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FCRA Compliance Blueprint for Employer Background Checks

The Fair Credit Reporting Act (FCRA) and its effect on employment practices are finding new court scrutiny, case precedents and employer confusion. The following blueprint simplifies employer “need to know” information. 

The Federal Trade Commission (FTC) enforces the FCRA. As of August 2013 the FTC’s Bureau of Consumer Protection advises employers to perform the following steps before conducting a background criminal, court or credit check:

1) Provide the applicant or employee a written stand-alone notice, outside of the employment application, which advises of the pending background check.
2) Gain written permission from the applicant/employee which includes forward moving checks as performed.
3) Certify compliance to the company from which you are getting the applicant or employee's information. You must certify that you 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.

Thereafter, according to the Bureau:  “Before you reject a job application, reassign or terminate an employee, deny a promotion, or take any other adverse employment action based on information in a consumer report, you must give the applicant or employee:

Notice that includes a copy of the consumer report you relied on to make your decision; and
Copy of “A Summary of Your Rights Under the Fair Credit Reporting Act.” 

Giving the person the notice in advance gives the person the opportunity to review the report and tell you if it is correct.

If you take an adverse action based on information in a consumer report, you must give the applicant or employee a notice of that fact – orally, in writing, or electronically. An adverse action notice tells people about their rights to see information being reported about them and to correct inaccurate information. The notice must include:

Name, address, and phone number of the consumer reporting company that supplied the report;
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
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.”

According to the Bureau, “Employers who use ‘investigative reports’ – reports based on personal interviews concerning a person's character, general reputation, personal characteristics, and lifestyle – have additional obligations under the FCRA. These obligations include giving written notice that you may request or have requested an investigative consumer report, and giving a statement that the person has a right to request additional disclosures and a summary of the scope and substance of the report. (See 15 U.S.C. section 1681d(a),(b)).” 

Additional information is available at…
http://business.ftc.gov/documents/bus08-using-consumer-reports-what-employers-need-know

State and federal courts have recently set case law enforcing these notices and rights of appeal as related to not only agency checks, but also employment references and interviews. Several employers have found themselves embroiled in legal battle, settlements, fines and adverse publicity specifically over failure to notify candidates of their rights to be provided notice or appeal. A few of these found additional EEOC complaint by treating protected classes dissimilarly, thereby creating discrimination. 

In light of these and other risks, it becomes increasingly important to manage incoming and outgoing background check data. Employers who publish a policy denying reference checks will continue to find a demotivation and “What happens in Vegas…” attitude among staff. Employers must control information without avoidance of information.

Employers cannot ignore responsibilities for candidate background checks and have been held responsible for negligence by ignoring reasonable care in hiring. Additionally, bona fide occupational qualifications (BFOQs) remain legitimate hiring criteria. Employers need to conduct these checks lawfully and fairly with consideration to comprehensive risk management.  

Crafting of policies considers the staging of notice, probabilities of disqualification, hiring steps, differentiation in screening among company job descriptions and unique employer compliance strategies. HRS recommends the incorporation of full scale screening permission, most recently including job-specific Internet records research, into the crafted notice. HRS is available for custom crafting of expert policies and permission/notice forms according to unique employer needs and practices.


Jessica Ollenburg - Tuesday, August 13, 2013