7 Keys to Understanding Employee Background Checks & the FCRA

employee background checksThe federal Fair Credit Reporting Act is a terribly confusing law that can have serious legal implications for non-compliance.    A recent lawsuit (Hunter, et al v. First Transit Inc.) illustrates how serious FCRA non-compliance can be. First Transit, or First Student bus transportation as many of you may be familiar, recently settled a class action lawsuit for $5.9 million for willful non-compliance of the FCRA by not obtaining authorizations before performing criminal background checks and also for firing or not hiring applicants because of a criminal background check and failing tp provide the required FCRA notices.

Compliance with the FCRA has produced a growing number of lawsuits in recent years so I thought it was important to take a few minutes and look at the 7 keys to understanding employee background checks and the FCRA:

1.       When Does the FCRA Apply?  The simple answer is if you use a 3rd party background screening firm for employee background checks then the FCRA applies.  FCRA compliance is not required of volunteers.

2.       Step One:  All Applicants.  All applicants for employment MUST receive a Disclosure Statement. 

3.       Step Two:  All Applicants:  All applicants for employment MUST provide a written or electronic authorization for the background check.  The disclosure statement and authorization can be one document.

The final two steps only apply if you are taking adverse action that is based “in whole” or “part” on the background screening report.  What does that mean? 

Well, an example of “in whole” would be a report contains a criminal record for rape.  The criminal record is the basis for the adverse action. 

An example of “in part” would be a report contains a criminal conviction for underage drinking.  You determine the record itself does not exclude the applicant.  However, on the application they indicated they did NOT have any criminal convictions.  So the adverse action is based on the dishonestly.  However, this is partly based on the report because you would not know about the dishonestly without the background screening report.  Make sense? 

So what does the FCRA require of adverse action?  It mandates a 2 step process:

4.       Pre-Adverse Action.  The first step in the process is a Pre-Adverse Action Letter which includes a copy of the background screening report and a Summary of Rights Under the FCRA.  Basically an applicant has a right to see what is going to be used against them and has the right to challenge the report if they feel the information is incorrect. 

5.       Adverse Action.  After waiting a “reasonable amount of time” which has been interpreted as 5 business days you are required to issue an Adverse Action Letter which denies the position.  There is no requirement to hold the position during the waiting period.

2 final keys to understanding the FCRA:

6.       Disputes.  A background screening firm is required to re-investigate if an applicant initiates a legitimate challenge to the background screening report.  These challenges are handled by the screening firm and if there was an error then a corrected report is issued after the re-investigation.

7.       Limit on Non-Convictions.  The FCRA limits the reporting of non-convictions (arrests, pre-trial diversions, etc.) to 7 years UNLESS the salary of the positions is $75K or greater.

The key takeaway is non-compliance of the FCRA can result in serious legal consequences.  

Safe Hiring Solutions is committed to helping you comply with the FCRA.  We provide sample forms and guidance.  You can view a recent recorded webinar:  Understanding the FCRA.

Do you have any questions about the FCRA?  You are not alone if you do.  This law is quirky and confusing.