Have you ever passed on a candidate because of a low credit score and didn’t tell the person?

Have you ever used a social media screen as a legitimate background check?

Have you ever screened a candidate without their consent?

If you answered yes to any of these questions, you could be in trouble… expensive, lengthy class action lawsuit trouble.

Using background information when vetting applicants is certainly necessary, and yes, it’s also full of potential pitfalls for employers if you don’t know the ins and outs of employment law. There are numerous protections for employees and potential employees at the local, state and most notably, federal levels. You’ve probably heard about the Equal Employment Opportunity Commission (EEOC) and its regulations regarding discriminatory practices, but you may not be as familiar with the Fair Credit Reporting Act (FCRA) and how it serves to protect employees’ background information from being used against them in the hiring process, especially if that information is collected without consent or includes inaccurate data.

If this is your first time hearing about FCRA, we encourage you to read up on these posts:

The FCRA and You: Protecting Your Credit Information

How to Avoid an FCRA Class Action Lawsuit When Hiring

FCRA Infringements – Big Name? You’re Still Not Safe From Lawsuits

There is a strict protocol employers must follow for conducting background checks on candidates. If you’re not familiar with the protocol, it’s in your best interest to partner with an accredited screening agency like Active Screening to help inform your decisions, alert you to risky practices, develop a screening program that works for your company, and to verify the methods you use once the information is in hand.

Two of the biggest FCRA rules that employers repeatedly fail to comply with are Authorization and Adverse Action. Violations of these routinely get even the most seasoned and robust American companies into trouble with the Federal Trade Commission (FTC), the government agency responsible for overseeing the proper use of FCRA.

Let’s tackle Authorization first. You MUST get an applicants’ consent before conducting a background check. Running a ‘social media background check,’ doesn’t count and can land you in a whole heap of trouble for other reasons, too. But let’s define consent:

  • It’s written
  • It’s asked for on a form separate from any other forms related to the candidate’s application for the job
  • It’s required if you will hire an outside agency (like Active Screening) to check out a candidate
  • Consent often includes the right to inquire about a candidate’s credit report (but this should be specifically stated)
  • There can be no waivers, additional wording, or other unneccessary information on the form that can be confusing to applicants
  • It’s required to obtain extra information like school transcripts or military service records
  • An applicant does NOT have to consent to a background check. You are entitled to take them out of consideration if they do not consent.

The other area employers struggle with is called Adverse Action. This is, essentially, when an employer decides not to hire an applicant based on the information in the background check. But there are some steps that employers must take to comply with FCRA and stay in the FTC’s good graces. Before you tell the candidate you’re not hiring them based on information collected in the background check (in itself, called Adverse Action), you must give the applicant:

Once this pre-adverse action notice is completed, the candidate can review the information and explain or ask for a correction of any negative information. If this doesn’t happen within a reasonable amount of time, you can move forward with your Adverse Action notification:

  • You must tell the applicant in person, in writing, or electronically that he was rejected because of information in the report
  • Include the name, address and phone number of the screening agency
  • Inform the applicant that the screening agency didn’t make the hiring decision and doesn’t know why you weren’t hired
  • Ensure the applicant knows that she can dispute the information in the report, ask for a correction and request a free report from the same agency within 60 days.

Still have more questions? Email us here.

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