behavior. So the City of Glendale’s pre-employment medical examination—including a drug test—was a reasonable method for the City to address potential problems like absenteeism, safety violations, and reduced productivity.

Although subsequent case law suggests drug testing should be conducted only if related to the job, the Loder case, read in conjunction with the broad discretion granted to the federal government in NASA, suggests courts are now more likely than ever to grant employers significant discretion to obtain applicant information.

Other Limits on Obtaining Background Information

Even though the NASA case suggests employers may ask appropriate information about applicants’ and employees’ backgrounds, other laws and rules restrict an employer’s ability to gather information. Therefore, employers must be careful to seek information relevant to the job in question, without broadly seeking other personal data.

For example, many employers conduct pre-employment, post-offer medical or psychological examinations. While medical examinations are appropriate for select positions that require specific physical abilities—such as a position in a warehouse requiring the ability to lift, bend, squat, and carry heavy items—employers risk violating anti-discrimination laws when they conduct blanket medical screenings. If an employer learns information about an applicant’s disability, the burden will be on the employer to show it did not take the information into account when making a hiring decision.

Psychological examinations can be problematic, because they can disproportionately affect applicants in certain protected classes. For example, in one case, Ford Motor Company settled a lawsuit based on a psychological test that disproportionately affected African American applicants, because Ford chose not to utilize less discriminatory alternatives that were available.

Employers are not just limited in their abilities to gather information through physical examinations. Even information available from a computer terminal can increase potential legal liability. For example, under the federal Fair Credit Report Act, an employer cannot use a third party credit reporting agency to obtain an applicant’s credit or criminal history without the applicant’s consent. Likewise, employers cannot make employment decisions based on information gathered from the “Megan’s Law” website, a state registry for registered sex offenders.

Guidelines for Employers

To review applicants’ backgrounds without infringing on privacy or other rights, employers must think critically about their legitimate business needs and seek information relevant to an applicant’s ability to do the job. Employers should review the hiring practices at all stages with this goal in mind.

First, employers should examine their job applications to ensure legal compliance. For example, in many states, an employer may be limited in its ability to obtain and use an applicant’s criminal history. Yet employers often have uniform application forms that do not account for these limits. In a recent California class action lawsuit, applicants sued Starbucks for seeking criminal history information to which it was not entitled. Such litigation is costly and easily avoided by crafting a job application that complies with legal requirements.

Second, employers should establish processes for conducting interviews that seek job-related information and treat applicants consistently. Often, interviewers must be trained to identify prohibited questions or subjects. For example, simple and well-intentioned icebreakers like, “What year did you graduate from college?” or “Do you have kids?” are not appropriate because they may lead the applicant to disclose information the employer should not take into account when making a hiring decision. Moreover, asking select candidates these questions impedes an employer’s ability to show it did not “single out” anyone for discriminatory treatment.

Third, employers must create a systematic method for conducting tests and background investigations. Employers should base their decisions to perform such tests and investigations on logical criteria, such as job function. Also, to reduce costs and limit potential legal claims, employers should conduct such tests and examinations only after advancing applicants beyond the initial screening stages. Medical examinations, in particular, should not be conducted until an applicant has received a contingent job offer.

Also, employers should ensure applicants understand from the outset that background screening or medical examinations will be part of the hiring process. Providing notice, and requesting consent, will reduce an applicant’s ability to claim a reasonable expectation of privacy down the road. Additionally, upfront notice will deter applicants who do not want to provide the information.

Employers should also consider whether to hire a third party to conduct background investigations. If so, the employer must comply with certain notice and consent requirements. However, reputable companies will know the legal requirements, be well-equipped to perform the desired screening at reasonable cost, and may help reduce the possibility that the employer will gather information it should not. Of course, because the employer is still ultimately legally responsible, it must nonetheless ensure the third party does not seek information to which the employer is not entitled.

Finally, employers should be aware that current employees, as opposed to applicants, have a heightened expectation of privacy under California law. Accordingly, employers should create comprehensive measures to screen candidates at the beginning and recognize that if they do not, they will probably be limited in their ability to obtain information once the applicant becomes an employee. While the NASA case granted the federal government broad discretion to seek background information about current contractors, the federal government sought to do so as a uniform security measure following a recommendation by the 9/11 Commission. In other words, the government had a strong and legitimate interest in conducting the investigations, and an employer seeking to do the same for its current employees must also be able to show a strong interest in doing so.

In short, employers should review their hiring practices to ensure they comply with the law, but at the same time gather information relevant to an applicant’s suitability for the job. While the NASA case reaffirms an employer’s legitimate right to obtain background information, without violating an applicant’s right to privacy, employers must be mindful of other legal safeguards that prevent them from obtaining such information without careful consideration.