As an employer, you have several obligations to fulfill so that you stay within the laws as set out in the Fair Credit Reporting Act:

• If you hire an outside company to perform a background check, you must get the applicant or employee’s written permission. This permission must be on a separate form (not part of the employment application or other documents).
• If you want to include medical information in a background check, you must give the applicant or employee specific notice of that.
• Always keep in mind that the FCRA guidance is the minimum required! Check your state and other local regulations for additional requirements.
• If you decide not to hire someone (or take other adverse action) based on a background screening report, you need to first give the person a ‘pre-adverse action disclosure‘ along with a copy of the report and a ‘summary of rights.’ This applies even if the background report information is not the sole reason for the adverse action (such as deciding not to hire). Once you actually take an adverse action, the FCRA requires you to give a second notice that identifies the report source (the screening company or investigator) and explains the it was not the preparer of the report who made the adverse employment decision. This second notice must also include a notice of the right to dispute the accuracy or completeness of the report.

According to the FCRA (Fair Credit Reporting Act), you must have an employee sign a disclosure authorizing a background check prior to performing that check. All consumer reports, not just credit reports, are subject to the regulations of the FCRA, as well as the varying local and state laws that apply. Employers need to consult an attorney, or hire an experienced screening company, in order to comply with the specific laws in their own state.

There are several really important reasons to carefully screen potential new employees:

• If your business itself handles personal data, such as financial and health information, you must comply with electronic data privacy requirements. It becomes even more important to know who your employees are under this situation.
• An increasing concern is negligent hiring lawsuits, where employers can be held liable for actions of their employees, especially if you don’t check that employee’s background and suitability for the job.
• A more obvious concern is simply the reliability of the employee. A background check (including credit) is often a good indication of an individual’s reliability. Just keep in mind that a decision not to hire cannot be based solely on whether the applicant has filed bankruptcy.

Job applicants today expect not to be asked for date of birth, because of laws prohibiting age discrimination. As an employer, however, you’ve probably learned that effective background screening often depends on knowing date of birth, and perhaps race as well. It is permissible to request those pieces of information, as long as you keep in mind the following information. All applicants for the same type of work need to be treated the same (request the information and do background checks on every applicant you consider). Get the information on a separate ‘tear-off’ part of the application, and make it clear that the information will be disposed of as soon as it is used for the background check. It cannot become part of the employee’s permanent file.

A comprehensive criminal background check is an important tool for many employers. It is important to be sure that the check is performed within the law, but it is equally important to be sure that the information received is properly used in the workplace. An employer could be open to claims of discrimination if they have a blanket policy against hiring any applicant that has had a criminal conviction. An employer is also at risk for discrimination claims unless they can prove a business necessity for a clean criminal record, or can prove that requiring a clean criminal record has no adverse impact on any group protected by anti-discrimination laws.