Background screening for potential new hires is an essential component of the modern recruiting process and hiring process. However, there are critical standards companies must adhere to, including those overseen by the Fair Credit Reporting Act.
Whenever a consumer report is used in making hiring decisions, employers must stay in compliance with Fair Credit Reporting Act (FCRA) parameters. Whether these searches are conducted in-house or outsourced to a third party employment background screening company or consumer reporting agency, the process must be done legally.
The most common types of employment background checks (also referred to as “consumer reports”) are criminal records checks and credit reports. There are specific steps to follow before conducting this type of background check or taking an “adverse” action as a result of the information gathered through the report.
The Fair Credit Reporting Act includes the following important items:
The applicant must be informed about the background check and that decisions related to their application for employment will be made based upon its results. This permission must be obtained using a stand-alone document, and not as a section on the job application.
If outsourcing the credit or criminal background checks to a third party, businesses must certify that permission from the applicant was obtained. Notification of compliance must include:
- The candidate or employee was informed that a check would be conducted.
- Permission was granted by this party.
- The employer adhered to all Fair Credit Reporting Act requirements.
- The information will not be misused or directed in ways that discriminate against the applicant or worker.
- All state and federal laws will be adhered to in every step of the process.
Before Employers Take Adverse Action
An “adverse action” refers to the rejection of a job application, giving a demotion, denying a promotion, terminating a worker, or any other action that detracts from an individual’s employment status. Before doing so, employers must:
- Provide the affected party with a notice that includes a copy of the background check report.
- Provide the document “A Summary of Your Rights Under the Fair Credit Reporting Act.”
- Providing these documents allows the applicant or worker to review the background check report and let employers know if there are any errors on it.
After An Adverse Action Is Taken
Employers who implement an adverse action following the steps above must also let the individual know this action will be taken. This notice can be given in writing, orally or electronically. An adverse action notice informs the affected parties about their rights and allows them to correct inaccurate information. This notice should include:
- Name, address, and phone number of the agency that supplied the report.
- Verification that the agency supplying the report did not recommend any unfavorable action.
- Notice that the recipient has a right under the Fair Credit Reporting Act to dispute the report findings and receive an additional free report by request within 60 days.
Pre-employment screening and employment background checks are a vital part of successful recruiting and hiring. Employers should be aware of these key elements of the Fair Credit Reporting Act to ensure they conduct these processes in full compliance with the law.
Disclaimer Statement: All information presented is never intended as legal advice and is for information purposes only.
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