Staying Out of Trouble with Background Checks

By: Karen Elliott. This was posted Tuesday, February 12th, 2013

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With all of the recent events of workplace violence, not surprisingly,  employers may increasingly  turn to background checks  before making hiring decisions.   

While much has been written about making sure employers do not violate equal protection laws when using background checks, avoiding scrutiny from the EEOC is not an employer’s only concern. Employers must also make sure that they do not violate the Fair Credit Reporting Act (FCRA/Act) requirements.   Failure to comply can open the employer to severe financial and criminal liability, including attorneys’ fees. 

For starters, in government speak, a background check is potentially the same as a credit check trigging the Fair Credit Reporting Act (FCRA) requirements. Although it contains the word “credit” in its title, the FCRA applies to a broad range of employee information obtained from a third-party, including background checks.  Its purpose is to protect an individual’s privacy and to assure the accuracy of the information being acted upon.  The primary goal of the Act as it relates to employment situations is to ensure (1) that individuals are aware that “consumer reports” may be used for employment purposes; (2) that individuals agree to such use; and (3) that individuals are notified promptly if information in a consumer report may result in negative employment decisions initiating a background check.  To comply with FCRA, employers must provide proper notice and obtain proper authorization. 

The FCRA regulates “consumer reports” obtained from “consumer reporting agencies.”    This means that if you are an employer conducting background checks on your employees using a third-party resource, you must comply with the FCRA.  The FCRA does not regulate an employer’s ability to conduct a background investigation by means of the employer directly contacting applicants’ former employers, or otherwise directly checking public documents and records.  The Act applies only when the employer seeks that information through a third-party source.

If the employer is requesting information through a third-party using only existing public records, before obtaining such a report, the employer must notify the employee or potential employee in a clear and conspicuous writing that the employer is obtaining or going to obtain a consumer report for employment purposes.  This disclosure must be made in a document that is separate from any other information or notice.  It may not be included on the application.

If the employer has the third-party verify references, addresses, degrees or other information, a combined written disclosure must be provided. This disclosure must include the same information as above, as well as inform the employee that a request for an investigative report may be made, and should describe the information that the report will seek, including, as applicable, information on the employee’s character, general reputation, personal characteristics and mode of living.  The disclosure must state that such information will be obtained by personal interviews with sources who know the employee.  Finally, the notice must inform the employee of his right to receive a complete and accurate disclosure of the nature and scope of the investigation requested.  If requested, the employer must mail the information within five (5) days after receipt of a written request for the information, and a copy of the Federal Trade Commission’s “Summary of Rights” document must also be provided. 

A revised version of the Summary of Rights document is now required as of January 1, 2013, so make sure you are sending the correct form. 

In addition to the disclosure, employers must obtain written authorization from an employee or potential employee to obtain either a consumer report, an investigate report, or both.  The employee authorization can be given on the applicable disclosure form referenced above. In order to eliminate any confusion, many employers attach the Summary of Rights form to the disclosure notice and in the employee’s written authorization  have the employee give not only permission for the background check, but affirm receipt of the Summary of Rights form.           

 There are very specific FCRA  requirements employers must follow before making an adverse decision based on the report – too detailed to describe here.   Just make sure you follow the adverse action requirements before you take any action. In addition, make sure you follow the EEOC’s guidance as well.

As a final note, many background check companies offer to check social security numbers when conducting the pre-employment background check.  This is not a proper procedure. Social security numbers may only be checked after employment (unless you are properly using E-Verify).  If you do come up with a mis-match after employment, again there are specific guidelines that employers must follow.

If you have any questions about background checks or other employment law matters, the employment law team at Sands Anderson, PC would be pleased to assist your company.

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