FCRA (as the name implies) covers credit reporting, but it also sets standards and guidelines that affect the information gathered about applicants for employment. All ‘consumer reports’ relating to ‘character, general reputation, personal characteristics, and mode of living’ about an individual are regulated by the federal FCRA. Most background reports prepared by a third party consumer reporting agency thus fall under the regulation of the FCRA.

According to FACTA (the Fair and Accurate Credit Transactions Act of 2003), all credit and background screening report information must be disposed of properly. To properly dispose of this type of information, paper records must be shredded or otherwise destroyed in such a way that there is no way to reconstruct the information. Any such information stored on a computer must be completely erased before that computer is sold, donated, or disposed of.

Under the Fair Credit Reporting Act (FCRA), applicants must sign a disclosure authorizing you to perform a background check. The FCRA regulates all consumer reports, not just credit reports. Additionally, the laws differ from state to state about what can be included in a background report, as well as how that information can be used in the screening process. It’s important to consult with your attorney, or hire a screening company with experience in your state, before you begin checking applicants’ backgrounds.

Some of the top reasons for using background screening are:

• It is critical to know who you are hiring if that employee will be handling the personal data of others. This becomes a factor if your business deals with financial or health information for customers because you must comply with electronic data privacy requirements.
• If you do not check an applicant’s background and suitability for a specific job, and that employee later causes injury to another person, you open yourself up to a negligent hiring lawsuit.
• A background check, including credit information, is simply a good way to review the reliability of that applicant. Do remember, thought, that you cannot refuse to hire simply based on the fact a person has filed bankruptcy.

The Americans with Disabilities Act (ADA) is a federal civil rights law designed to assist individuals with disabilities to integrate into mainstream society and to prevent discrimination against them. The EEOC (Equal Employment Opportunity Commission) handled the enforcement of ADA regulations. All businesses with 15 or more employees must comply with the ADA, which protects every person with a physical or mental impairment that substantially limits one or more major life activities (such as sleeping, standing, or sitting), or who has a record (perhaps in the past) of such a substantially limiting impairment, or who is treated or regarded by the employer as though they have that impairment (such as the employer having the fear of hiring a person who has had cancer but is now in remission because there might be a recurrence). Only a person who is otherwise qualified for the job is protected by the ADA. The employer is not required under the ADA to hire a person with a disability over a more-qualified person.

The Society for Human Resource Management reported in their 1996 Workplace Violence Survey that only 66% of companies were using background screening. Today, that number is up to more than 96% of HR professionals reporting using background checks. Pre-employment screening is becoming a routine part of the hiring process, due in large part to today’s concerns about security, workplace violence, and corporate scandals.

In order to stay within the laws of the Fair Credit Reporting Act, an employer has several obligations:

• You must get the applicant or employee’s written permission for the background check, if it will be performed by an outside company. This permission cannot be a part of the employment application or other documents; it must be on a separate form).
• You must also give specific notice if the background report will include medical information.
• You should always check your state and other local regulations for additional requirements, because the FCRA guidelines are the minimum required.
• It’s important to provide proper notice in the event of adverse action (such as deciding not to hire) based on information in a background screening report. The first step is to give a ‘pre-adverse action disclosure’ along with a copy of the background report and a ‘summary of rights.’ Even if the background report is not the only reason for not hiring, this notice still must be given. At the time of the adverse action itself, you are required to give a second notice. The second notice must identify the source of the report (such as the screening company), explain it was not the source of the report who made the adverse decision, and include a notice of the right to dispute the accuracy or completeness of the report.

Yes, although some HR-related laws are applied depending on the size of the company, the FCRA covers small business owners and large corporations. If you request information that can be defined as a consumer report, and is provided by a consumer reporting agency, the regulations of the FCRA apply to you regardless of the number of employees you have.

Many employers consider a comprehensive criminal background check as an important tool. Employers need to know that they are within the law when checking criminal backgrounds, and also to be sure the information is properly used in applicant screening activities.

Don’t Invite Discrimination Claims

Don’t leave yourself open to claims of discrimination by having a blanket policy against hiring anyone with a criminal conviction. Be sure you can show how it is a business necessity for an employee in a certain position to have a clean criminal record, or that requiring a clean criminal record has no adverse impact on any group that might apply for the job and who are protected by anti-discrimination laws.

As an employer, a criminal background check can be an important tool. You should also be aware that you have a choice (within the law) of what kind of information to receive and consider in your employee screening process.

Choices to Consider

Should you request a report that includes only felonies, or misdemeanors as well? What about only convictions, or should arrests be a factor? Again, within the law, it largely depends on your business. However, keep in mind that a long arrest record, even without convictions, may be an indicator of character. Additionally, the difference between a misdemeanor or a felony is only a matter of a dollar amount that is attached to the crime.

Professional Screening Assistance

A good employee screening company can advise you the kinds of reports you should consider based on your business.