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Are Your Company’s Background Checks Compliant?

When employers are making staffing decisions, whether it be hiring, reassignment, or promotion, it is always important to consider the background of the new hire or internal hire. Important background information may include:

  • A Social Security number trace to ensure a valid social security number,
  • a national criminal search to search for criminal-related activity nationwide,
  • a county criminal search which searches for criminal history associated with the name and address of the new hire,
  • a motor vehicle search to ensure that they will be a good fit if they are driving company vehicles,
  • an employment credit check in the case that the new hire is handling any company money, and
  • an employment reference check to gather information about what others who have worked with the new hire in the past know about the individual.

Any time employers use an applicant or current employee’s background information to make an employment-related decision, there are many federal laws that organizations must comply with that protect applicants and employees from discrimination. The Equal Employment Opportunity Commission (EEOC) enforces these laws regarding discrimination not only when making employment-related decisions, but in the workplace as whole. This includes discrimination on the basis of race, color, religion, sex (pregnancy, gender identity, and sexual orientation), national origin, age (40 and over), disability, genetic information as referenced in the Genetic Information Nondiscrimination Act (GINA), military service veteran status, or any other characteristic protected by federal and state laws. In addition, employers must make sure that they are treating everyone equally when considering checking an applicant or current employee’s background information. It is illegal to conduct a post-offer background check solely based off of the characteristics listed above.

Another federal law employers need to comply with is governed by the Federal Trade Commission (FTC) known as the Fair Credit Reporting Act (FCRA). Under the FCRA (15 U.S.C. 1681), employers must get an applicant or current employee’s written consent before hiring a third-party agency to provide a consumer report. A consumer report includes any information regarding a new hire or current employee’s credit or character, including information about credit history, criminal history, and employment history (refer to the above list).

Regardless of the information that employers receive in any background report, not limited to the list above, they must be careful with how they utilize this information. Employers must ensure that the background checks that they are either requesting from a third-party, or running themselves, are relevant to the job that the new hire is seeking. For example, if an employer is hiring a new bank teller and they run an employment credit check and it comes back with a listing indicating check fraud, regardless of how long ago the applicant was convicted, employers should probably consider that a reason to rescind their offer of employment.

As stated above, in order to legally run background checks, employers must first get the applicant or current employee’s consent, or written permission, to run the reports. This should be a document that employers include along with a disclosure form informing applicants and current employees of the scope of the search. The consent form should include a request for information from the applicant or employee to include the following information: current address, addresses for the past seven years, Social Security number, birth date, driver’s license number, etc. In addition, employers must also give the applicant or employee a document titled “A Summary of Your Rights Under the Fair Credit Reporting Act”. This document may be obtained from the third-party that companies utilize to complete the background reports.

Employers who decide not to hire or promote an individual based on unfavorable information in the background check reports must provide the individual with a pre-adverse action notice which must include wording that informs the individual that he or she is on notice due to adverse information in their background reports and that their application for employment with the company is currently under review. This letter also states that they may be eliminated from further consideration of employment based on information received from the consumer reporting agency. The letter must also list the name, address, and contact information of the consumer reporting agency that produced the report. Employers should also include wording that states that the consumer reporting agency that produced the reports did not influence the company’s decision to potentially rescind the offer. Lastly, the letter must state that individuals have the right to dispute the accuracy of the report and are entitled to an additional free report from the consumer reporting agency within 60-days. New Focus HR recommends that these letters be delivered via Certified Mail to ensure that the information has been received by the intended recipient.

Employers who choose not to hire the applicant or promote the employee based upon adverse information must also send out a post-adverse action letter informing the applicant or employee that they are no longer being considered for the job due to adverse information in their background check reports. Employers must make this decision and send the post-adverse action letter within five days of sending out the pre-adverse action letter. Again, employers must be consistent and send the same information as they did in the pre-adverse action letter when sending the post-adverse action letter to the applicant or current employee. In addition, New Focus HR recommends that these letters be delivered via Certified Mail to ensure that the information has been received by the intended recipient.

Many of times the misconception is made that all criminal activity will show up in a national criminal report which is supposed to be a “nationwide” search. This is not true as national criminal reports are a compilation of available statewide database reports. The name, “national”, however is deceptive. National criminal reports are “national” in the sense that they cover courts and agencies all over the nation, but they in no way are inclusive of ALL courts and agencies in the United States. There are many rules and regulations based on the state that an employer is requesting a record from regarding the types of information they release to the public. And, some counties don’t provide a database for this purpose at all. Therefore, national records have a potential to miss information. For this reason, New Focus HR always recommends that employers check all of the individual counties where the applicant or current employee has lived for the last seven years and in accordance with the FCRA guidelines.

Background checks and other consumer investigative reports should be kept on file for a minimum of one year from the date that the employer received the completed reports or from the date that the personnel action was taken; whichever comes later. The Department of Labor extends this requirement to two years for federal contractors that have at least 150 employees and a government contract of at least $150,000. Lastly, if the new hire or employee files a charge of discrimination in accordance with the EEOC guidelines, employers must retain all records until the case is concluded.

For additional information on this topic, please contact us at www.NewFocusHR.com.

Written By: Patrick McKenna, SHRM-CP

HR Coordinator





New Focus HR is a human resources consulting and training company that services all organizations. Our expert team collaborates with businesses to attract, motivate, retrain and retain their biggest assets, employees. While engaged with an organization, our focus is to find solutions that improve the company’s internal HR-related practices while increasing results at the same time! Our focus. Your results.