FCRA-Compliant Background Checks: A Guide for Employers

The Fair Credit and Reporting Act (FCRA) was enacted to regulate how consumer information, including information contained in background checks, is collected and handled by employers. The FCRA sets strict guidelines on how businesses can gather and use this data when making hiring decisions. For example, pursuant to the FCRA, employers must obtain written consent to perform background checks, provide clear disclosures about the implications of negative findings, and follow specific steps when taking adverse action based on those findings. Performing FCRA-compliant background checks allows employers to protect both their own interests, as well as the interests of their job applicants.

What is an FCRA-Compliant Background Check?

An FCRA-compliant background check follows the guidelines set by the FCRA. First and foremost, the FCRA mandates that background checks must be conducted fairly and transparently. Some key requirements for employers conducting background checks include:

Obtaining written consent from the candidate before conducting the background check.
Providing clear disclosures to the candidate about the type of information that will be gathered and how it may be used.
Notifying the candidate of their rights under the FCRA, including the right to dispute inaccurate or incomplete information.
Following proper procedures if the employer plans to take adverse action (such as not offering the applicant the position) based on the background check findings.

If the employer intends to deny employment based on the background check results, they are required to give the candidate a copy of the report and an opportunity to dispute any inaccuracies before finalizing the decision.

Key Components of an FCRA-Compliant Background Check

FCRA-compliant background checks require employers to follow specific steps, which provides transparency and fairness for both employers and applicants. The key components of FCRAcompliant background checks include:

Written Consent

Employers must obtain written authorization from the applicant before conducting a background check. This will serve as confirmation that the applicant understands and agrees to the check. Without it, performing the background check would violate FCRA guidelines.

Clear Disclosure

Employers are required to provide applicants with a standalone disclosure form that explains the purpose of the background check. The disclosure cannot be combined with other documents, so the candidate can fully understand the nature of the check and what information will be gathered.

Adverse Action Process

When an employer plans to deny employment based on background check results, they must follow specific steps outlined by the FCRA:

Pre-Adverse Action: Employers must give the applicant notice before making any final decision. This notice includes a copy of the background report and a summary of the applicant’s rights under the FCRA, allowing them the chance to review and dispute any inaccurate or incomplete information.
Post-Adverse Action: If the employer decides to proceed with the adverse action after allowing the applicant time to dispute, they must send the applicant a final notice to inform the candidate of the employer’s decision and provide information on their rights to take further action, if needed.

Why FCRA Compliance Matters for Employers

Adhering to FCRA regulations is not only a legal requirement for employers, but is also a way to protect their businesses. Employers that do not comply with FCRA rules for background checks face several risks, including:

Legal Penalties: Non-compliance can result in costly lawsuits, fines, and potential class-action cases brought by affected applicants.
Reputational Damage: A company that faces legal action due to FCRA violations may suffer harm to its reputation, which can affect future hiring and business relationships.
Employee Trust: FCRA compliance helps build trust with candidates, showing that the company respects their privacy and follows fair hiring practices.

Following FCRA guidelines allows businesses to conduct background checks transparently, minimizing the risk of errors and protecting the company from potential future disputes.

How Long Do FCRA Background Checks Date Back?

One of the most common questions employers face is how far back FCRA-regulated background checks can search for certain types of information. Under the FCRA, there are specific limitations on reporting certain types of information, particularly when it comes to criminal history and financial data.

Criminal Records

In most cases, FCRA background checks can report criminal records going back up to seven years. However, there are some exceptions for specific industries and positions with higher salary thresholds where older information may be more relevant.

Convictions

Unlike criminal records, convictions are not subject to a prescribed limit. In fact, convictions can be reported indefinitely, allowing employers to consider them, regardless of when they occurred.

Working within these limitations is important so that employers can remain compliant for FCRA regulations while also making sure that the background checks provide the information needed to make sound hiring decisions.

Best Practices for FCRA-Compliant Background Checks

To avoid legal risks and streamline the hiring process, employers should adopt practices that
comply with FCRA guidelines. The following steps help protect both the business and the
applicants.

1. Partnering with a Reputable Screening Provider

Choosing a screening provider that strictly follows FCRA guidelines is extremely important to maintaining employer compliance. Because of this, employers should vet providers to confirm they use accurate methods, provide clear disclosures, and follow proper protocols for adverse actions. Partnering with a trusted provider helps prevent mistakes that could lead to legal complications down the line

2. Keeping Records and Documentation

In order to comply with the FCRA, employers must retain comprehensive records related to background checks, including written consent forms, disclosures, and all communications with applicants related to adverse actions. Good recordkeeping can provide a documented history that can be extremely important in the event of a legal dispute or audit.

3. Periodic Audits of Hiring Practices

Conducting regular audits of hiring and screening procedures helps identify gaps in compliance with FCRA requirements. Audits allow businesses to spot any irregularities and correct them before they escalate into legal issues, providing a proactive way to manage compliance

4. Training for HR and Legal Teams

HR and legal teams should receive ongoing training on FCRA guidelines. Regular training sessions help keep staff up-to-date on requirements and industry best practices and reduces the chance of costly mistakes during the hiring process

5. State-Specific Requirements

While the FCRA provides a federal framework, many states impose additional regulations on background checks. Employers must familiarize themselves with state laws and incorporate them into their hiring processes, ensuring that they are compliant on both the federal and state levels.

How to Dispute a Background Check Under the FCRA

If an applicant discovers inaccurate or outdated information in their background check, the FCRA provides a clear path for disputing those errors. The process allows individuals to correct mistakes that could unfairly impact employment decisions.

Steps to Dispute

Contact the Background Check Provider The first step is to notify the background check provider in writing. This communication should clearly outline the specific inaccuracies in the report and include supporting evidence where possible.
Notify the Employer While disputing the background check, it’s important for the applicant to inform the employer about the situation. Employers cannot finalize any adverse employment decisions based on the report until the dispute has been resolved.
Wait for the Investigation The background check provider has 30 days to investigate the dispute. During this period, they will verify the contested information and either correct the report or confirm its accuracy.
Receive a New Report If the investigation results in changes to the background check, the applicant will receive an updated report, and the employer must review the revised information before taking any action

Consumer Rights

Under the FCRA, applicants have the right to dispute inaccuracies in their background checks at no cost. The law mandates that background check providers and employers handle disputes in a timely and fair manner. Applicants are entitled to receive the results of the investigation and, if applicable, the corrected report.

Long-Term Consequences of Non-Compliance

Failing to comply with FCRA regulations can lead to significant consequences for businesses. Non-compliance goes beyond immediate legal penalties, as it can also have lasting effects on a company’s operations and reputation. Some long-term consequences include:

Financial Damages: Employers who violate FCRA guidelines may face lawsuits that result in costly settlements or judgments. Fines for non-compliance can also add up, especially in cases or repeated violations or class-action lawsuits.
Legal Fees: Defending against FCRA-related lawsuits can be expensive, even if the business ultimately prevails. The cost of legal representation and court fees can become a heavy burden on the company’s resources.
Reputational Harm: Being sued for FCRA violations can damage a company’s reputation, making it difficult to attract and retain top talent. News of non-compliance can spread quickly, leading potential employees to question the company’s commitment to fair hiring practices.
Increased Scrutiny: Companies that face FCRA-related legal action may attract attention from regulatory bodies and consumer rights groups. This can result in closer monitoring of the business’s hiring practices and increased pressure to maintain compliance moving forward.

For these reasons, it is important for employers to establish strong procedures for FCRA compliance. Avoiding long-term consequences not only protects a business’s bottom line, but also its reputation and ability to hire and retain skilled workers.

Hiring Responsibly

FCRA-compliant background checks are a key part of responsible hiring. Following the Fair Credit Reporting Act helps employers avoid legal trouble while keeping the hiring process transparent and fair. Properly managing background checks provides fair treatment for applicants and protects businesses from costly disputes, fines, and damage to their reputation.

Conn Maciel Carey’s national Labor and Employment Practice Group represents employers in all aspects of the employment relationship. Whether it is complying with employment screening laws or managing dispute processes we can help you stay in compliance with the latest FCRA requirements. Contact us today at (202) 715-6244 to learn more.

This article is intended for informational purposes only and does not serve as legal advice. It does not cover all aspects or requirements of the relevant laws. If you have any specific questions or need clarity on these legal issues, please consult your attorney for detailed guidance.