Overview: The Fair Credit Reporting Act (FCRA) governs the use of consumer credit reports as well as investigative consumer reports for employment purposes. To conduct these third-party employee background checks of job applicants or employees, companies must comply with a number of steps under the FCRA. Chief among the steps are the Act's notice and consent requirements.
The FCRA mandates not only that employers notify all job applicants and employees beforehand if they wish to conduct a background check, but that employers obtain their written consent.
In addition, employers that decide they might deny employment or take other adverse action based in whole or in part on the findings of a background check first must send a pre-adverse action letter to the applicant or employee. This notification also must provide a copy of the report, a summary of FCRA rights and information on how individuals can challenge the report if they wish to do so.
HR professionals should be aware that several states have counterparts to the FCRA. Many mirror the federal legislation, but some impose additional requirements.
Trends: A number of states, including California, Illinois and Connecticut, have enacted laws in the last few years limiting the use of credit checks to certain types of jobs such as those involving financial data or sensitive information. A host of similar measures have been introduced elsewhere, so this is a trend that bears watching.
Author: David B. Weisenfeld, JD, Legal Editor
The Supreme Court has ruled in Spokeo v. Robins that a plaintiff must allege something more than a hypothetical violation in order to pursue a federal claim under the Fair Credit Reporting Act (FCRA).
In-depth review of the spectrum of New York employment law requirements HR must follow with respect to preemployment screening and testing.
The Fair Credit Reporting Act does not prevent an employer from conducting third-party credit checks so long as the employer obtains the applicant's written consent and complies with the FCRA's notice requirements. However, some states have gone beyond federal law and placed restrictions on when employers can conduct credit checks of job applicants or employees for screening purposes to certain types of positions.
An employer's use of background checks raises many compliance issues, including the Fair Credit Reporting Act; the state "ban the box" trend that prevent employers from asking criminal history questions on initial job applications; and ensuring background checks do not discriminate against minority job applicants.
From the use of criminal background checks for employment purposes to ban the box laws and credit checks, this webinar covers key dos and don'ts plus the state of the law.
XpertHR's Financial Services Resource Center for HR helps financial services employers handle their most challenging employment issues by bringing relevant resources together in one place for easy access.
This How To outlines the steps an employer should take in with determining whether to run a credit check during the preemployment process and how to do so.
An employer may use this policy to notify job applicants and employees of its intent to perform a background check. An employer may not conduct a background check without written authorization from job applicants or employees.
This How To outlines the steps that an employer should take when using criminal records for employment purposes.
XpertHR's Transportation Resource Center for HR: Recruiting and Hiring helps transportation industry employers handle their most vexing employment issues by bringing relevant resources together in one place for easy access.
HR guidance on complying with the Fair Credit Reporting Act (FCRA).