New Requirements for Applicant Background Checks

Companies routinely conduct background checks on applicants for employment or current employees being considered for promotion to assist them in selecting the best candidates. There are several types of background checks available to employers. The type of check utilized should depend upon the requirements and nature of the job position. Some checks may also be required by federal or state law. Employers are subject to the Fair Credit Reporting Act (“FCRA”) when they utilize third parties to perform background checks on job applicants or employees.

The FCRA requires employers to notify applicants/employees before ordering a background check or taking an adverse employment action based on the results of a background check. It also requires that prior to ordering a background check, an employer must obtain the application/employee’s consent. Failure to comply with these requirements can result in civil penalties, punitive damages, and even attorneys’ fees.

As of January 1, 2013, employers required to follow the FCRA must provide new and updated notices to applicants and employees. The recently created Consumer Financial Protection Bureau (“CFPB”) issued these new requirements and deadlines. The CFPB is now the enforcement authority over the FCRA. Prior to the creation of this new federal agency, the Federal Trade Commission enforced the FCRA. Under the FCRA, an employer must certify that it: (1) notified the applicant/ employee and obtained that individual’s permission to get a consumer report; (2) complied with all of the FCRA requirements; and (3) will not discriminate against the applicant or employee or otherwise misuse the information, as provided by any applicable federal or state equal opportunity laws or regulations.

Before an employer may reject a job application, reassign or terminate an employee, deny a promotion, or take any other adverse employment action based on information in a consumer report, the employer must give the applicant or employee: (1) a notice that includes a copy of the consumer report relied upon in making the decision; and (2) a copy of a summary of Rights Under the Fair Credit Reporting Act. The 2013 change includes modification to the mandatory “Summary of Rights” form. This form is a standard notice that must be provided to an applicant or employee subject to an investigative consumer report or when a “pre-adverse action” notice is sent to an applicant or employee. A copy of the new notices are available here.

Please note that employers have flexibility to avoid these strict FCRA requirements by conducting their own background checks. As an employer evaluating a potential hire, you may conduct your own due diligence search of the prospective employee by contacting past employers, checking with local law enforcement, searching public databases and another reasonable methods of assessing a person’s character, skills, and suitability for a particular position. Employers may use their own employees, such as a human resource professional, or their attorney to conduct background checks by verifying references or credentials without implicating the FCRA.

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