The U.S. Supreme Court recently upheld the right of the federal government to investigate the background and honesty of federal contract employees at NASA's Jet Propulsion Laboratory in Pasadena, CA.

Does the court's decision impact in any way the rights and practices of private employers to investigate the background and honesty of their applicants and employees?

The case – National Aeronautics and Space Administration (NASA) vs. Nelson et al – was triggered when the U.S. Department of Commerce mandated that contract employees with long-term access to federal facilities complete a background check.

Specifically, NASA mandated that contract employees complete a standard background check, one long used for direct employees. The process begins with the employee filling out a standard form. It asks if the individual has "used, possessed, supplied, or manufactured illegal drugs" in the last year. If so, the individual must provide details. The individual also must sign a release authorizing the government to obtain personal information from schools, employers, and others during its investigation.

It's much like the background check procedure used by hundreds-of-thousands of private employers throughout the United States and Canada.

NASA's demand triggered a negative response.

Twenty-eight contract employees at NASA's Jet Propulsion Laboratory, operated by the California Institute of Technology, refused to cooperate in a background check... and sued the government. They argued the background checks – which included drug use investigation and honesty checks – would violate their constitutional right to "informational privacy." (Informational privacy – also known as data privacy -- refers to an individual's right to privacy of personal information and personal data.)

The high court, in its recent decision, backed up the government's right to do background checks and to require applicants and employees to cooperate. Following are key elements of the court's unanimous decision:

• "The questions respondents [NASA contract employees] challenge are part of a standard background check of the sort used by millions of private employers."

• "The Government itself has been conducting employment investigations since the earliest days of the Republic... Since 1871, the President has enjoyed statutory authority to 'ascertain the fitness of applicants' for the civil service 'as to age, health, character, knowledge and ability for the employment sought..."

• "... 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 challenged questions... are reasonable, employment-related inquiries that further the Government's interests in managing its internal operations."

• "In context, the drug-treatment inquiry is also a reasonable, employment-related inquiry. The Government, recognizing that illegal-drug use is both a criminal and medical issue, seeks to separate out those drug users who are taking steps to address and overcome their problems."

• "... open-ended questions are reasonably aimed at identifying capable employees who will faithfully conduct the Government's business... The reasonableness of such questions is illustrated by their pervasiveness in the public and private sectors."

What You Can Learn From This NASA Decision...

Although this NASA vs. Nelson decision applies to the legality of government doing background checks, private employers can learn from it. For example:

On the one hand... the Court's decision may strengthen the employer's defense in any charges of violating discrimination laws when doing background checks for applicant criminal histories and credit reports.

The Equal Employment Opportunity Commission (EEOC) is moving to question and restrict employer's use of criminal record checks and credit reports as violations of discrimination laws. Though the Court's decision doesn't involve the anti-discrimination in employment laws, in the decision the Court clearly states the legitimate interest the government – in its role as an employer -- has in checking applicant and employee backgrounds.

If the EEOC challenges a private employer's hiring practices involving background and credit checks, the Court's decision may be helpful in a defense.

On the other hand... though private employers have the right to perform background checks and credit checks on applicants and employees, keep in mind the federal and state laws that do regulate and limit the collection and use of such personal and background information.

Some examples:

The federal Fair Credit Reporting Act (FCRA). This law requires employers to use caution and great care when making hiring, promotion, reassignment and termination decisions based – in whole or even just in part – on information obtained from a third party background check or consumer reporting service.

To avoid civil penalties, plus actual damages, court costs and attorney fees, here's what an employer must do when using a third party service to do a background check and/or credit check on an applicant or an employee:

1. Disclose in a separate document (which is solely the disclosure) that a consumer report may be obtained for employment purposes.

2. Get written authorization from the individual to obtain the report.

3. Before taking adverse action based – in whole or in part – on information in a consumer report, notify the individual (1) that you plan to take adverse action, (2) provide a copy of the report to the individual, (3) provide the individual with a notice of his or her rights under FCRA, and (3) provide the individual with the name, address and phone number of the third party service from which you got the report.

The third party service you use to get information on an applicant or employee should provide you with the proper forms and documents in order to comply with the FCRA.

Note: Don't let the name of this Act fool you. It covers more than fair credit reporting. The employer's obligations under FCRA apply to requests for criminal records, motor vehicle records, employment verifications, credentialing checks, and other types of information gathering.

• The Americans with Disabilities Act (ADA). This law restricts the employer's collection of medical information during the hiring process and during employment.

• Criminal history state laws. Various state laws regulate the employer's use of criminal records. Some even make ex-offenders a "protected class." Before probing into applicants' criminal histories and setting limits on the hiring of applicants with criminal histories... check the limitations of your state's law.

• Credit history limitations. At least four states ban or severely limit the use of credit history information in hiring. The states are Washington, Oregon, Hawaii, and Illinois. Other states are considering similar laws. And the EEOC is moving to restrict the use of credit history information by employers.

[NOTE: Information and guidance in this story is intended to provide accurate and helpful information on the subjects covered. It is not intended to provide a legal service for readers' individual needs. For legal guidance in your specific situations, always consult with an attorney who is familiar with employment law and labor issues.]