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
Updated to reflect forthcoming Suffolk County ban the box law.
Updated to include information on a case involving the Fair Credit Reporting Act.
This How To details the steps an employer should take to conduct a background check on a current employee and address any results that are unfavorable to the employee.
Enhanced to improve comprehensiveness, organization and scope of coverage.
This form should be used by an employer to obtain parental consent prior to obtaining a background check from a third-party consumer reporting agency on a minor aged under 18 in order to comply with the federal Fair Credit Reporting Act. (FCRA).
This checklist may be used by an employer to comply with the Fair Credit Reporting Act's requirements when engaging a third-party consumer reporting agency to conduct background checks.
Colorado Gov. Jared Polis has signed a bill to make Colorado the 13th state with a "ban the box" criminal history law. The measure also bans employers from advertising that a person with a criminal history may not apply for a position.
This letter may be used by an employer when it is basing an adverse employment decision on background check information it received from a third-party consumer reporting agency in compliance with the Fair Credit Reporting Act (FCRA).
The 9th Circuit Court of Appeals has ruled that a prospective employer violated the Fair Credit Reporting Act by including extraneous information relating to various state disclosure requirements.
Delta Airlines has agreed to pay $2.3 million to settle claims from about 44,000 job applicants alleging the airline violated the Fair Credit Reporting Act (FCRA) with disclosure forms that include impermissible extraneous information.
HR guidance on complying with the Fair Credit Reporting Act (FCRA).