Background Checks: What Employers Should Know

What do you really need to understand about background checks? It’s important for employers to be proactive about their background screening policy and to understand employer responsibilities, what is included in background checks, and the types of records being reported.

FCRA Employer Responsibilities

The Fair Credit Reporting Act (FCRA) is the federal law that regulates the use of consumer reports, including background checks. But the FCRA doesn’t just regulate the Consumer Reporting Agency (CRA), the entity conducting the background check, and it applies to the End-User too – that’s you! There are three basic duties owed by end-users of consumer reports.

1. Provide certification to the CRA. You must certify your identity and permissible purpose under the FCRA for requesting background checks and that you will use the information for that purpose only. This is generally done at the time you sign an agreement with your provider and may be required with each order you place by selecting or acknowledging your permissible purpose.
2. Make disclosure to and obtain authorization from the consumer. You must provide disclosure to the consumer (your candidate) stating that a consumer report will be obtained for employment purposes and obtain authorization from the candidate. The FCRA language for this requirement is brief and seemingly simple but loaded with potential liability. There are specific requirements for consumer disclosures, and FCRA claims for disclosure violations have been on the rise. High-dollar judgments for violations of the FCRA notice provisions highlight the need for employers to take a close look at the forms being used.
   
   Most screening companies offer FCRA compliant sample forms which can be used. Use them and think simple! Don’t try to customize these, add additional language, or brand them – keep them simple to ensure compliance. It’s a good idea to have legal counsel familiar with the FCRA review your forms, as these forms are ultimately the responsibility of the end-user. 
3. Comply with adverse action requirements. End-users must comply with adverse action requirements under the FCRA. The candidates must be notified, through a pre-adverse action letter, that you are considering making a hiring decision based in whole or in part on information in the background check. If the employer decides not to hire a candidate, the individual must also receive an adverse action notice explaining that a final hiring decision was made as a result of information obtained through the background check. Keep in mind that this process is required for all employment decisions where a background check is conducted – hiring, retention, promotion, and termination.

Make sure you are also familiar with your state and local laws related to consumer reports which may impact the adverse action process in your location. For example, Washington has an additional disclosure form that must be given to applicants with the pre-adverse action letter. Many locations have also passed fair chance hiring laws, also known as ban-the-box laws, which can impose additional requirements for adverse action letters. For instance, Seattle employers must list the specific items from the background check that are being considered. The adverse action responsibility rests with the employer, not the screening provider. But look to your provider for sample forms that ensure compliance.

What’s included in your background checks?

Screening companies’ practices vary widely within the scope of legal requirements. Be proactive about understanding what is included in your checks (and what is not). A clear report is a good sign, but only if you know your searches are providing the relevant information. Background checks can be costly, so employers may be tempted to select searches based upon expense alone without fully understanding what information will be provided. For example, it might be tempting to only request a national criminal (or multi-jurisdictional) search; however, this is not a substitute for county court searches. This is a database search and is unreliable as the primary source of records. However, it is a great tool when combined with comprehensive county court searches.

Let’s talk about names. Are you searching AKAs and maiden names? Court records are generally based on name and date of birth, and this means the name used at the time the charge was filed is the name on the official record. Not searching previous names or possible aliases could result in missed charges. Misspellings? That happens too. The good news is that spelling variations are often revealed by the SSN Address Trace, enabling employers to search those names as part of the background check.

There is no such thing as a foolproof background check. Court structure varies by state, sometimes drastically. Some states offer statewide access to county court records, while others do not provide any access to lower courts. But by being proactive and understanding the different types of services and searches available, you can be confident that your background checks are compliant and provide the level of assurance you need to make confident hiring decisions.

What records are reported?

Even though the federal and state regulations of reportable records may seem clear at first blush, there is actually much gray area, and practices vary in the background screening industry within those legal parameters. The FCRA allows all criminal convictions to be reported (no time limit) and arrest records to be reported for seven years. The only exception for employment purposes is an expected annual salary of $75,000, in which case these restrictions do not apply. However, just because all convictions are allowed does not mean a CRA can access all convictions and does not mean employers can or should consider all convictions.

One CRA may report all convictions found, while another may report only convictions within seven years. One may report withheld adjudications or dismissals within seven years, while another does not. All these practices are acceptable, and screening practices vary. Moreover, courts do not always retain records for the same length of time, and court rules may impact the ability to obtain older records.

There are also many conflicting laws regarding which records can be reported by CRA’s and which records can be considered by employers. The short answer? It depends on where the employer is located and where the applicant lives. Several states have statutes that preempt federal law and impose greater restrictions than the FCRA. Most of those states have exceptions in the form of a salary cap. For example, CRA’s cannot report any criminal charges to employers in Washington past seven years unless the employee is reasonably expected to make an annual salary of $20,000 or more. While the minimum wage has increased far beyond that in Washington, it does impact some part-time, temporary, and seasonal positions. If the salary cap is met, then all convictions can be reported. But can you consider them? It depends on your industry. Ultimately, it is the CRA’s responsibility to comply with federal and state laws regulating reportable records, and it is the employer’s responsibility to know what criminal records can be considered in hiring decisions. Be proactive in understanding what is included in your checks, so you can make confident and informed hiring decisions.

Do you have a Background Check Policy?

If you don’t have a documented screening policy, consider creating one for your organization. Determine the scope and type of records your organization will consider within the legal parameters and how you will consider adverse information on the background check in your hiring process. Know what is included in your checks and document your process. Doing this now may prevent unwelcome surprises later.

It is important to understand that there are federal, state, and local laws that may impose additional requirements and restrictions on background checks and the hiring process.