How to Avoid Legal Issues When Running a Background Check and Stay FCRA Compliant 5 Jun 2018


“We’re an Equal Opportunity Employer”. We’ve all heard this at the end of a radio or TV ad for companies looking to hire. Most people don’t give it much thought until they’re in charge of finding a new employee. And the truth is it does take a lot of thought! Many commissions, laws, and regulations have been established to protect the rights of applicants searching for jobs.

The Equal Employment Opportunity Commission (EEOC) is responsible for enforcing laws that protect applicants and employees from discrimination. In addition to that, the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) work to enforce the Fair Credit Reporting Act (FCRA).

Add to that the constantly changing federal, state and municipality laws regarding background checks, and you have yourself a recipe for disaster. Or at least you will if you try to hire without doing your research. Here are a few tips that can help you avoid legal issues when running a background check on someone.

1. Treat everyone equally during the entire hiring process… and beyond!

When you’re in the interviewing or hiring process, you need to treat everyone with equality. It’s illegal to treat someone differently because of their race, religion, sex, national origin, color, disability, genetic information, or age (if they’re 40 or older). For example, it would be unacceptable if you only asked people of a certain race for their financial or criminal history.

It’s also illegal to ask someone for any genetic information, including a medical history, and make an employment decision based on that information. There are some cases where you can ask for medical information after the employee is hired. This may be the case if there is clear evidence that they are unable to do their job, or if they are a safety risk to themselves and others due to their medical condition.

2. Inform applicants ahead of time that you require a background check.

Employers must notify anyone applying for a job with their company that a background check is required and that employment decisions may be made based on the information received from the report. You should also provide an explanation of what you will be screening for in the background check and how you plan to use the information you receive. If you plan on conducting background checks throughout their employment, you’ll need to disclose that too.

Keep in mind that to notify the applicant, you must have a separate, stand-alone written document that clearly states you will be conducting a background check. You can’t just make it a small section in your general employment application. And, you are required by law to have the applicant’s written permission before you can run a background check.

To avoid embarrassment and legal issues, make sure to have the applicant double check their name and social security number. This could prevent you from getting a report for someone who has a similar name as your applicant.

3. Don’t use the information from your background check to discriminate.

This may sound obvious, but it could cause serious legal repercussions if you don’t apply the same standards to all your applicants. For example, if multiple applicants have the same financial or criminal history, and you reject some of the applicants because of their ethnicity, this would be discrimination.

If an applicant has a disability, you shouldn’t make an employment decision based solely on that information. Let them demonstrate their ability to perform the job, as long as it won’t have a major impact on your company’s finances or operations.

4. Always follow FCRA requirements when taking adverse employment action.

  1. If you are considering taking adverse action against an applicant (not offering a job or promotion, for example) based on their background check, you need to follow these three steps.
    Tell the applicant/employee orally, in writing, or electronically that you are considering taking adverse action. Give the applicant/employee a copy of the background check you received and a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act”, which your screening company should have given you. Also, give them all the details of the company that prepared the report, and inform them that they can dispute the accuracy or completeness of the report.
  2. Give the applicant enough time to review the report and explain any negative information before you move on to the next candidate or excuse the employee.
  3. If after giving the applicant time to dispute or explain information you still decide to take adverse action, tell the applicant/employee orally, in writing, or electronically that you took adverse employment action based on the information you received in their background check.

5. Hang on to all personnel and employment records.

You need to save all physical and electronic employment records for at least 2 years after you received the records.

In most cases, you need to save all physical and electronic employment records for at least 2 years after you received the records or 2 years after the action was taken (whichever is longer).

After the time is up, you can dispose of the records by burning, pulverizing or shredding paper records. Get rid of electronic records so that they can no longer be read or reconstructed. This may require “scrubbing” a hard drive.

6. Use an employment screening company that’s FCRA compliant.

The Fair Credit Reporting Act was established to protect job seekers from inaccurate information and ensure fair hiring choices are made. If you’re planning to run a background check for a new hire, then you need to stay FCRA compliant. After All this act is in effect nationwide and covers all industries.

To avoid the headache of understanding this all yourself, choose an employment screening company that’s already FCRA compliant. This will help you avoid the legal consequences of misusing a background check. Trusted Employees’ FCRA expertise facilitates compliance by providing you documentation, forms, letters and more to fulfill FCRA background check requirements.

To learn how our employment screening services can help you, schedule a free consultation with one of our experts.