What Obligations Do Employers Have When Using Background Checks?

When designing a background check process for any business, there are multiple stages to consider before you're ready to start using vetting solutions in hiring. Understanding the types of background checks you'll need to order is one important step—from verifying professional licenses to looking into criminal history reports, reliable background checks form a pillar of safe, smart hiring practices.

However, you must also consider the potential legal risks that come along with using background checks. For employment purposes, the Fair Credit Reporting Act regulates the use of background checks by businesses to limit opportunities for discrimination and unfair practices. Unfortunately for companies, FCRA violations are also a favorite target for litigious law firms, especially when there is the possibility of a class action. That legal risk makes it imperative for employers to understand their obligations under the FCRA.

That's not always easy—especially with court rulings that have at times muddied the waters surrounding what is and is not acceptable under the FCRA. For example, the "standalone disclosure" is a frequent class action lawsuit target, despite the seemingly simple nature of the directive. 

FCRA Compliance Basics

So what should employers know? Ultimately, we can boil the obligations you face down to several key points:

• You must provide a "standalone disclosure" of your intent to use a background or credit check. To avoid any potential legal issues, it should be truly "standalone." Do not include any other disclaimers or waivers on the disclosure form. You may include it as part of a job application packet on its own page.
• You must get the applicant's consent for a background check. You may collect this authorization separately or as a part of the disclosure form.
• You must provide a "pre-adverse action notice" if background check information alters your consideration of an applicant. This notice must come with a copy of the background check report.
• You must allow time for the applicant to review the report and offer corrections or evidence of inaccurately reported information. The applicant has the right to appeal what they believe to be an unfair decision.

One interesting item to note regarding compliance is a recent court ruling that applicants do not have the right to explain the context behind accurate information reported on a background check. In the case, an individual indicated on a job application that they had no criminal past, but a background check revealed a prior murder conviction. The business denied the application without providing notice.

Although the courts ruled that the business did violate the FCRA with its actions, they also held that the plaintiff had no standing to sue because the information was accurate.

Even though that may seem to provide a window of opportunity for simplifying compliance, the suit reached a high level of the appeals courts before it was finally settled. To avoid legal risk, follow the letter of the law—even when it means introducing slight delays into the hiring process.