Background verification has been conducted for both current as well as potential employees for several reasons and the type of screening depends upon the nature of the job. The relevance of backgrounds checks is ever increasing forreasons such as an increase in negligent hiring lawsuits. A bad decision can wreak havoc on a company’s budget and reputation as well as ruin the career of the hiring official. Hence companies are ever on the alert on whom they bring into the organization. There has also been an increase in falsified or inflated information in the job market as well making recruiters wary of believing anything claimed in the resume upfront.
Background reports can range from a verification of an applicant’s Social Security Number to a detailed account of the potential employee’s history and acquaintances. There is even some evidence that employers are now searching popular social networking Web sites such as Facebook for the profiles of applicants. A recent study found that 44% of employers use social networking sites to obtain information about job applicants.
What is FCRA?
Fair Credit Reporting Act was established in order to set standards for employment screening. Under the FCRA a consumer report there are certain limits set on the background check done on an employee/applicant. The FCRA says the following cannot be reported:
Bankruptcies after 10 years.
Civil suits, civil judgments, and records of arrest, from date of entry, after seven years.
Paid tax liens after seven years.
Accounts placed for collection after seven years.
Any other negative information (except criminal convictions) after seven years.
However the FCRA made an amendment whereby criminal convictions can be reported indefinitely. Under the Fair Credit Reporting Act, the employer is required to get your permission before obtaining the records and certain records are protected as confidential such as education records, military service records and medical records.
Under federal law, if the employer uses information from the consumer report for an “adverse action” – that is, denying the job applicant, terminating the employee, rescinding a job offer, or denying a promotion – it must take the following steps.
Before the adverse action is taken, the employer must give the applicant a “pre-adverse action disclosure.” This includes a copy of the report and an explanation of the consumer’s rights under the FCRA. After the adverse action is taken, the individual must be given an “adverse action notice.” This document must contain the name, address, and phone number of the employment screening company, a statement that this company did not make the adverse decision, rather that the employer did, and a notice that the individual has the right to dispute the accuracy or completeness of any of the information in the report.
Two major loopholes that have been reported in the FCRA are, first, if the employer does not use a third-party screening company but, rather conducts the background check itself, it is not subject to the notice and consent provisions of the FCRA. Secondly, the employer might tell the rejected applicant that its adverse decision was not based on the contents of the background investigation, but, rather for reasons other than the background report, whereby the applicant cannot contest or view his background verification report. Some of the gaps have been filled recently by allowing the applicant to view his report through annual file disclosures.
To conclude an employer must be aware of the following rights under the FCRA, violations of which could cost the company dearly.
The applicant/employee has the right to know what is in his/her file.
The applicant/employee has the right to ask for the credit score.
The applicant/employee has the right to dispute inaccurate or incomplete or unverifiable information hence it should be ensured that CRA provide accurate and correct information.
Consent must be obtained before conducting a background check.
Access to report files should be restricted to necessary personnel only.
Disclaimer: The content of this post does not constitute direct legal advice and is designed for informational purposes only. Any issues regarding compliance and obligations under United States or International laws or regulations should be addressed through your legal department or outside counsel.