Complying with the FCRA

The Fair Credit Reporting Act (FCRA) was enacted in the 1970s to help consumers resolve inaccuracies in their credit reports. Later, in 1996, it was expanded to include employment background checks, now defined under this law as consumer reports. Under the FCRA, employers using a third party to provide background checks on their employees must follow specific regulations and procedures as well as provide specific documentation to job candidates throughout the process. In this context, background checks can include credit reports, education and employer verification, criminal history reports, driving records, or drug tests, among other investigative reports. If an employer can and chooses to do these investigations independently of a third-party organization, the FCRA does not apply.

When choosing to use a third-party vendor to complete any aspect of background checks, compliance with the FCRA is undoubtedly in your best interest. Failure to comply may result in a lawsuit – in 2016 more than 400 lawsuits concerning FCRA were brought before a federal court. In addition to covering background checks, the FCRA has specific guidelines for other investigations done in the workplace. For example, while it does not directly cover sexual harassment investigations conducted by a third-party, you may be required to notify all parties after the conclusion of the investigation.

No matter the situation, it is always better to be educated on applicable laws in order to ensure compliance. Compliance with the FCRA will not only ensure your company is protected against potential lawsuits, but it will make the hiring process smoother and more beneficial to you and your future employees. In order to comply with the FCRA, here are a few tips:

First and foremost, ensure the third-party organization completing background checks for your potential employees is compliant with the FCRA and other local, state, and federal laws. When it is time to hire a new employee there are a few more steps that you need to take:

  1. Provide written disclosure that you will be conducting a background check. This should include explicit, clear statements of all aspects that will be included in the background check (i.e. credit report, criminal history report, drug screening, personal interviews, etc.) When providing a disclosure for a background check there should be no additional information on the page; the document should contain only information directly pertaining to the background check.
  2. Get written authorization from the potential employee that they are aware of and consent to a background check. After receiving their written approval for a background check, you should provide this document to the organization conducting your background checks and notify them that they may begin. While the FCRA does not dictate wording or explicit phrases that must be included, it clearly requires specific information be provided and understood by the potential (or current) employee.
  3. If you choose to follow-through with adverse action based on the findings of the background check you must follow specific procedures. Notify the job candidate and provide a copy of the report and allow a minimum of five days for their response, giving them adequate time to dispute findings of the report they feel are inaccurate. After the five-day waiting period, you may take action and inform the job candidate that you are doing so.
  4. In addition to letting the job candidate know your decision based on the findings, you should provide them with a copy of the report indicating that the third-party organization did not make the final decision and cannot explain why the decision was made. Be sure to make the job candidate aware of their right to dispute the report. They have the right to dispute the accuracy or completeness of any report and be provided with a new, free report within 60 days of being notified.
  5. Retain all required documentation. Be sure that any documentation that is needed to comply with the FCRA or other local, state or federal laws is retained and stored correctly. When documentation is no longer needed, dispose of it properly. In some cases, this can mean shredding, burning or pulverizing documentations to ensure that it remains confidential.

Compliance with the FCRA does not mean that employers can use the information gathered from background checks in any way they choose. When utilizing any confidential or personal information about an employee, be sure to investigate all aspects of local, state and federal legislation to ensure that you are compliant in all aspects. No matter your organization, compliance with the FCRA and other regulations will ensure a more efficient and smooth process for you and your employees, helping to take the stress out of hiring.

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