What Do Employers Need To Know About FCRA?

what employers should know about FCRA compliance

In the hiring process, an employer may want to delve into the background of an applicant or candidate more. 

Oftentimes, even outside of business relationships, we may go online to learn more about someone

For a business, this becomes a more significant priority. As a business, you want to make sure that who you’re hiring is the person they say they are. You also want to make sure that you’re hiring someone who’s trustworthy, responsible, and who will promote a safe environment in the workplace for your other employees and your customers. 

When you don’t do your due diligence before hiring someone, you can face legal liability. For example, if you don’t do a criminal background check and a person with a history of violence assaults another employee, you could face civil penalties because of negligent hiring. 

At the same time, when you’re an employer, you’re limited in what you can look at in someone’s background and how you can use that information based on state and federal law. In some cases, local laws can play a role too. 

One federal area of regulation that’s pertinent to employers is the Fair Credit Reporting Act, originally enacted in 1970. 

What Is The Fair Credit Reporting Act? 

The Fair Credit Reporting Act or FCRA was put in place to help customers dispute and take care of inaccuracies in their credit reports. Since its original implementation, it’s been expanded to cover a number of other consumer reports. 

A consumer report has information provided by a third-party consumer reporting agency, in this context to you as an employer. 

The information can include credit information and many other personal factors. The information along with determining employment eligibility, is used for credit or insurance

The FCRA compliance standards typically regulate employers who utilize background reports. The compliance standards also apply to the Consumer Reporting Agencies, providing them with reports. 

If you’re an employer and you’re doing a background check using a third-party source or service, FCRA rules are almost always going to apply. 

FCRA provides the following protections to job applicants

• The federal regulations give employees the right to be informed if a background check is going to be conducted on them. 

• An employee has the right to consent to a background check for employment purposes. 

• They have to right to review whatever information is being provided about their financial and personal situation. 

• An employee has the right under the FCRA to correct anything inaccurate in their background report. 

• They can appeal a decision if they feel like it was made unfairly. 

FCRA Compliance For Employers 

An employer is required to be compliant with FCRA, meaning they have to conduct transparent, fair, and accurate background checks. 

There are three areas of responsibility for an employer. 

First, you have to be compliant before you request a check, then before you take an adverse action, and the third category of compliance is what you do after taking adverse action. 

Before Requesting A Background Check 

In terms of compliance, before you request a background check as an employer, you should give written notice to the applicant. Let them know that you may use the information from their consumer report for decisions related to their employment. 

You have to give them standalone notice of this. You can’t include it in the employment application. 

The applicant then has to provide you with written permission to get their consumer report. 

Responsibilities Before You Take An Adverse Action 

If you’re doing a background check on a job candidate, and you feel that what you found disqualifies them from the position for any reason, there are steps you’re legally required to take before rejecting the application, denying a promotion, or taking any other employment-related action viewed as adverse. 

You have to provide the applicant or employee with a copy of the report used to make the decision. You also have to provide them with a copy of what’s called “A Summary of Your Rights Under the Fair Credit Reporting Act” and time to review the report and confirm or dispute what it says. 

What You Have To Do After Taking Adverse Action 

Then, if you’re moving forward with adverse action, you have to provide notice of intention to the applicant. The notice can be verbal, electronic, or in writing. 

This is called an Adverse Action Notice, which explains the person’s right to review what’s reported on their background check. This is when you let the person know they have an opportunity to correct anything that’s incorrect. 

You will provide them with the name and contact information of the Consumer Reporting Agency that you got the report through and a statement that the screening service didn’t take the adverse action and can’t give reasons for it. 

You’ll let the person know they have a right to dispute the completeness or accuracy of the information, and you’ll also have to tell them they can get an additional free report from the company if requested within a 60-day window. 

Keep The Documentation 

Based on requirements from the Equal Employment Opportunity Commission or the EEOC, you have to keep the documentation for a year after the later of pulling the report or taking action. 

Then, after that period ends, you have to get rid of the report properly. 

Discrimination Regulations 

As a business, you have to comply with standards from the Equal Employment Opportunity Commission (EEOC) too. 

There are a number of standards that can be applicable, such as the fact that you can’t check applicant or employee backgrounds when your decision is based on a personal characteristic like age, race, sex, orientation, religion, disability, or national origin. Inclusivity should be essential.

You have to be consistent in how you apply standards, and you can’t base employment decisions on a background problem that could be more common in some groups than others. 

Compliance Conclusion

Even unintentionally being non-compliant with the above regulations can be financially and reputationally devastating to a business. It’s important that you understand the guidelines that are applicable to your business, and if you have questions, seek legal counsel to stay compliant.

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