Conducting background checks that comply with the FCRA

Employers that hire outside firms or investigators to conduct employee investigations and background checks must make sure those vendors strictly comply with the Fair Credit Reporting Act (FCRA). Failing to do so can result in substantial legal risks, including damages, penalties, fines, punitive damages and attorneys’ fees awards.

Why background checks?

Employers conduct employee investigations and background checks for various reasons. Some request background checks when filling vacancies or promotion slots. Other checks come in the context of employee complaints and disciplinary actions. Many checks have the goal of ensuring workplace safety—perhaps by confirming that applicants don’t have criminal records.

In Florida, employers that conduct background investigations that comply with the FCRA enjoy a statutory presumption of immunity from liability for negligent hiring under Section 768.096 of the Florida Statutes.

When using a private investigator, security firm or HR service to perform background checks and investigations, employers become subject to the FCRA’s requirements because the employees and applicants are “consumers” under the law. The outside investigators are considered “consumer reporting agencies” (CRAs).

Before using CRAs and obtaining and using their reports, employers must follow several procedures.

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Certify FCRA compliance

Employers must certify to the CRA conducting the background check that:

  • The information will be used for employment purposes only.
  • The information will not be used in violation of any state or federal equal opportunity law.
  • The employer will provide all notices of disclosures and consents from applicants and employees.
  • If an adverse action is to be taken against the applicant or employee, the employer will provide all appropriate disclosures.
  • If the employer seeks an “investigative consumer report” (ICR) to obtain more detailed information (for example, on a person’s character) via interviews with other people, the employer will give the applicant or employee additional information and disclosures as required by the FCRA.

Disclose and get consent

The employer must provide the applicant or employee with a disclosure, as well as a separate consent document authorizing the employer to obtain a report.

  • The employer’s disclosure must be a separate document—not part of any other consent form, application or other document. It must be a clear and conspicuous statement disclosing that a report may be requested.
  • The employer must obtain a written consent and authorization in a single, separate document signed by the applicant or employee before requesting a report from a CRA.

Handling ICRs

If the employer needs an ICR to gather information beyond simple factual matters that can be easily verified (such as dates of employment, positions and salary), the employer must:

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  • Inform the applicant or employee in writing that an ICR may be requested. If the initial disclosure does not contain this notice, the individual must receive it within three days after the ICR request was made to the CRA.
  • Advise the applicant or employee that the ICR may include information about his or her character, general reputation, personal characteristics and mode of living. This disclosure must include a summary of rights under the FCRA, including the right to request additional information about the nature and scope of the investigation.

If the applicant or employee requests additional information, the employer must provide that information in writing and deliver it no later than five days after receipt of the request or five days after the ICR is ordered, whichever is later.

A copy of the Federal Trade Commission’s (FTC) publication, A Summary of Your Rights Under the Fair Credit Reporting Act, must also be delivered at this time.

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Before taking adverse action

If the employer decides to deny employment or take any other adverse employment action based in whole or in part on the information from any consumer report, it must give the individual a copy of the consumer report received from the CRA and a copy of the FTC publication. This must happen before the adverse action is taken.

After taking adverse action

After taking adverse action, the employer must send the employee or applicant a notice of adverse action that includes:

  • Notice of the employer’s final decision
  • A copy of the FTC publication
  • The name, address and telephone number of the CRA
  • Notice of the right to obtain an additional free copy of the report by making the request within 60 days
  • Notice of the right to dispute with the CRA the accuracy or completeness of the report
  • Notice that the CRA did not make the decision to take the adverse action and is unable to provide the specific reasons why the employer took the action.
Personnel Records: What to Keep, What to Toss will answer your questions about the 2009 changes to recordkeeping management. Test your knowledge:
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  • Do the new I-9 rules affect how you handle immigration records?
  • Are you officially overdue for reviewing your files to ensure all employee information is up to date?
  • Your recordkeeping duties change when you “reasonably anticipate” litigation. But what does THAT mean? And which records must you retain in such cases?
  • 70% of corporate records are stored electronically. Do you know the new Federal Rules of Civil Procedure for storing and deleting company emails?
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