News + Events
Policing Employment Background Checks
July 29, 2010
Conducting background checks on new and existing employees can be a valuable practice by employers. Among other things, they can verify the accuracy of information provided by applicants, help protect the employer from employee theft or potential negligent hiring lawsuits, and ensure the safety of other employees and customers. But, employers ought to periodically check their practices – or those of their third-party service providers – to make sure they are in compliance with applicable law. Specifically, the Fair Credit Reporting Act and state law counterparts govern employee background checks regarding both potential and existing employees.
Under FCRA, a consumer report includes information about a person’s credit characteristics, character, general reputation, and lifestyle that has been collected by a third-party in whole or in part for making determinations authorized by FCRA. This information can include typical credit information, such as payment history and accounts in collections, and public records, including driving history, criminal records, and bankruptcies.
Employers may obtain a consumer report from a consumer reporting agency regarding an applicant or an existing employee. For existing employees, it doesn’t matter if the report is sought for a periodic review, in connection with a promotion, or simply because a particular employee is under suspicion. All that matters is that the consumer report is to be used “for employment purposes,” which includes evaluating an applicant for initial employment or a current employee for promotion, reassignment, or retention. Before an employer may obtain a consumer report about an applicant or employee, however, the employer must provide the person with a separate clear and conspicuous written notice that a consumer report may be obtained and used for employment purposes. Furthermore, the applicant or employee must give the employer his or her written authorization to obtain the consumer report.
An employer must certify to the consumer reporting agency that it has complied with the notice and consent requirements and will further comply with FCRA, including its adverse action requirements, if necessary. These adverse action requirements include pre-adverse-action requirements – including notice – and post-adverse-action requirements which are somewhat more involved. An employer who takes an adverse action against an applicant or employee based in whole or in part on a consumer report must comply with both sets of requirements.
Employers should be aware that FCRA prevents their consideration of certain information in the employment context and should insist that the consumer reporting agency providing background checks comply with these exclusions. For example, consumer reports may not include records of arrest that are more than seven years old or the applicable statute of limitations, whichever is longer, unless the annual salary for the job is $75,000 or more. In addition, FCRA pre-empts state law in several areas, but not in others. Therefore, the prudent employer will consider FCRA, as well as applicable state law counterparts, when creating and implementing an employee screening program.