Hiring the right employees is challenging. Great talent helps take your organization to the next level, while a bad hire can honestly bring your company to its knees. Background checks help HR managers vet candidates to make sure they are who they represent themselves to be and that there is nothing in their backgrounds that might threaten the business’s safety and security.
From a legal perspective, background checks are considered to be consumer reports, which means they are regulated by the Federal Fair Credit and Reporting Act (FCRA). The FCRA is a federal law enacted in 1970 to help consumers resolve disputes and errors in their credit reports. It has since been expanded to include protections for other consumer reports, including background checks. Conducting FCRA compliant background checks protects consumers from having their information rights violated and protects businesses from expensive lawsuits. The following is a brief summary of how the FCRA affects pre-employment background screenings:
Safeguards for Consumers
The primary purpose for the FCRA is to provide critical safeguards for applicants undergoing background checks, including the following:
The right to be informed
- The right to provide consent
- The right to review their information
- The right to correct errors in the background report
- The right to appeal decisions
Rules for Employers
FCRA rules apply to employers using background reports and third-party agencies, Consumer Reporting Agencies (CRAs), that provide the reports. FCRA compliance means that the employer and the CRA adhere to all transparency and accuracy requirements outlined in the FCRA.
Each stage of the background check has its own set of requirements.
Before the check:
Employers must provide a stand-alone, written notice to the applicant. This notice explains that information obtained during the screening may be used for employment decisions. The applicant must sign a written consent.
Before taking adverse action:
If employers decide that the results of a background check disqualify the candidate for the position, the following steps must be taken:
- Provide a pre-adverse action notice
- Provide a copy of the report
- Provide a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act”
- Offer a reasonable amount of time to review the report and dispute the findings if necessary
- After taking adverse action
Employers who decide to continue with the action must do the following:
- Provide a notice of intent to take an adverse action
- Provide information about the agency that compiled the report
- Indicate the individual’s right to dispute the report
- Inform the applicant that they can receive an additional free copy of their report directly from the CRA within 60 days.
Also, employers must preserve all documentation relating to the report and actions taken for one year and then dispose of the information appropriately.
FCRA-compliant screenings reduce the risk of consumer lawsuits. Learn more and protect your business with FCRA-compliant employment screenings today.