Employers seeking background checks on potential or current employees need to be aware of the Fair Credit Reporting Act (FCRA) and its implications for both them and their employees. The FCRA protects the rights of employees and employment candidates during the background check process when completed by a third-party investigator.
There has been an increase in lawsuits against employees for failing to comply with provisions in the FCRA. Employers should make sure that they are complying with the FCRA during every step of the process, especially disclosure and authorization.
Disclosure Before Ordering a Background Check
Among other things, the FCRA requires employers to provide the applicant with a “clear and conspicuous disclosure” that such a background check, also known as a consumer report, may be obtained for employment purposes. This disclosure must be “in a document that consists solely of the disclosure.” There are only a few permissible additions to this document, mainly consisting of the individual’s signed authorization.
This disclosure must include such information as the background check agency’s name, address, and telephone number; a description of the nature and scope of the background check reports to be ordered, and it should meet all other requirements specified by applicable state or local law.
Issues of Disclosure
The FCRA dictates that the disclosure from a background check must also “stand alone.” This means that it should not be combined with, or even stapled to, an application or other document. The disclosure cannot contain any extraneous information. The most common extraneous information inserted into background checks is a release of liability.
The extraneous language in background check disclosure notifications has itself been the source of many new lawsuits.
While the FCRA is federal law, individual states may have additional requirements for background check disclosures. Employers should check with employment law attorneys in order to assure compliance with any state-required disclosures.
Issues of Authorization
Employers must also obtain authorization, either in writing or by electronic means, from the applicant prior to obtaining the background check report. This authorization form must have wording that is exclusive to the sole purpose of the company’s intent to perform a background check. It cannot be combined with a liability waiver, “at will” language, state law disclosure, or any other language. It must also contain the definition of “consumer report” and state specifically what types of information will be collected about the applicant.
The authorization form also cannot include a question, including a check box, asking about the applicant’s criminal history. This question has also been deemed to fall under “extraneous” information and is not permitted by the FCRA. Such questions may also violate state or local law.
Companies that also use investigative consumer reports are required to provide an additional disclosure specifically about the investigative consumer report. This must be separate from the original disclosure form. Companies should also be sure to check with employment lawyers in order to ensure that they include any state-specific disclosures.
Protection for Companies and Employees
The growing number of lawsuits centered around employers’ failure to comply with the FCRA means employers should be careful during the hiring process to follow all federal, state, and local regulations. Accurate disclosure and authorization are parts of the process and employers should be sure not to gloss over them with improper authorization forms or illegal disclosure.
Working with a third-party service for background checks is a way for a company to show that the hiring process is not biased. Following FCRA disclosure and authorization practices helps protects the rights of potential employees while also ensuring that companies do not leave themselves open to lawsuits.