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To avoid hiring mistakes, employers sometimes use pre-employment background checks as a risk management tool. When an employer uses a third party to conduct the background check (such as a criminal background check or a credit report), the employer must comply with the obligations imposed by the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. ("FCRA"). FCRA is a federal statute that governs the collection, assembly, and use of "consumer reports" by Credit Reporting Agencies ("CRAs"). Despite the statute's misleading title, under FCRA, a "consumer report" includes not only information related to the individual's credit worthiness, but also public records, criminal records, sex offender registration, driving records, and other various information related to the individual.
FCRA compliance can be broken into the following two steps:
Step One: Obtaining a Consumer Report Concerning an Applicant or Employee. Prior to ordering a background check through a CRA, the employer must: (1) provide the applicant with clear and conspicuous notice on a separate, stand-alone form stating that the employer might order a consumer report on the employee; and, (2) obtain the applicant's written consent authorizing the employer to order the background check.
Under FCRA, the required notice and authorization may be on the same form. The form may not be included as part of the employment application. The authorization remains valid during the individual's employment with the employer. If the employer intends to use the authorization throughout the individual's employment to seek additional consumer reports, the notification must "clearly and conspicuously" state that it may be used to procure additional consumer reports while the individual is an employee.
The employer must also certify to the CRA that it has (1) provided the necessary notices/disclosures to the employee; (2) obtained the employee's written permission to procure the consumer report; (3) intends to use the consumer report for employment purposes as permitted under FCRA; and (4) will further comply with its obligations under FCRA in the event that it takes "adverse action" against an employee based on the information in the consumer report.
Step Two: Taking Adverse Action Against an Applicant or Employee Based on Information in a Consumer Report. After receiving the consumer report, if an employer intends to take adverse action against an applicant or employee based on the information contained in the consumer report, it must comply with two additional requirements:
(1) The employer must notify the applicant/employee of the possible adverse action before taking such action (i.e. must provide a Pre-Adverse Action Notice). FCRA broadly defines "adverse action" to include any employment-related decision that negatively affects the employee/applicant. The Pre-Adverse Action Notice must include: (1) an unredacted copy of the employee's consumer report upon which the adverse action may be based, and (2) the Consumer Financial Protection Bureau's ("CFPB") form Summary of Your Rights Under the Fair Credit Reporting Act. (Please note that as of January 1, 2013, employers are required to use the updated forms referencing the CFPB, as opposed to the old forms that referenced the Federal Trade Commission ("FTC")).
FCRA does not mandate that an employer wait a specific period of time between providing the Pre-Adverse Action Notice and taking the adverse action, but a "reasonable period of time" must elapse.
(2) After providing the Pre-Adverse Action Notice and waiting a reasonable period of time, the employer may take the adverse action, but must provide the employee with an additional Post-Adverse Action Notice. In addition to informing the employee/applicant of the adverse action that was taken, the Post-Adverse Action Notice must include the following information: (1) the CRA's name, telephone number, and address; (2) a statement that the CRA did not make the decision to take the adverse action against the employee and cannot explain the reasons why the adverse action was taken; (3) a statement that the employee may obtain a free copy of his consumer report from the CRA within 60 days; and (4) a statement that the employee may dispute the accuracy and/or completeness of the consumer report with the CRA.
In addition to FCRA, employers who want to consider an applicant's criminal history must also take care to ensure that they are not screening applicants out in a discriminatory manner. The Equal Employment Opportunity Commission ("EEOC") has issued guidance seeking to assist employers in the use of arrest and conviction records to screen out potential employees who pose an unreasonable risk without simultaneously engaging in discrimination prohibited by Title VII of the Civil Rights Act. In brief, the EEOC instructs employers to consider the following three factors when determining whether a particular offense should disqualify an applicant from employment: (1) the nature and gravity of the offense or conduct; (2) the time that has passed since the offense or conduct and/or completion of the sentence; and (3) the nature of the job held or sought. See May 18, 2012 E-Alert, "Use of Arrest and Conviction Records in Employment."
New Hampshire employers should also be aware that under state law they may only include the following question in their initial employment applications: "Have you ever been arrested for or convicted of a crime that has not been annulled by a court?"
Contact any member of Devine Millimet's Labor, Employment & Employee Benefits Practice Group to discuss any questions you have related to an employer's obligations with regard to employee background checks.
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The Devine, Millimet & Branch Labor, Employment and Employee Benefits Group offers this free Friday E-Mail Alert service to provide information on recent developments in labor, employment and employee benefits law. If you have any questions about this e-mail, or if you know of anyone else who may be interested in receiving these alerts, please send us an email at employment@devinemillimet.com.
This E-Alert is provided for informational purposes only. It is not intended to serve as legal advice or legal opinion. Devine, Millimet & Branch, P.A. makes no representations that this is a complete or final description or procedure that would ensure legal compliance and does not intend that the reader should rely on it as such. Our attorneys are available to assist employers in their compliance efforts and to represent employers in matters before state and federal courts and administrative agencies. For more information, please contact the attorney(s) listed or the Devine Millimet attorney with whom you regularly work.
© Copyright 2013 Devine Millimet & Branch, Professional Association
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