FTC Provides Advice on Complying with FCRA in Background Checks

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The Federal Trade Commission recently issued a blog post reviewing the requirements under the Fair Credit Reporting Act when conducting background checks, and offering suggestions on how to comply with those FCRA requirements.

Employers using a third party to conduct background checks of prospective or current employees must comply with the requirements of FCRA (which refers to such background checks as “consumer reports”). In Background checks on prospective employees: Keep required disclosures simple, the FTC notes that these requirements include the following:

  1. Before you get a background screening report about a prospective employee, disclose to the person that you intend to get the report and then get their written authorization allowing you to do that.
  2. If the background screening report reveals something that may cause you to decide not to hire the person, you must notify him of the results of the report and provide him with a copy. Next, you have to give the person sufficient time to review the report so he can challenge any elements that might be incorrect.
  3. If you ultimately decide not to hire someone based in whole or in part on the contents of a background screening report, you must provide a notice to that person that states he wasn’t hired due at least in part to the result of the background screening report.

The FTC then goes on to provide additional guidance about the disclosure and authorization requirement, stating that these two may be combined into a single document. The FTC cautions that, in that document, employers should “use clear wording that the prospective employee will understand.”

Moreover, the document must consist of only the disclosure and authorization. The FTC notes that the following information should not be included in the document, as doing so could constitute a FCRA violation:

  • Don’t include language that claims to release you from liability for conducting, obtaining, or using the background screening report.
  • Don’t include a certification by the prospective employee that all information in his or her job application is accurate.
  • Delete any wording that purports to require the prospective employee to acknowledge that your hiring decisions are based on legitimate non-discriminatory reasons.
  • Get rid of overly broad authorizations that permit the release of information that the FCRA doesn’t allow to be included in a background screening report – for example, bankruptcies that are more than 10 years old.

As we have previously discussed in our January 2016 E-Update’s Top Tip, it is critically important to eliminate this type of additional information from the disclosure/authorization document. Employers should also be careful about using forms provided by their third-party consumer reporting agencies, as we have found that they often do not comply with this restriction. And this issue is an increasingly hot target for litigation.