A pre-employment background check must comply with the Fair Credit Reporting Act.Here's how to ensure your background checks are legal.
Before you conduct pre-employment checks, it's important to understand the Fair Credit Reporting Act (FCRA) to ensure legal compliance.
FCRA-compliant background checks involve several steps. Although there are no shortcuts, the process is straightforward.
There are steps you must take if you decide not to hire a candidate or retain an employee based on information you discover in a background check.
This article is for business owners, managers and supervisors who want to learn more about FCRA compliance when conducting background checks.
The Fair Credit Reporting Act governs how employers execute, obtain, and manage consumer reports, including standard pre-employment and current employment-related background checks. This process not only protects personal data but also allows employers to fully assess whether a candidate is fit for employment. Your business is better off when you take the time to implement background checks correctly.
What is the Fair Credit Reporting Act?
The Fair Credit Reporting Act is a set of regulations that helps manage creditors' and potential employers' access to people's private data. For example, before running a background check, which falls under FCRA oversight, employers are required to disclose that a candidate's consumer report may be used for employment-related decisions. Further, employees must obtain written consent from an employee or candidate prior to conducting a background check. FCRA rules apply to the background check itself, who administers it and how it is executed.
Note that the FCRA does not simply govern employment background checks but also protects information collected by consumer reporting agencies, such as credit bureaus, medical information companies and tenant screening services. The FCRA also states that companies that provide information to consumer reporting agencies also have specific legal obligations, including the responsibility to investigate the disputed information. [Read related article: Choosing a Background Check Service]
What is FCRA compliance?
In the context of background checks, FCRA compliance refers to the set of FCRA requirements that both the employer and the background check service that conducts the screening must comply with for pre-employment background screenings.
There are several key steps in ensuring FCRA compliance for pre-employment background checks. First, employers must notify the applicant that a background check will be conducted. This notice should be in writing, and the job candidate should sign the document.
Second, if the background check reveals something that leads you to not offer the job to the candidate, you must inform them via an adverse action letter and provide them with a written copy of the report that contains the information that was used to deny employment. You should also provide candidates the opportunity to dispute the results of the background check
Employer responsibilities during the background check process
There are several rules companies must understand before administering a pre-employment background check. First and foremost, a company may not execute a background check of any kind solely based on a candidate's race, national origin, color, sex, religion, disability, genetic information or age.
The Equal Employment Opportunity Commission (EEOC), a federal agency that administers and enforces civil rights laws against workplace discrimination, also has a say in this process. The EEOC explicitly prohibits employers from excluding potential hires based purely on past arrests or criminal convictions. However, certain state and federal regulations may prohibit an individual with a criminal record from holding a particular job.
Common errors that result in FCRA violations
Oversights in the background check process can result in FCRA violations. Here are some common mistakes businesses make:
Inadequate or incomplete disclosure from the employer to the candidate that a background check will be conducted
Failure to report that the reason for not hiring a candidate was due, in full or in part, to data discovered during the background check
Improper adverse action taken after the background check was completed
Failure to acquire written consent prior to processing the background check
Inadequate disclosure of, or complete failure to share, the results with the candidate or employee
Failure to share the Summary of Rights under the FCRA
How to administer legally compliant background checks
Businesses should follow these steps when conducting pre-employment background screenings:
Get the necessary information. Every employer needs the job candidate's full (legal) name, any previous names, date of birth, Social Security number and home address to administer a background check.
Obtain written and informed disclosure and consent. Along with providing a full and informed disclosure, acquire a written consent form from the candidate or employee prior to running a background check of any kind. Verbal approval is not good enough, as employers cannot prove that consent was given. You must get it in writing, and it must completely outline how and why the process works the way it does.
Execute the background check in a timely manner. It is not uncommon for background checks to take five to seven days or longer if the candidate has lived in multiple states or has used more than their current (first or last) name.
Provide a copy of the report. Supply a copy to the candidate, particularly if you are denying an employment opportunity of any kind (e.g., full-time, part-time, contract, temp, volunteer).
Store the data securely. Regardless of whether you hire the candidate, ensure that their information is stored or filed If you hire the candidate, the background check information can be stored in their human resources file. If the candidate is not hired, you can store all pertinent data, including background check reports, in the recruitment file to be kept within HR.
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