At SentryLink we are often asked about the legal rules and regulations involved in beginning employee background checks. Here we attempt to explain some of the basics involved, in particular the Fair Credit Reporting Act. Disclaimer: We are not lawyers and specific situations may vary. Please consult with your attorney before implementing any screening program.

The federal rules regarding employment screening are contained in the Fair Credit Reporting Act. At a minimum, your screening program must conform to these rules. (State-specific rules may also apply, and we will be covering those in future posts.) The FCRA has two primary goals with respect to employment:

  • Ensuring that people are explicitly notified, and agree to, any background checks that are done, and
  • Allowing people to correct any misinformation before any decisions are made by the employer.

Job candidates must sign a release form agreeing to permit a background check before it is performed. The most common background checks are criminal record checks, credit reports, and driving records. The release form must provide “clear and conspicuous” disclosure, which is generally interpreted as requiring a separate page rather than burying it in the rest of the job application. Here is a sample background check release form (PDF reader required).

What happens if they are not willing to sign? You cannot perform the background check in that case…but you are not required to hire them, either. It is very important that you have a consistent policy on this to avoid any charges of discrimination.

If you find out information in the course of doing the background check that causes you to take adverse action against the candidate, certain rules must be followed. Adverse action can be broadly defined — failure to hire, termination, decision not to promote, and so on. It is best to err on the side of caution here. If the report will cause you to treat the candidate or employee in any negative way, adverse action rules apply.

For adverse action, the employer must do the following:

  • Before taking the adverse action, give the individual a copy of their report and a copy of the Summary of Your Rights Under the FCRA (PDF reader required).
  • After taking the adverse action, you must tell the individual that adverse action has been taken. This notice must include contact information for the consumer reporting agency (CRA) that provided the report, and a statement that the CRA cannot explain why the adverse action was taken. You must also tell them they have the right to dispute the facts in the report, and that they are entitled to an addtional free copy of their report from the CRA for the next 60 days.

There are some interesting loopholes here with respect to the trucking industry that were put in place in 1998. In many cases truck drivers do not have to sign a release form or receive a pre-adverse action notice. My understanding is that this is due to the fact that truckers are often hired at a distance. Of course there are other industries where this would apply as well, so the trucking lobby clearly did well here. If this applies to your company you may wish to examine your options in more detail.

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