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An accounting clerk’s refusal to submit to a company background check amounted to insubordination, despite the fact that she had worked for her employer for several years without incident and had not been informed when hired of the possibility of a future background check, a Commonwealth Court panel has ruled in an apparent case of first impression. The judges’ decision in ATM Corp. of America v. Unemployment Compensation Board of Review is in line with the holding of the matter’s referee, who concluded that Rachel Petock’s actions were grounds for her to be dismissed without the possibility of unemployment compensation. The UCBR reversed, arguing that Petock had been justified in refusing to sign an authorization form for a background check that would have needlessly intruded on her private life. President Judge James Gardner Colins and Judges Robert Simpson and Mary Hannah Leavitt disagreed. “To follow the board’s conclusion that the authorization form was unreasonably intrusive would require this court to find that preparation of consumer or investigative reports on employees is unreasonable as a matter of law, even though they are expressly contemplated for employment situations,” Leavitt wrote on behalf of the panel. “This we cannot do. [Petock] had access to confidential information and to large sums of money. If a background check of the type identified in [Pennsylvania's] Fair Credit Reporting Act was too intrusive on [Petock], it is difficult to imagine for what employment positions it would ever be appropriate.” Kurt Miller of Thorp Reed & Armstrong in Pittsburgh, who represented ATM Corp. in the matter, said he believes the decision is one of first impression. “I think it’s a very favorable decision for employers and background investigation firms,” Miller said, adding later, “Under the Unemployment Compensation Board of Review decision in this case, employers were in a bit of a quandary when seeking [background check] authorizations from existing employees.” Department of Labor & Industry spokesman Barry Ciccocioppo said his office is reviewing the opinion, and has not made any decision about an appeal. According to the opinion Petock had been working for ATM Corp. for four years when her employment ended in February 2005. The fall-out began early that month when ATM Corp.’s head of human resources informed workers that background checks were to be performed on certain employees, including all 25 members of the company’s accounting team. ATM Corp. told the relevant employees to fill out forms authorizing the company to perform background checks on them and return the completed forms to human resources by mid-February. Petock later testified that she had never been told that a background check would be required as a condition of employment, according to the opinion. An ATM Corp. official acknowledged during testimony that the company’s written work rules, though containing a reference to insubordination as grounds for dismissal, did not specifically mention background checks, and that employees were not given written notice that refusing to participate in the process might lead to a firing. Petock testified that she had a number of reservations when first told of the proposed background check, according to the opinion. She felt that her driving record and personal debts were not relevant to her ability to perform her job, and had heard a rumor circulating around the office that a bankruptcy filing would be grounds for dismissal. Petock further argued that though one of her duties was to process — and sometimes sign — checks worth large sums of money, ATM Corp. kept such close track of those checks that any embezzlement attempt would be futile. A company official testified that ATM Corp. had financial controls in place to prevent misappropriation of funds, according to the opinion. When the deadline date for returning the completed background check authorization forms had come and gone, according to the opinion, Petock was contacted about her failure to do so by a company official, who gave Petock one last chance to fill them out, telling her that she had been a good employee and that the company did not want to lose her. Petock still refused and was fired. “[ATM Corp.] asserts that its decision to do a background check on [Petock] was reasonable, first, because of her access to sensitive and confidential information, and second, because those checks were required by both [its] customers and its business partners,” Leavitt wrote. Citing the Commonwealth Court’s 1982 opinion in Simpson v. UCBR, in which an employer was permitted to search workers’ lunch boxes before they left for the day, Leavitt noted that employment relationships sometimes lead to diminished individual rights, such as privacy. “It is beyond peradventure that [ATM Corp.] has a legitimate need to protect the confidential information of its customers to which accounting department employees, including [Petock], have daily access,” Leavitt wrote. “A background check on those employees is a reasonable way to protect that confidential information, particularly where demanded by [a company's] financial partners and customers.” In a footnote, she called attention to the fact that if an employee were to misuse an ATM Corp. customer’s confidential information, the company could be held liable under the theory of negligent hiring. ATM Corp. attorney Miller said the decision showed the Commonwealth Court has recognized the advent of a “new era of identity theft and security concerns.” But Miller said he would caution employers to put language about possible background checks in writing in employee handbooks in order to avoid a situation like that found in ATM Corp. He also suggested that upon hiring employees, companies have new hires sign background check authorization forms that are prospective in nature, even if companies are unsure they will need to have any performed.

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