Background Checks and the FCRA: What Employers Need to Know

Originally enacted in 1970, the Fair Credit Reporting Act (FCRA) is a federal law that regulates the collection, dissemination and use of consumer information. While the name of the law may infer that regulations apply only to the procurement and use of credit reports, it’s important to note that the FCRA regulates consumer reports and investigative consumer reports, otherwise known as background checks, prepared by background check companies.

The purpose of this article is to highlight specific areas of the FCRA that are critical for users of background check reports to remain in compliance with FCRA regulations.

Lawsuits targeting employers for failing to comply with provisions in the FCRA are on the rise. Large companies such as Dollar General, Whole Foods, Panera, and Michaels have been the subjects of class action lawsuits for allegedly violating certain parts of the FCRA. The sharp increase in lawsuits largely revolve around three key areas:

  • Failure to provide a disclosure to an applicant before a background check is ordered
  • “Extraneous” information in a background check disclosure
  • Failure to comply with the FCRA adverse action requirements

So what can employers protect themselves from a potential lawsuit? Below are key pieces of the FCRA that every employer utilizing background checks should be following.

Before Ordering a Background Check Report

The FCRA requires employers to provide a “clear and conspicuous” disclosure in writing to the applicant. The “disclosure” must explain that a Consumer Report and/or Investigative Consumer Report may be procured for employment purposes. The disclosure must also include the background check agency’s name, address, and telephone number, describe the nature and scope of the background check reports to be ordered, and meet all other requirements specified by applicable law.

The FCRA further states that the disclosure shall “stand alone,” meaning that the disclosure must not be combined with or stapled to any employment application or other document. The disclosure must also not contain any extraneous information. The most common extraneous information inserted into a background check disclosure is a release of liability. As mentioned above, the extraneous language in background check disclosure notifications has been the source of many new lawsuits.

While the FCRA is a federal law, some states may have additional disclosure requirements for background check disclosures. We recommend checking with an employment law attorney in your state to ensure compliance with any state required disclosures.

Employers must then obtain authorization in writing, or by electronic means from the applicant prior to obtaining the background check report.

Adverse Action Requirements

The adverse action requirements are a critical piece of the FCRA and provide the applicant with an opportunity to review and dispute (if necessary) any inaccurate or erroneous information in a background check report. Adverse action is generally described as action to deny an applicant employment based on information contained in an applicant’s background check. Considering an applicant for a position other than the position he/she originally applied for “based in whole or in part” on a background check report may also be considered adverse action.

Before taking adverse action based “in whole or in part” on a background check, an employer must provide the applicant with a copy of the background check and a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act.” The employer is then required to allow a “reasonable period of time” to pass to allow the applicant to identify any possible errors or inaccuracies in the report. While the FCRA does not provide a specific amount of time, the general consensus is that 3-5 business days is appropriate.

After taking adverse action, the employer must provide the applicant with the name, address and telephone number of the background check agency that prepared the report and a statement that the agency “did not make the decision to take the adverse action and is unable to provide the applicant with the specific reasons why the adverse action was taken.” Furthermore, the employer must provide notice to the applicant of the applicant’s right to obtain a free copy of the background check report from the background check agency within 60 days of the notice, and their right to dispute the accuracy or completeness of any information in the report.

If you have any further questions about the items mentioned in this article, or if you would like ApplicantPro to assist you in building a compliant background check program, please contact us.

Legal Disclaimer: This article is designed solely for informational purposes, and should not be inferred or understood as legal advice. Persons in need of legal assistance should seek the advice of competent legal counsel.


Ban The Box Legislation: Does it Effect Your Hiring Process?

Chances are you’ve heard the term Ban the Box. Perhaps your organization hires employees in one of the many regulated jurisdictions throughout the United States, and you’re a well-seasoned veteran of the regulations. Maybe you’re unfamiliar with the concept entirely! Whatever your situation may be, we hope this article can shed some light on the ever-growing, ever-changing Ban the Box movement.

What is Ban the Box?

In a nutshell, Ban the Box is a generic term used for a law or regulation that essentially prohibits an employer from inquiring about criminal records on an employment application, and in some cases, delays the time in which an employer can inquire about criminal records until later in the hiring process. The term derives from the criminal record question “checkbox” found on most employment applications.

Statistics from the United States Department of Justice indicate that there are approximately 650,000 individuals released from prison every year. These individuals have a need, and often a desire, to work and become productive members of society. In essence, Ban the Box is a well-intended movement designed to give individuals with criminal records a “fair chance” at employment. The conventional wisdom is that removing the criminal record question from an employment application will prevent an employer from making an automatic disqualification decision without first examining an applicant’s qualifications or providing a chance for him/her to explain his/her side of the story. Whether or not these laws are necessary or working as intended is entirely up for debate and certainly a topic for a separate discussion.

Currently, the following jurisdictions have some form or another of Ban the Box legislation on the books:

States: Hawaii, Illinois, Massachusetts, Minnesota, New Jersey, Oregon, Rhode Island

Counties: Montgomery County, MD Prince George’s, MD

Municipalities: Baltimore, MD; Buffalo, NY; Chicago, IL; Columbia, MO; New York, NY; Philadelphia, PA; Rochester, NY; San Francisco, CA; Seattle, WA

Because Ban the Box laws vary greatly from jurisdiction to jurisdiction, you should consult with competent legal counsel in your jurisdiction to ensure compliance if your organization operates or hires employees in any of the aforementioned jurisdictions. In some jurisdictions, the law may or may not apply depending on the size of your organization and whether or not your organization is public or private. Nevertheless, it’s vitally important to understand if and how the law applies to your organization. This is especially true for employers with multi-jurisdictional operations who may hire individuals from different parts of the country. While all Ban the Box jurisdictions prohibit the use of a criminal record question or “box” on the employment application, many jurisdictions go beyond this basic requirement and require the employer to delay inquiring about criminal records or even running a background check until an interview has been performed or an offer extended.

Below are some examples of when an employer can inquire about criminal records during the hiring process:

Carefully examine your current hiring practices and examine whether or not it is necessary to ask applicants about their criminal history

The cities of Chicago, IL and Seattle, WA along with the states of Illinois, Massachusetts and Minnesota allow an employer to ask about criminal records after an “initial screening of applicants.”

Employers in Buffalo, NY, the states of Oregon and Rhode Island can ask about criminal records during the first interview, while employers in Montgomery County, MD; Price Georges County, MD; the state of New Jersey, Philadelphia, PA; Rochester, NY and San Francisco, CA can only inquire about criminal records after the first interview.

Finally, the cities of Baltimore, MD; Columbia, MO; New York City, NY; the District of Columbia and the state of Hawaii require employers to wait until after a conditional offer of employment has been extended to the applicant.

Given the growing trend of Ban the Box legislation across the country, ProScreening suggests that employers carefully examine their current hiring practices and examine whether or not it is necessary to ask applicants about their criminal history. Employers in Ban the Box jurisdictions should be especially careful with the risks of asking about criminal records, and should only do so when legally permissible.

Legal Disclaimer: This article is designed solely for informational purposes, and should not be inferred or understood as legal advice. Persons in need of legal assistance should seek the advice of competent legal counsel.


What Background Check Should Your Company Run In Order To Perform The Proper Due Diligence On A New Hire?

The first thing you should know is that a single "National" database containing all criminal records does not exist outside of the FBI system. Are you surprised to hear that? Most people usually are!

Unfortunately, employers and background check agencies cannot simply enter an applicant’s name, date of birth, or social security number into one place and receive all of their criminal records. Rather, criminal records are stored in several completely separate systems, including places such as in County Courthouses, State Repositories, and in privately owned multi-state databases. Clearly this can be overwhelming, especially when you are trying to determine which of those you need to have searched as part of your new hire background checks.

At ProScreening, we feel the best practice for an accurate and comprehensive criminal search is to perform BOTH a multi-state database search as well as a search of all county court records where an applicant has lived within the last 7 years. We call this search package our "Comprehensive Criminal Check". The following describes why it is important to include both types of searches in your background checks.

Searching an instant multi-state database can be compared to casting a wide net across the country to see if there are any crimes that your applicant committed across the country. Although these instant database searches are essential to find any crimes committed outside of where an applicant has lived, unfortunately they are estimated to only contain approximately 50% of court records from across the country. Due to that, databases should never be used as your only source for criminal records.

In order to perform a comprehensive criminal search, the industry standard (which we support) is to also search each counties felony and misdemeanor records where an applicant has lived. The best practice to do this accurately is to first determine where your applicant has lived, worked, and/or gone to school during the past 7-10 years. In order to do this, ProScreening utilizes a Social Security Number Trace to access 7 years worth of an applicant’s address history. With this information, we can make an informed decision as to which county criminal records we should search. County records are the most detailed, accurate and up-to-date type of criminal searches available. Unlike databases, the information contained in county criminal records is usually updated in real time and will contain the most accurate case disposition information.

Due to the different demographic restrictions of both the database searches and county records, we strongly recommend that your background check includes BOTH our Instacriminal Multi-State Database and 7 Years of County Criminal Records in order to provide you with a background check that is truly thorough. Aside from an actual FBI Background Check, our recommended Comprehensive Criminal Background Check is your best option to truly know what kind of person you might be hiring.