The following information is provided as a courtesy to our customers
and is not to be considered legal advice.
Today's employers regularly screen employees or potential employees
using criminal records, employment histories, educational verifications,
driving records, credit reports and more. Due to the federal Fair
Credit Reporting Act ("FCRA"), employers must comply with
certain disclosure and reporting requirements while performing background
checks. The FCRA was enacted primarily to protect the privacy rights
of individuals relating to credit information. The law, however,
covers significantly more than just credit reports. A summary of
the relevant provisions of the FCRA pertaining to employment screening
is provided below. To review the FCRA in its entirety, please visit
www.ftc.gov/os/statutes/fcra.htm.
What is a Consumer Report and a Consumer Reporting Agency?
The FCRA requirements apply whenever an employer requests a "consumer
report" or "investigative consumer report" from a
consumer reporting agency. A "consumer report" includes
any written, oral, or other communication of any information by
a consumer reporting agency regarding a consumer's credit worthiness,
credit standing, credit capacity, character, general reputation,
personal characteristics, or mode of living which is used as a factor
to establish the consumer's eligibility for employment. For purposes
of the discussion below, references made to consumer reports include
employment reports. A "consumer reporting agency" is any
person or company who, for financial gain, regularly engages in
the business of assembling or evaluating consumer credit information
or other information on consumers for the purpose of furnishing
consumer reports to third parties.
Written Disclosure and Authorization Required
The FCRA requires any employer intending to obtain a consumer report
to first make a clear and conspicuous written disclosure to the
applicant or employee that a consumer report may be obtained for
employment purposes. The disclosure cannot be included in an employment
application or other document that contains additional information.
The employer must also obtain the employee's or applicant's written
authorization before obtaining the report.
Employer-User Certification Required
Employers also must comply with certain reporting requirements.
To obtain a consumer report from a consumer reporting agency, the
employer must first provide certification to the consumer reporting
agency that the employer:
- Is requesting the report for employment purposes (which includes
evaluating an applicant or employee for employment, promotion,
reassignment, or retention as an employee).
- Has provided the required disclosure to the applicant or employee.
- Has obtained the necessary written authorization to request
the report.
- Will provide the applicant or employee with a copy of the report
and a written description of the applicant or employee's rights
before taking any adverse action based in whole or in part on
the report.
- Will not use the information from the report in a manner that
violates federal or state equal opportunity laws.
Notice Requirements in Connection with Adverse Actions
In the event an employer plans to take any adverse action based
wholly or in part upon information contained in a consumer report,
the FCRA requires the employer to make certain notifications to
the applicant or employee.
For employment purposes, an "adverse action" means either:
1) a denial of employment; or 2) any other decision for employment
purposes that adversely affects any current or prospective employee.
The FCRA requires an employer to provide a copy of the consumer
report to the applicant or employee and provide the applicant or
employee with a copy of his/her rights under the FCRA (the "Summary
of Rights Under the FCRA") before taking adverse action based
upon information contained in the consumer report.
After the employer takes adverse action, the employer must provide
the applicant or employee with notice of the following:
- The name, address, and telephone number of the consumer reporting
agency issuing the report
- A statement that the consumer reporting agency did not make
the adverse decision and is not able to explain why the adverse
decision was made
- A statement regarding the applicant or employee's right to obtain
a free disclosure of the applicant or employee's file from the
agency if the applicant or employee requests the report within
60 days of notice of the adverse action
- A statement regarding the applicant or employee's right to dispute
directly with the consumer reporting agency the accuracy or completeness
of any information provided by the agency.
Penalties for Non-Compliance FCRA
Employers "negligent in failing to comply" with FCRA requirements
are liable to an applicant or employee for actual damages, costs
of a suit, and attorney's fees. In addition, an employer's "willful
non-compliance," may result in punitive damages. Criminal penalties
also may be imposed if a person obtains a credit report under false
pretenses.
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