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Complying with Federal Laws

More and more businesses are using background check companies. Regardless of how you get the information you must comply with federal laws that protect applicants and employees from discrimination. That includes discrimination based on race, color, national origin, sex, or religion; disability; genetic information (including family medical history); and age (40 or older). The Equal Employment Opportunity Commission (EEOC). When you run background checks through a company in the business of compiling background information, you must comply with the Fair Credit Reporting Act (FCRA). The Federal Trade Commission (FTC) enforces the FCRA. Review the laws of your state and municipality regarding background reports or information because some states and municipalities regulate the use of that information for employment purposes.

In all cases, make sure that you're treating everyone equally. It is illegal to check the background of applicants and employees when that decision is based on a person's race, national origin, color, sex, religion, disability, genetic information (including family medical history), or age (40 or older). For example, asking only people of a certain race about their financial histories or criminal records is evidence of discrimination.

Understanding regulations in the background screening and hiring industry are a necessity for any HR department.

Negligent hiring claims are filed against an employer when they fail to perform due diligence on an employee who has caused harm or when the employee failed to prevent the damage given the authority of the employee's position.

 

Consistent and Updated HR

Policies are an important part of preventing negligent hiring. Hiring and promotion policies will document the background checks and other tests that would be run at every level of job position in your organization. The HR department should be well trained on these policies and they should be updated regularly.
Not every job position will require in depth background checks. A position that requires driving should require driving records and if their license and insurance are valid and current.

 

Documentation

Federal regulations, including the EEOC and the FCRA, require certain forms and documentation during the hiring process. These forms also should be maintained in a particular way for a certain length of time and destroyed in an approved way. Electronic forms, including applications, consent to background screens and drug testing, are easier to maintain and should be considered.

When an employee is initially hired, part of the hiring process is generally a screening of the applicant’s background. Annual criminal background checks and drug testing can be performed and should be included as part of the employee agreement upon hiring.

 

Fair Credit Reporting Act (FCRA)

The FCRA regulates the use of consumer reports by employers. The FCRA also dictates the way an applicant is to be notified about obtaining a background check or credit report and how they can dispute the findings. This regulation helps to ensure the accuracy of background screening reports.

The first rule of the Fair Credit Reporting Act is that you must have a permissible purpose to review someone's personal consumer report. The reasons for this are based on personal privacy and to keep personal records away from those who don’t have a purpose for reviewing such data.  As an employer, as long as you have the consumer’s permission, you may review their records for hiring purposes.

As per the Fair Credit Reporting Act, you can only acquire consumer reports when you are properly certified to do so. Certification in this case means you have to report to the consumer reporting agency the purpose and usage of the consumer report. Also, you cannot use a report for any other reason but the ones you have stated.

 

You Must Notify The Consumer in Cases Of Adverse Action

Adverse action, defined by the FCRA, means refusing a hire or promotion. When communicating with the consumer, you need to do so in either writing, electronic communication, or verbally (i.e. in person or via phone). No matter the method the following information must be included:

  • The address, name, and phone number of the agency you received the report from,
  • A statement that the reporting agency had no impact on the decision made,
  • A statement that the consumer can receive a copy of the report free of charge within 60 days, and
  • A statement that the consumer can challenge any aspect of the report with the reporting agency.
  • The consumer also has the same 60-day right to receive any information reported on by third party and other non-credit affiliate agencies.

 

Account Alerts

It is not uncommon for consumers to have alerts in their account. As per the FCRA, a certain amount of due diligence is required in these cases. Two alerts you commonly see are fraud alerts and active duty military. When a consumer has such flags in their account that means that any consumer-reporting agency you use has to further verify that their information is correct. This is done through direct contact with the consumer at a phone number submitted and verified by the consumer personally. As a potential employer, make sure the reporting agency you are using is reputable and following these procedures to avoid false positives and Fair Credit Reporting Act violations.

When the address on file with a consumer reporting agency differs than the one you report from the consumer, you will be informed of this by the agency. When this occurs, you must follow the process of action as defined by the Consumer Financial Protection Bureau and local regulators.

Dispose of sensitive consumer information as per the steps and processes defined by the by the Consumer Financial Protection Bureau, local regulators, and the Securities and Exchange Commission. Review your disposal methods so they meet required regulations.

 

Pre-Adverse Action and Adverse Action

These terms are referred to in the FCRA and are used to inform a candidate or employee that their background check yielded negative results. If a business does not adhere to these rules, the employee can take them to court. When a background check on an applicant and/or current employee produces negative results, and the decision not to move forward in hiring or retaining this individual be related to information contained in their background screening report, you are bound by the FCRA (Fair Credit Reporting Act) to fulfill their adverse action letter obligations. Any time employers make use of a third-party CRA (Consumer Reporting Agency), they are required to remain compliant with the FCRA by delivering adverse action notifications correctly, and in a timely manner. These notifications must be delivered to the recipient with specific information and in an appropriate time frame.

Pre-Adverse Action Notice is when an applicant's background check shows undesirable behaviors from the past, you should send a pre-adverse action notification. This letter is sent before adverse action is actually taken and informs the individual that based on the CRA report, their application will be denied. The employer must provide the applicant/employee with a copy of his/her background report, a copy of “A Summary of Your Rights under the Fair Credit Reporting Act,” and a reasonable period of time to dispute the accuracy or completeness of information in the report. This allows the applicant to respond to the findings and dispute any inaccuracies. The FCRA does not specify how long an employer must wait after the pre-adverse action notice before actually taking adverse action. The applicant must have a meaningful opportunity to review the information and to respond. The FTC has suggested five business days as a reasonable amount of time. Though it is not required by the FCRA, it is recommended that the pre-adverse action notice be provided to the applicant/employee in writing.

If, after a reasonable amount of time, the applicant has not appealed the pre-adverse action letter, you must proceed with your adverse action letter obligations by sending official notice. This notice may be given only after you followed the required pre-adverse action process and the applicant/employee has had the opportunity to dispute. The notice must be in writing and contain the information listed below.

 

Required Information for taking Adverse Action

When fulfilling adverse action letter obligations, you must take care to include all of the necessary information. The following items must be included with an adverse action letter (Obligations cannot be overlooked):

  1. State that the adverse action is based either in whole or part on information contained in the background report provided by the CRA.
  2. Name, address, and toll free telephone number of the CRA you used.
  • Statement that the CRA supplying the background report had no hand in the decision to take adverse action and cannot give specific reasons for it
  • Notice of applicant's right to dispute the accuracy or completeness of the provided information (covered in the Pre-Adverse action)
  • Notice of applicant's right to another free consumer report. This is provided upon request of the CRA within 60 days

 

Social Media

 

  • 60 % of employers are using Social Media in background checks.
  • Checking out a job candidate's social media presence before hiring might not be worth the risk.
  • Depending on what you see and how you use it when deciding which candidate to hire, you could be subject to a lawsuit from someone who didn't get the job.
  • The legal risks come from the information you learn that the candidate may later claim was the reason he or she wasn't hired. There are a variety of "protected characteristics," such as age, race, religion, medical history and nationality that employers can't consider when deciding whether to hire someone. Employers that do base hiring decisions on that type of information can be sued
  • Research shows 76 percent of employers that don't use social media when conducting background checks said they avoid this practice mostly because of the legal concerns.
  • Some lawyers believe that while there are risks in checking out social media when screening candidates, there are also risks in not looking at it. You run the risk of hiring a person that is dangerous or unproductive.
  • Companies must have social media policies. Companies should pay attention to the social networking sites their customers and employees inhabit.

 

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