Background Checks, Adverse Action, and the FCRA

Employers usually conduct background checks on job applicants to look for issues such as a criminal record that could affect their employment decisions. The information that is found in a background check may not necessarily be correct. For example, a record of a criminal conviction could belong to someone with the same name.

Protections for Job Applicants and Employees

The Fair Credit Reporting Act provides protections for job applicants and employees who are subject to adverse action as a result of information obtained through a background check. An adverse action can include denial of employment or any other action that adversely affects the consumer, such as being fired or not getting a promotion.

An employer must follow requirements set out by the FCRA before it can take adverse action against an employee or job applicant. The employer is required to provide the applicant or employee with a pre-adverse action notice that includes a copy of the consumer report and a summary of rights from the Consumer Financial Protection Bureau. This gives the applicant or employee a chance to review the information and discuss it with the employer before an adverse action is taken.

When the employer is ready to take an adverse action, it must provide an adverse action notice to the job applicant or employee. It can be delivered in writing, electronically, or orally.

The adverse action notice must contain the name, address, and phone number of the consumer reporting agency that provided the employer with the report, a statement saying that the consumer reporting agency did not make the decision and cannot give a reason for it, a statement saying that the applicant or employee has the right to obtain a free copy of the report if it is requested within 60 days, and a statement explaining the individual’s right to dispute the accuracy or completeness of the information with the consumer reporting agency. The FCRA does not specify how long an employer should wait between sending pre-adverse action and adverse action notices.

Make Sure Your Business Complies with the Fair Credit Reporting Act

In recent years, an increasing number of job applicants and employees have filed lawsuits alleging that employers took adverse actions against them in violation of the standards set by the FCRA. This is why it is essential for employers to make sure they follow the law and provide individuals with accurate information about their rights.

Conducting background checks is an indispensible part of the hiring process. If your company needs to hire a new employee, DataCheck can help you gather the information you need and advise you on the requirements of the FCRA, as well as other federal and state laws. Contact DataCheck today to learn more about our background check services.