The Fair Credit Reporting Act (FCRA) & Background Checks

Background checks have become and will likely remain a standard and expected part of the hiring process. The job market is competitive so employers have the leverage to confirm the truth of what job applicants say and the leverage to omit anyone with a red flag from consideration. Additionally, increased digitization and improved cyber-infrastructure means data, including personal data, is more readily available and cheaper than ever before. Furthermore, the stakes are higher for employers than ever before. Hiring one “bad apple” can have devastating consequences for a company’s operations and reputation. 

Background checks provide an easy and relatively quick way for employers to protect themselves and take one extra step in hiring someone reliable. An employer, or potential employer, uses background checks to:

• Verify the information that the job applicant offers them. 
• Look for anything to suggest the job applicant is less than reliable. 
• Identify anything to suggest the applicant might pose a threat to the employer or its other employees. 

That’s fair: employers just want to make an informed decision based on accurate data. However, with this practice comes a responsibility to respect and protect the rights of applicants and employees. 

The Fair Credit Reporting Act (FCRA) provides the legal framework for how employers should conduct these background checks. 

The background check attorneys at Consumer Attorneys are dedicated to protecting your rights. The FCRA aims to balance the needs of employers with the privacy and accuracy rights of individuals. This is especially true regarding background checks conducted by potential or current employers, as many people do not know that the FCRA not only applies to background checks but also imposes crucial requirements and gives consumers and all employees or potential employees powerful rights.  

Everyone - employees and employers - needs to understand their rights and obligations under the FCRA - whether you are an employer conducting background checks or an applicant on the cusp or in the midst of one. 

The FCRA dictates how background companies should collect and use information and provides specific protections and avenues for recourse if anyone violates those rights. Knowing these rights can help job applicants ensure that they are treated fairly and that any decisions about their employment are based on accurate and complete information.

On the other hand, employers must navigate the complex requirements of the FCRA to avoid legal pitfalls and ensure that their hiring practices are fair and compliant. Any failure to follow FCRA guidelines can lead to significant legal and financial repercussions and damage to an organization's reputation. 

Therefore, it is in the best interest of both parties to fully understand and comply with the provisions of this law.  This article provides an overview of the FCRA, its importance for employers, how to conduct an FCRA-compliant background check, employer responsibilities, the consequences of non-compliance, and what to do if your employer violates the FCRA.

What is the FCRA?

The FCRA is a federal law enacted in 1970 to promote the accuracy, fairness, and privacy of information in files maintained by consumer reporting agencies (CRAs). The FCRA governs how CRAs and background check companies collect, use, and share consumer information, with whom they can share it, and how they can share it. The FCRA is crucial for protecting consumer rights and ensuring that the information used in credit reports and background checks is accurate and fair.

The FCRA covers a broad range of information, including credit history, criminal records, medical screening, and other personal data. When it comes to employment, the FCRA sets specific guidelines for conducting background checks to ensure that employers and potential employers treat job applicants and employees fairly. 

The legal framework governing background checks also understands that employers must keep their workplaces safe. Employers need to know that when they hire someone, they are hiring someone who is reliable and trustworthy and not a threat to the other employees, the employer’s reputation, or the employer’s business. So it provides a clear outline for how to do it. 

What is FCRA Compliance and Why Do Employers Need to Be FCRA-Compliant?

FCRA compliance means adhering to all of the rules and regulations outlined in the Fair Credit Reporting Act. Particle compliance is non-compliance. 

For employers, this means following specific procedures when requesting and using background checks for employment purposes. An FCRA-compliant background check safeguards the rights of the screened individual. It safeguards the employer by establishing a paper trail to prove that the employer received all necessary disclosures and authorizations. 

Employers need to be FCRA-compliant for several reasons. 

Employer Responsibilities Before Requesting a Background Check

Employers have several responsibilities before they even request a background check. Here’s what employers should do to comply with the FCRA:

• Provide clear disclosures. Employers must clearly and conspicuously inform applicants or employees that a background check will be conducted in a standalone document.
• Obtain written authorization. Employers must obtain written authorization from the individual before conducting the background check. This ensures that the individual is aware of and consents to the screening process.
• Certify compliance with the background check provider. Employers must certify to the background check provider that they have obtained the necessary authorization, will comply with FCRA requirements, and will not misuse the information obtained.
• ONLY use FCRA-Compliant background check providers. They may be a little more expensive, but employers should select background check providers that comply with FCRA regulations to ensure the accuracy and legality of the information collected.

How to Conduct an FCRA-Compliant Background Check

Conducting an FCRA-compliant background check involves several steps, put in place to protect the rights of the screened individual. Here’s how employers can assure people their background checks comply with FCRA requirements. 

What are the Consequences of FCRA Non-Compliance?

Non-compliance with the FCRA can result in severe consequences for employers, including:

1. Lawsuits, Lawsuits, and more Lawsuits. Employers who fail to comply with FCRA requirements can (and will) face lawsuits from those job applicants or employees affected by those violations. These lawsuits can result in significant legal penalties, including statutory damages ranging from $100 to $1,000 per violation, actual damages, punitive damages, and attorney’s fees.
2. Reputational damage. Non-compliance can really hurt an employer’s reputation and make it challenging to attract and retain top talent. It can also damage relationships with current employees and stakeholders.
3. Operational disruptions. Legal battles and the resulting penalties can and will create significant operational disruptions and divert resources and attention away from the core business.
4. Government enforcement actions. Federal and state agencies may take enforcement actions against non-compliant employers, which can result in additional fines and sanctions.

What to Do If Your Employer Violates the FCRA

If you believe your employer has violated the FCRA, there are several steps you should take to protect your rights:

Conclusion

The Fair Credit Reporting Act (FCRA) protects job applicants and employees by mandating that employers conduct background checks fairly, responsibly, and accurately. Employers must comply with FCRA requirements to avoid legal consequences and protect individuals' rights. 

If you believe your rights under the FCRA have been violated, taking action to protect yourself is essential.