A background check is any written, oral, or other communication of any personal information by a consumer reporting agency which is used as a factor in establishing a candidate’s eligibility for employment purposes.
The Fair Credit Reporting Act (FCRA), governed by the Federal Trade Commission (FTC), outlines the scope and limitations for background checks.
The FCRA ensures that individuals are aware that consumer reports may be used for employment purposes and agree to such use. The FCRA also secures an individual’s right to prompt notification if information in a consumer report may result in a negative employment decision.
The form of a background check should be legitimately related to essential job functions. In this article, I will describe different types of employment background checks and define which are covered by the Act.
Types of Background Checks
The most common background checks are professional reference checks. A reference verified by an employer is not covered by the FCRA. If the reference is supplied by a third-party reporting agency, however, then you must comply by the guidelines outlined by the Act.
Another type of background check is verification of academic credentials. An employer may request copies of a candidate’s grade transcripts or diploma to verify that the individual actually attended and/or graduated from the institutions mentioned on a resume or application form. This type of background check is not covered by the FCRA because, again, no third-party reporting agencies are involved.
Some companies run credit checks on job candidates. Reasons for doing so include verifying financial stability and fiscal responsibility. Credit checks are covered by the FCRA as they are obtained from a credit reporting agency. Companies should only run credit background checks for positions which involve an individual handling large amounts of money or other commodities.
When job positions involve traveling, particularly with the use of company cars, companies may run a motor vehicle record (MVR) checks. All MVRs are covered by the FCRA.
Criminal background checks are used to discover unsavory past behaviors including any prison, misdemeanor, or drug history. Criminal background checks are covered by the Act.
What “Covered by the Act” Means
If background checks are covered by the Act, it means you as an employer must supply written notification of the individual’s rights under the FCRA, and you must also obtain written confirmation from the individual that he or she received such notification and consents to your collection and use of a credit report for employment purposes.
I have created a Fair Credit Reporting Act Sample Disclosure and Authorization Form, which you can download for free. You may use the wording as is, but you will need to adjust the content to fit your company and the offered position. The form must be supplied on its own individual sheet of paper. It may not be combined with a job application or other form.
Before any adverse employment actions are taken based on information in a consumer report, you must provide the individual with a copy of the report, plus a copy of the employee’s rights under the FCRA. You must then give a reasonable amount of time for the employee to dispute the report with evidence.
After any adverse employment actions are taken, you must notify the individual within three (3) days of the action, as well as contact information for the consumer reporting agency. The individual may request complete disclosure from you as the employer, in regards to the nature and scope of your investigation. If a request is made you must comply within five (5) days.