Employers FCRA Obligations with Background Checks

Every business wants to find the best possible employees. Often, though, this is easier said than done. It can be tough to tell just from an interview and a resume whether or not a prospective employee is a good fit.

For that reason, it’s common practice for employers to check the background and work history of applicants as part of the selection process.

Unfortunately, this practice can become a legal can of worms if employers disregard their obligations under the Fair Credit Reporting Act (FCRA).

Here is everything you need to know to avoid running afoul of this important piece of legislation.

What Is the FCRA?

The Fair Credit Reporting Act (FCRA) is a federal law. It was originally enacted in 1971 to provide recourse for consumers to dispute inaccuracies on their credit report. Today, it has expanded to include information about a person’s character and reputation, in addition to their credit history.

The Purpose of the FCRA

The FCRA exists, above all, to protect the privacy of consumers. Since background checks and work history are considered a type of consumer report, this law comes into effect whenever an employer requests information about a prospective employee.

Disclosure and Consent

The FCRA requires employers to provide a candidate with a written disclosure when they intend to seek a report. The disclosure form must be separate from other documents provided to the applicant. The job seeker must sign a written consent form before the employer can move forward with getting a report.

Correct Language For the Disclosure and Consent Form

Be careful about the language you use on your disclosure and consent form. Don’t use any language which releases you from liability, and don’t demand that the applicant sign off that all information is correct. In general, less is more when it comes to the language on these forms

Before Taking Adverse Action

In some cases, an employer may decide to disqualify an applicant based on information from a consumer report. Before making this decision, employers are required to provide the prospective employee with two adverse action notices: one before the adverse action occurs, and a second and final one after.

Adverse Action Notices

Once an adverse action has been taken, the company is required to provide the job seeker with notification of the decision, along with complete information about the company which prepared the reports.

The Equal Employment Opportunity Commission (EEOC)

Besides the FCRA, employers need to be aware of their legal obligations regarding Equal Employment Opportunity. It’s illegal to seek reports solely because of a candidate’s national origin, religion, age, color, disability, race, gender, or genetics.

FCRA Violations

The last few years have seen a rapid increase in FCRA-related lawsuits, which can be very expensive for employers. One common violation is including the disclosure and consent forms on other employment documents (instead of on a stand-alone form).

States

As a federal law, the FCRA is in force throughout the United States. However, some states have additional laws on the books which may require two identical stand-alone disclosure/consent forms for applicants. So it’s important to familiarize yourself with the legal requirements of your state.

It is always in an employer’s best interest to learn as much as they can about employees before hiring them. With a little extra care, you can do so without inviting any costly litigation.