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Legal Compliance Considerations

Ordering Background Checks and the FCRA

Employers using outsourced employment screening reports for employment purposes, must comply with applicable sections of the Fair Credit Reporting Act (FCRA).  In addition, various states have adopted their own laws that pertain to the procurement and use of outsourced reports used for employment evaluation purposes (Consumer Reports).  Your state may require additional disclosures or impose employer obligations, limits or restrictions not required under Federal law.

From a strictly operational standpoint, here is a rundown of FCRA required procedures pertaining to ordering outsourced background checks:

  1. Job applicant or employee is presented with a separate, standalone FCRA & state compliant consent form,  authorizing employer to obtain a consumer report (background check report) for employment evaluation purposes.  (Consent language contained in employment applications cannot be used.)  (It must be a separate, stand-alone document containing specific, statutory disclosure language.)
  1. Applicant reads, completes and signs consent prior to employer ordering background check.
  1. At the same time the applicant is presented with the consent form, applicant/employee must also be given the handout document entitled “Summary of Your Rights Under the FCRA.” as prepared by the Consumer Financial Protection Bureau (CFPB). http://www.consumerfinance.gov/
  1. Once the consent form is signed by the applicant and returned to employer, employer may order consumer report (background screening report) from Consumer Reporting Agency (background screening company).
  1. If the employer decides not to hire a prospective employee and the decision not to hire was based either in whole, or in part, on information contained in a consumer report (outsourced background report), then the FCRA requires the employer (user of the consumer report) to initiate the prescribed “Adverse Action Procedures.”
  1. Additional: California, Michigan and Oklahoma law requires employers to provide a check box on the consumer report disclosure/consent form, which allows applicants/employees to check if they wish to receive a free copy of their consumer report (background report) if a report was prepared.  If the applicant/employee indicates with a checked box that they wish to receive their report, it is the employer’s obligation to provide a copy of the consumer report to the applicant / employee.  However, the law allows the employer to relegate this task to the background checking company upon prior arrangement.
  1. Your particular state law may prescribe how long employers must keep consumer reports on file.

Click here to go to our FCRA compliance resource page

Notice: Nothing in this Web site is intended or offered as legal advice. We always recommend that employers consult with qualified legal counsel on matters pertaining to employment background screening, legal compliance and labor law.

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