Employers, Background Checks, and Government Rules

In 2014, two federal agencies worked together to issue a critical guidance document for employers who use background checks. Even now, many years later, this publication is still an essential resource for employers when designing a pre-employment screening program. The document, titled “Background Checks: What Employers Need to Know,” is the joint effort of the U.S. Federal Trade Commission (FTC) and the U.S. Equal Employment Opportunity Commission (EEOC). 

Let’s review the key points outlined by the FTC and EEOC in this document, along with critical requirements of the Fair Credit Reporting Act (FCRA) – the federal law that regulates background checks – and other vital considerations that employers should keep in mind when developing a policy for conducting background checks on their applicants. 

What Should You Know Before You Request Reports?

Before ordering a background check for employment purposes, you should prepare to engage in an equitable process that aligns with the requirements of the FCRA and any other applicable laws. The EEOC reminds employers to treat everyone equally. If you conduct background screening on applicants and employees, everyone should receive the same treatment. The process should be consistent for all who engage with it.

As an employer, remember that the FCRA requires you to follow specific procedures before ordering a background check for employment. These requirements include the following:

• You must inform the individual that you may obtain and use their background report for an employment-related decision. This is often referred to as the disclosure. The FCRA specifies the requirements for this disclosure, including that it be clear and conspicuous and in a standalone document.
• If you order an investigative consumer report – a background report that includes information obtained through personal interviews – there are additional disclosure requirements with which you must comply.
• You must obtain the individual’s written consent to a background check.

• You must certify to your background check provider that you received their written permission, have complied (and will comply) with FCRA requirements, you won’t discriminate against the individual or misuse the information in violation of federal or state equal employment opportunity laws.

Using Background Information

Once you obtain background information, what’s next? What should you consider when reviewing someone’s background information? The EEOC states that you should:

• Apply the same standards to everyone.
• Be mindful that some potential background issues may be more common among members of protected classes.

If your screening program includes a criminal background check, the EEOC also provides resources with best practices and guidance to help employers understand ways in which they may consider arrest and conviction history in employment decisions while avoiding violations of Title VII of the Civil Rights Act of 1964.

Adverse Action Using a Background Check for Employment

Under the FCRA, employers have responsibilities when considering adverse action based on information in a background report. As an employer, before taking adverse action, you must:

• Provide the individual with a notice that you intend to take adverse action.
• Include a copy of the background report you used to make your decision.
• Give the individual a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act.”
• Provide the applicant a reasonable time to review their report and respond or file a dispute should they wish to do so. Five business days is considered best practice in many cases. However, some jurisdictions have passed ban the box and fair chance hiring laws that extend this period.

When taking final adverse action, employers must inform the individual and provide:

• The name, address, and phone number of the consumer reporting agency that provided the report. A statement that the consumer reporting agency did not make the decision and cannot provide specific reasons for the adverse action.
• Notification that the individual has a right to dispute the accuracy or completeness of the report.
• Notification that the individual may receive an additional free report from the screening provider within 60 days.

It is important to note that many jurisdictions have passed ban the box and fair chance hiring laws which require compliance with additional requirements and restrictions when using background check information in employment decisions.

Disposing of Background Information

The FTC Disposal Rule requires the proper disposal of consumer reports and information from those reports to prevent unauthorized access to or misappropriation of the information. Properly disposing of physical documents may include burning, pulverizing, or shredding information to ensure it cannot be reconstructed. Electronic information must undergo secure erasure. The FTC has provided guidance on the Disposal Rule, which includes more details of the Rule and what may constitute proper destruction of consumer report information.

Navigating Compliance With State and Local Laws 

In the years since the original guidelines were published, the regulation landscape for employers who conduct background checks has changed. Many cities, counties, and states have enacted laws that could impact employers’ background screening programs. These laws include ban the box, fair chance hiring, pay equity, and other laws. If you conduct screening in an area with one of these laws, you generally must comply with these laws in addition to the FCRA and other applicable laws and regulations. For more information about ban the box and fair chance hiring laws, visit our Resource Center. 

Other Helpful Resources 

The EEOC and other government agencies still periodically publish guidance for employers about background checks. The EEOC and FTC’s joint publication “What Employers Need to Know” is an excellent example of this guidance. The information outlined in this and other EEOC and FTC guidance can help employers understand critical points about using background checks in employment decisions.

The EEOC also provides other resources, such as those related to the use of arrest and conviction history in employment decisions. The EEOC groups many of its background check-related resources in one central location.

The FTC has also published other helpful resources for employers, including a blog post titled “Background checks on prospective employees: Keep required disclosures simple,” “Disposing of Consumer Report Information? Rule Tells How” article, and a resource entitled “Using Consumer Reports: What Employers Need to Know.”

Some state and local jurisdictions will also publish FAQs or guidance on complying with their jurisdiction’s laws, such as ban the box and fair chance hiring laws. When screening in a jurisdiction with these laws, consider searching the appropriate local agencies’ websites for additional information and guidance.

Lastly, employers are encouraged to review their screening programs and processes with legal counsel to help ensure their compliance with the laws and regulations applicable to their organization.