The Fair Credit Reporting Act and Background Checks — Common Questions and Tips for Employers | Dentons

When an employer is considering a candidate for a job, they probably want to investigate the person’s work history, education, criminal record, financial history, medical information, among others. This type of background check is known as a consumer report and is regulated by the Federal Trade Commission (FTC) through the Fair Credit Reporting Act (FCRA).

While this post is geared toward FCRA compliance when hiring an employee, the same provisions below apply to current employees and retention decisions.

The FCRA is a long and complex set of laws that can be quite intimidating for employers. Here are some common issues regarding the FCRA and how to comply with its provisions, as well as some practical tips for employers.

Notice to Applicant and Consent to Obtain Consumer Information

Three steps must be completed by an employer before he can obtain the consumption report of an applicant:

(1) Inform the claimant that their consumer report can be used by the employer for employment-related decisions. This notice should be written in a stand-alone document (for example, a separate written disclosure rather than buried in a job application) with clear and visible language.

(2) Obtain the applicant’s consent, in writing, to have access to their consumer report. The consent section can be included on the document containing the notification provision mentioned in step number one above. According to the FTC, if an applicant refuses to provide permission, an employer can deny that person’s application.

(3) Certify to the consumer information agency that it: (a) has properly informed the requester and obtained consent to access the consumer report, (b) will comply with the terms of use of the FCRA for adverse actions, if any, and (c) will not use the information in the consumer’s report to violate any federal or state equal employment opportunity law or regulation.

Negative information uncovered in the consumer report

If an employer discovers information in the consumer report that could disqualify the candidate for the job, before making a final decision or taking action, the employer should send the requester a copy of the consumer report and the “Summary of consumer rights ”, which informs the requester on how to contact the consumer information agency.

This gives the applicant the opportunity to review the report and correct any errors with the consumer information agency before a final employment decision is made.

Decision not to hire applicant based on consumer report

If an employer decides not to hire the applicant based on information revealed by the consumer’s report, they must provide certain information to the applicant within three working days of that decision. The notification can be made orally, electronically or in writing and must contain:

(1) Note that the hiring decision was made on the basis, in whole or in part, of a consumer report received from a consumer news agency.

(2) The name, address and telephone number of the consumer information agency which provided the applicant’s information.

(3) A statement that the consumer information agency did not make the decision not to hire the applicant and is not aware of the reason for the adverse decision.

(4) A statement informing the applicant that he has the right to challenge the accuracy and completeness of any information contained in the report and can obtain an additional free report from the consumer information agency if he submits a request within 60 days of the employer’s decision.

Practical advice

Apply the company’s background check policy equally to all applicants
A business must not only comply with the FCRA when performing a background check, but also federal and state anti-discrimination laws. It is illegal to check the background of applicants and employees when this decision is based on race, national origin, color, sex, religion, disability, genetic information (including family medical history) or age (40 years or older). In addition, apply the same standards to everyone when evaluating the information obtained during the background check.

All background reports should be disposed of safely
This includes burning, pulverizing or shredding paper documents and disposing of electronic information so that it cannot be read or reconstructed.

Take adverse action
While not explicitly prescribed by the FCRA, courts and FTC guidelines suggest that five days is a reasonable time to expect after notifying the applicant of the discovery of information that may disqualify him from employment and before making the final decision.

National and local laws on background checks
Be aware of and check the laws of the states where the company employs and hires people. Some state laws limit the consideration that employers can give to certain criminal records in the hiring process. For example, California does not allow employers to review or search for information about certain types of criminal records, including an arrest or detention that did not result in a conviction.

Provide a clear and distinct notice
Make sure the Notice to Applicant is a stand-alone written document. Don’t just include it as part of the job application. Make the language as clear as possible.

Work with your employment lawyer on other questions regarding the Fair Credit Reporting Act and employee background checks.

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