Updated on June 24, 2013
When hiring for a position, do you perform a background check? More than likely, you use consumer reports to check the background of a candidate. Consumer reports can encompass many types of information such as criminal records, credit history, driving records, and employment history. What happens when the results of a background check give you cause for concern?
When you use a company to conduct background checks on your behalf, these companies are consumer reporting agencies. When employers make hiring decisions based on consumer report information, there are steps you must follow in order to comply with the Fair Credit Reporting Act (FCRA). The purpose of the FCRA is to protect the privacy of information found in consumer reports and to ensure that the information is as accurate as possible.
Written Notice and Authorization
When using consumer reports for an employment decision, you first must get the candidate’s authorization in writing, and notify them in writing that a consumer report will be used. If you use a consumer reporting agency, they should be able to provide a template that you can use. This notice and authorization can be electronic. For example, our company sends the candidate an email with a link to a website that contains the notice, and allows them to enter their information and authorize electronically. Paperless is a beautiful thing.
Taking Adverse Action
When a consumer reporting agency reports information to you that affects your decision to deny a job offer or promotion, there are two steps you need to take:
Step 1: You will need to send the candidate a “pre-adverse action disclosure” before making the official decision. This includes a summary of their rights under the FCRA and a copy of the consumer report. This gives the candidate a chance to make any corrections to the information if, in fact, it is wrong.
Step 2: If the candidate does not take steps to correct any inaccurate information after a period of time (usually five to seven days), you may proceed with the denial of the job or promotion, and will need to send the candidate an “adverse action notice.” This notice can be oral, written, or electronic. The notice needs to include the name and contact information of the consumer reporting agency that provided the report, a statement that the reporting agency did not make the decision for adverse action, and a notice of the individual’s right to dispute the information in the credit report. Your consumer reporting agency can assist you with this process.
Note that FCRA rules do not apply if the employer checked references directly without using a consumer reporting agency. For example, if an employer called a school directly and found out that a candidate did not have the degree they said they did, the employer can choose to deny the job without following FCRA procedure.
For more details, the Federal Trade Commission has a good article on its website called Using Consumer Reports: What Employers Need To Know.