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Tom's Talent Blog

Background Checks: Make Your Process Legal

Posted by Jen Erb on Aug 20, 2015 3:00:00 PM

Legal_PadWe’ve been getting questions lately about background checks and the laws surrounding them in terms of applicants. It is extremely important that you and and your recruiters know the law, and you have a legal process in place to prevent your staffing firm from not following the laws for pulling background reports. There are steep fines for non-compliance.

Criminal background checks are governed under the Fair Credit Reporting Act (FCRA), when obtained from a third-party, like a background check provider.  Many employers think that the law only covers credit reports. The FCRA has very specific requirements for employers to follow before and after a background check is pulled on an applicant.  In addition to these requirements, the FCRA dictates that employers must treat all applicants the same, regardless of race, national origin, color, sex, religion, disability, genetic information (including family medical history), or age (40 or older). For example, an employer isn’t allowed to ask for extra background information because an applicant is a certain race or ethnicity.

Before You Pull the Background Check

Under the FCRA, an employer must provide two notices to the applicant.

1.  Disclosure – The disclosure must be a clear and conspicuous written notice, in a document consisting solely of the disclosure, notifying him or her that a report may be obtained.  The disclosure cannot be part of the employment application; it must be a separate document, but can be combined with the Authorization (below).  If a third party also does your reference checks (called an investigative report under the FCRA) then you should have additional verbiage in your disclosure specifically for an investigative report.

 2. Authorization – You must also obtain a written authorization from the applicant to pull the report. The authorization can also contain a form to obtain all of the information that the reporting agency needs to provide the report to you, like social security number, birth date, addresses, and prior names.

Generally employers are not asking for the social security number on the initial employment application, because an employer does not really need it until the selection stage when a background check is performed, and of course at the time of hire for tax and employment verification (I-9) purposes. Keep this in mind when structuring your selection process, and deciding when you include the FCRA Disclosure and Authorization document(s).

After You Pull the Background Check

If after you pull the background check, you decide not to hire the applicant because of what is contained in the report you must provide the applicant two more notices.

1.  Pre-adverse Action Notice - The pre-adverse action notice given to an applicant, commonly referred to as the "Summary of Consumer Rights" form, must contain a copy of the employee's consumer report and a summary of the employee's rights under the FCRA.

2.  Notice of Adverse Action – Once you notify the applicant that they are not being hired due to the information in the report, then you would send the applicant the Notice of Adverse Action.  The Adverse Action Notice must include the following:

  • The reporting agency's name, telephone number, and address;
  • A statement that the reporting agency did not make the decision to take the adverse action against the applicant and cannot explain the reasons why the adverse action was taken;
  • A statement that the applicant may obtain a free copy of his or her consumer report from the reporting agency within 60 days; and,
  • A statement that the applicant may dispute the accuracy and/or completeness of the report with the reporting agency.

Generally, regulation guidance has noted that employee must have at least a week to dispute the accuracy of the report, so an employer must wait this time between sending the above notices.  Your background check provider should be able to provide you with the Authorization and Disclosure notices as well as Pre-adverse Action Notice.  They may also have sample verbiage for the Notice of Adverse Action.

This article specifically talks about the details of notice requirements under the FCRA.  There are even more regulations on the necessity of pulling criminal background checks in the first place, job-relatedness, and the “ban the box” laws in many states. That’s a whole other conversation!

Topics: Employment Policies, Legal