The Right Way to Make Hiring Decisions Based on Background Checks
As consumers, we’re all protected by the Fair Credit Reporting Act (FCRA), which spells out the appropriate ways our sensitive data may be handled and used by employers, insurers, landlords, and anyone requesting access to these records. The findings of these consumer reports are used to determine our eligibility for most if not all of the basic necessities of life: employment, housing, credit, insurance, and more.
So as an employer pulling a background check on an applicant, it is important to remember the right way to make decisions based on your findings in order to remain in compliance with the FCRA. Avoiding the “wrong” way will ultimately protect your assets and interests in the same way that running a background check will help you find the most appropriate additions to your team.
What to Do When a Background Checks Pulls Negative Results
First the FCRA will require that you provide the applicant with a disclosure document informing them that the background check will take place, and then receive written authorization from the applicant to run the check.
If the check is returned with information that compels you not to hire the applicant, there are few things that must be done to cover your bases and stay compliant. You must:
- let the applicant know of the results of the report and your decision not to extend an offer due at least in part to the results.
- provide the applicant with a copy of the report.
- give the applicant enough time to review the report and challenge any inaccuracies.
Be aware that ban-the-box-type legislation is becoming more prominent across the U.S. and you must educate yourself on how your state regulates the handling of criminal histories of your applicants.
We’re always happy to answer questions regarding FCRA compliance. Contact us to learn more.
What Should Your Background Check Disclosure Include?
The FTC recommends that employers keep the background checks disclosures and requests for authorization simple. Simple has become synonymous with compliance, according to recent statements issues by the FTC: “Keep it simple. It’s not just a good idea. It’s the law.”
Cover Your Bases. It’s Easier Than You Think
Simple also means easy. In fact, the FTC claims you can do it in a few sentences. So what should those few sentences say? In a single document (which will be provided to the prospective employee during or at the end of the interview process), there should be found:
- a concise, easy-to-understand notification that a background screening report will be obtained and their credit pulled
- a request for the prospect’s written authorization
It might be tempting to add unique provisions that you find important, such as requiring the prospect to certify all info on the application is correct, confirming that they understand your hiring decisions are non-discriminatory, and including broad authorizations to access or use questionable data (ex. bankruptcy information that is older than 10 years). Don’t be tempted, because you could be venturing into the realm of noncompliance with the FCRA.
When Should You Provide the Background Check Disclosure?
Obviously, you want to get the prospect’s authorizing signature before running the report, but new ban-the-box provisions are pushing for the running of background checks after the interview has taken place and the prospect has had the opportunity to prove their merits and ability to perform the job in question. This may already be your process, but it’s important to consider what findings are deal-breakers and what might be handled on a case-by-case basis.
What’s Your Process?
Does your background check disclosure need work? Let us know.
FTC to Employers: Simple Background Check Disclosures Are Best
In order to maintain compliance with the Fair Credit Reporting Act, companies must make certain that the proper disclosures are made to prospective employees before running background and credit screening. Employers must include disclosures that both
- inform them of their rights
- and acquire their authorization
The FCRA classifies background and credit screening reports as “consumer reports” when said data is used to determine an individual’s eligibility for certain services, including employment, housing, credit, insurance, etc. All of the above is essential to maintaining a certain standard of living, so understandably, the FCRA came into existence to protect consumers from unfair discrimination and to ensure the appropriate use of personal information.
It can be daunting for employers to handle such protected data, so the FTC recommends making “clear and conspicuous” written disclosures available to applicants up front.
How to Keep It Simple
The FTC issued a list of DO NOTs to give employers a hand in writing up these written disclosures and avoid FCRA violations.
- DON’T use language that is intended to release you (the employer) from liability.
- DON’T include language that requires/requests the prospect to certify that all information on their job application is accurate.
- DON’T include any wording that requests the prospect acknowledge that your hiring decisions are non-discriminatory and legitimate.
- DON’T use authorizations that are overly broad which permits the release of info the FCRA otherwise prohibits from inclusion in a background check (ex. bankruptcies more than 10 years old).
Why the omissions? The FTC states that all of this “extra” only makes it more difficult for the prospect to understand the main purpose of the document. Additionally, by adding your own provisions, you may be treading into dangerous territory outside of FCRA compliance.
Let us know if you have any questions about maintaining FCRA compliance.