Any business that performs background checks on employees or potential employees must comply with the Fair Credit Reporting Act, or FCRA. The FCRA is a federal law designed to promote accuracy, fairness, and privacy in the use of people’s information, including in employment background checks. Failing to follow the FCRA’s requirements can expose your business to lawsuits, fines, and damage to your reputation. What requirements does the FCRA have, and how can you stay in compliance with them? Keep reading to get a quick overview of the key points.
What Does the FCRA Apply To?
The FCRA applies whenever an employer uses a third-party background check company to obtain background information on a job candidate or employee. This includes criminal history reports, employment and education verification, credit reports, and driving records. Even charities and staffing agencies are subject to these requirements if they use a third-party screening service.
Requirements for Disclosure and Authorization
One of the most important requirements from the FCRA is disclosure. Before you order a background check, you must provide the employee or applicant with a clear, standalone, written notice that states you will be obtaining a background check report as part of your hiring process. This means the disclosure cannot be buried in an application or mixed in with unrelated information. Additionally, you must obtain the person’s written authorization before you order the background check. Without the proper disclosures and consent, the screening process is automatically not FCRA-compliant.
Requirements for Using Background Check Results
While the FCRA doesn’t state that you’re prohibited from considering background information like criminal history during the hiring process, it does have some regulations about how you use that information. You must ensure that your decisions are based on accurate, job-related information and that you’re following consistent standards for all of your applicants. Using blanket disqualifications without considering the nature of the job or the relevance of the infraction can put you at risk of noncompliance as well as discrimination accusations.
Requirements for Rejecting Based on Results
If you plan to reject an applicant or terminate an employee, also known as taking “adverse action”, based on the background check, there is a two-step process that the FCRA requires you to follow. First, you must provide a pre-adverse action notice that includes a copy of the background check report and a summary of their rights under the FCRA. You must then give them a waiting period to review and dispute any inaccuracies or offer explanations where possible.
After the waiting period (and the person’s response, if one is given), if the decision to take adverse action hasn’t changed, you must issue an adverse action notice. This notice needs to include the reporting agency’s contact information and a statement that the agency didn’t make the employment decision but only provided the background check results.
For any company that relies on third-party background screening companies, following these requirements is essential to staying compliant with the FCRA.
