background check compliance

From verification of identity to sourcing of criminal records, it’s important to avoid violations during candidate background checks.

Checking the background of a prospective employee during the recruitment process might sound like a standard activity, but a number of laws regulate the desire for information. To make sure you don’t end up on the hook for a violation, it’s important to go about getting the information in the right way. Get verification of identity, stick to the rules, and you’ll have no potential lawsuits such as the one Home Depot settled in 2015 hanging over your head.

Here’s how.

Watch Out for the FCRA

The Fair Credit Reporting Act (FCRA) is a federal law that applies to the collection of individuals’ credit information and all other types of consumer reports that may be used in deciding about a person’s employability. Passed in 1970, and significantly expanded in 1996, the Act affects the way you can ask for, obtain and use background checks on prospective job candidates. Other individual state restrictions may apply, but, for this purpose, we will focus on federal law.

Before you can inquire as to the background of a prospective applicant there must be two separate and distinct documents. One, a notification that a background check report may be obtained for employment and the other an authorization from the employee to do so.

All Candidates Equally

While compliance with the FCRA ensures you treat a candidate according to the law, it’s also important to ensure you treat them all equally. This means the decisions you make can’t be based on race, ethnicity, sex, religion, or age, or they can be considered discriminatory. To avoid this, you need a policy to apply the process of getting background reports uniformly to all candidates, or uniformly according to the job title applied for.  

States and local jurisdictions often have laws prohibiting credit reports or other “ban the box” type laws for specific groups of people, so it’s important to know what the requirements are for your state before you start a background check policy.  

Ensure the Job Meets the Criteria of the Check You Want

Many states have different laws that allow companies to perform certain types of background checks based on a person’s potion or title. In California, for example, Bill 22 of September 2011 stops employers from using consumer credit to help make hiring decisions. This was partly a legacy from the 2008 downturn that left many people jobless and in dire straits, which doesn’t necessarily mean their ability to do their job is affected. Since the writing of this blog, 13 other states have adopted this, and many others have this currently going though their prospective legislative process.

This changes if the applicant is aiming for any of these positions:  

  • Management, based on a person predetermined salary level, where applicable
  • Law enforcement or peace officer
  • Department of Justice positions
  • Positions requiring disclosure of the information to courts or other law enforcement
  • A person acting in a fiduciary position

It’s important, therefore, to determine whether each position you background-check warrants the level of investigation you request, such as criminal records or consumer credit.

Disclose the Results

The rules of disclosure vary between states. In a handful of states, companies are required to release the results to the candidate when asked for at the time of authorization. Under the FCRA, if you may take an adverse decision based in whole or in part of the background report, you must provide the applicant with a pre-adverse action notice, a copy of the report and a copy of their summary of rights. Since the information in such reports includes verification of identity, biographical details, driving records, and other public or private information that could possibly be inaccurate, the applicant has a legal right to dispute any of the facts.

The law provides for a reasonable amount of time, often 5 business days, for the employer to then send an “adverse” action notice to the applicant. This adverse action letter often states the employer is rescinding their job offer, and other legal language is also required. If the applicant does notify the CRA of his/her intention to dispute the report, a CRA has 30 days to reinvestigate the report and send its findings back to both the employer and the applicant.  This can cause substantial delays in your employment process, but it’s essential to afford candidates the time to follow procedure if you want to avoid any potential legal issues.

Conducting a candidate background check can be a risky business for employers who don’t have in-house expertise in this area. Over the past 10 years, companies have paid more than $300 million to settle claims related to background check violations. It’s far wiser to use a third-party company that specializes in such checks, which has indemnity to avoid liability for anything that might go wrong.

From verification of identity to the sourcing of criminal records, it’s important to avoid violations during candidate background checks. For more information on our employment screening services, please contact us at +1 (800) 295-7109.

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