Background Checks and the Fair Credit Reporting Act

Do you conduct background checks on your prospective employees before you make a decision on whether to hire them?  If you do, then I urge you to read this blog post carefully to ensure that you are in compliance with the laws and policies that govern the use of background checks for the hiring of employees.  The first question to ask yourself is are you familiar with the Fair Credit Reporting Act?  The Fair Credit Reporting Act was passed in 1970 to address the fairness, accuracy, and privacy of the personal information contained in the files of credit reporting agencies.  Since its passage in 1970, it has been strengthened through numerous Congressional amendments and today provides protection to consumers’ privacy and their right to know more about the information collected on them for the use of credit reporting.  As a result of these changes to the Fair Credit Reporting Act, there are actions that employers must take to notify prospective employees of some of these rights during hiring actions.   

There are four major provisions of the Fair Credit Reporting Act that you must comply with if you conduct background checks on prospective employees.  They are as follows:

  • Notify the prospective employee you are conducting a background check
  • Notify them that they have a right to understand the nature and scope of the information collected
  • Obtain the prospective employee’s written permission to conduct the background check
  • If you use a third-party vendor to conduct the background check, you must notify them that you have complied with the Fair Credit Reporting Act requirements

Here are the Federal Trade Commission’s detailed guidelines for the four provisions that you must follow in order to comply with the Fair Credit Reporting Act.

  • Tell the applicant or employee you might use the information from a background check for decisions about his or her employment. This notice must be in writing and in a stand-alone format.
  • If you are asking a company to provide an “investigative report” – a report based on personal interviews concerning a person’s character, general reputation, personal characteristics, and lifestyle – you must also tell the applicant or employee of his or her right to a description of the nature and scope of the investigation.
  • Get the prospective employee’s written permission to do the background check. This can be part of the document you use to notify the person that you will get the report.
  • Certify to the company from which you are getting the report that you:
    • notified the applicant and got their permission to get a background report;
    • complied with all of the FCRA requirements; and
    • won’t discriminate against the applicant or employee, or otherwise misuse the information in violation of federal or state equal opportunity laws or regulations.

Please feel free to send me comments or questions regarding this blog post or my previous post, and I will respond as soon as possible. Thank you for checking out my blog!