Background Checks: What Employers Need to Know

If you plan to use consumer reports (or employment background checks) to make employment decisions like hiring, promotion, reassignment and retention, be aware that you must be in compliance with the Fair Credit Reporting Act (FCRA). Read on to learn what that entails.

Compliance needs to occur at all stages of the consumer reports process as follows:

Before getting a consumer report, employers must:

  • Tell the applicant or employee (in a stand-alone, written format) that they might use information in their consumer report for decisions related to their employment. This notice cannot be in an employment application.

  • Get written permission from the applicant or employee. This can be part of the document they use to notify the person that they will get a consumer report. If the employer would like the authorization to allow them to get consumer reports throughout the person’s employment, that must be said clearly and conspicuously.

  • Certify compliance to the company from which they are getting the applicant or employee’s information. They must certify that they:

    • notified the applicant or employee and got their permission to get a consumer report;

    • complied with all of the FCRA requirements; and

    • will not discriminate against the applicant or employee or otherwise misuse the information, as provided by any applicable federal or state equal opportunity laws or regulations.

Before taking adverse action (rejecting a job application, reassigning or terminating an employee, denying a promotion, etc.) based on a consumer report, employers must give the applicant or employee

  • a notice that includes a copy of the consumer report they relied on to make their decision and

  • a copy of A Summary of Your Rights Under the Fair Credit Reporting Act found here.

After taking an adverse action, an employer must give the applicant or employee a notice of that fact orally, in writing or electronically. This adverse action notice must include:

  • the name, address, and phone number of the consumer reporting company that supplied the report;

  • a statement that the company that supplied the report did not make the decision to take the unfavorable action and can’t give specific reasons for it; and

  • a notice of the person’s right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get an additional free report from the company if the person asks for it within 60 days.

While consumer reports can be helpful for employers making employment decisions, they should be utilized very carefully and within the guidelines of the FCRA.        

Source: FTC.gov

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