Secure one-time consent for all employee credit checks

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in Employment Background Check,Human Resources

Issue: Must you seek permission each time you want to review an employees' credit record?

Benefit: As a new court ruling shows, the answer is 'no;' you can obtain one blanket consent from employees.

Action: Run credit checks at any time, but only for job-related reasons. Also, draft the consent form using broad language.

You probably know that you must obtain the written OK from applicants before accessing their credit reports. But what about when you're investigating current employees?

Can you require all employees today to sign a blanket release that authorizes you to run such checks periodically if the need arises? Fortunately, yes, you can, as a recent court ruling proves. Unlike with applicants, you don't need to ask employees for a written OK for each credit check.

Two important caveats: You must be able to show an employment-related reason to access credit reports on employees (such as probing theft incidents).

Also, make sure your blanket release for existing employees is broad enough. It should, for example, cover situations in which you use outside agencies to help conduct credit or background checks as part of an in-house investigation.

Case in point: A nursing home fired an employee after she refused to sign a form that allowed the company to obtain consumer credit reports on her at any time. The company used the reports to investigate in-house theft, plus to update background checks for continued employment.

She sued, claiming the Fair Credit Reporting Act (FCRA) prohibited such one-time, blanket authorizations to obtain credit checks. She argued that employers must get employees' approval each time they seek a report.

A federal appeals court sided with the nursing home, saying nothing in the FCRA specifically prohibits employers from obtaining blanket authorizations ahead of time. The FCRA simply states that employers must obtain employees' authorization "at any time prior to procuring the report," which can mean days, weeks, months or years. (Kelchner v. Sycamore Manor Health Center, No. 04-2552, 3rd Cir., 2005)

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