Amy Drushal 

Your decision to hire a new employee or promote an existing one may depend on the findings of a background check.  Did you know that you need to comply with the Fair Credit Reporting Act (the “FCRA”) if you perform background checks?  Despite its name the FCRA does not just apply to credit reporting.  It applies to all background checks done on an employee or applicant if the employer uses a third party consumer reporting agency (“CRA”).  

Despite its name the FCRA does not just apply to credit reporting

A “consumer report” encompasses criminal and civil records, driving records, civil lawsuits and reference checks.  To comply with the FCRA, an employer who is seeking to obtain a consumer report from a CRA for its employees or applicants must: disclose clearly, conspicuously, and accurately the employer’s intent to obtain a consumer report in connection with his or her current or potential employment; obtain express authorization from the employee/applicant to obtain the report; give the employee/applicant pre-adverse action notice prior to taking adverse action if you intend to take adverse action based upon the information obtained in the report; and provide the employee/applicant with an adverse action notice after taking the adverse action. 

The FCRA is applicable only if the employer hires a CRA to perform credit and background checks.  Failure to comply with the FCRA can subject an employer to fines and penalties, as well as civil and criminal lawsuits. Here is what you need to know before obtaining a consumer report of an employee or applicant for employment:
1. Inform the Applicant/Employee of Your Intent to Obtain a Consumer 
Before you obtain a consumer report, you must provide written notice to the applicant or employee informing him or her that you will be obtaining such a report and that you might use the information obtained for decisions related to his or her employment.  The notice must be a stand-alone format. This notice is not sufficient if it is contained within the employment application.  Failing to provide the notice as a stand-alone document can in itself be a violation of the FCRA. 
2.  Consent from the Applicant or Employee.
You must get written consent from the applicant/employee prior to obtaining any consumer report.  This consent can be contained within the notice of intent to obtain a consumer report discussed above.  
3.  Required Certification to Consumer Reporting Agencies.
Prior to obtaining the consumer report, you must certify to the CRA that you:
have provided the employee with the necessary notice and disclosures; have obtained the employee’s written permission to obtain the report; and that you intend to use the consumer report for employment purposes – in the hiring, firing, promotion and retention of employees.  You also must certify that you will comply with your obligations under the FCRA in the event that you choose to take adverse action against an employee based on the information in the consumer report.  You cannot obtain a consumer report until these certifications are made to the CRA.
4.  Notice of Proposed Adverse Employment Action.
“Adverse action” means employment-related decisions such as the decision to not hire, to demote, or to terminate an employee.  It also includes lesser disciplinary actions such as a temporary suspension.  If, after you obtain the report, you intend to take adverse action based on information contained in the report, you must do two things prior to taking the adverse action.  First, you must notify the employee of the possible adverse action.  Second, you must provide the employee/applicant with a pre-adverse action notice, called the “Summary of Consumer Rights,” which contains a copy of the consumer  report and a summary of the employee’s rights under the FCRA.  This advance notice allows the applicant/employee time to dispute the information contained in the consumer report and  provides an opportunity to correct such information. You must then wait “a reasonable amount of time” to take adverse action. There is no specific definition of “reasonable time,” but at least one court has found that five (5) business days is reasonable. 
5.  Notice of Adverse Employment Action.
You must give the employee/applicant notice upon taking adverse action.  This is a separate notice from the pre-adverse action notice discussed above.  Such notice can be oral or in writing (including by email).  An adverse action notice informs the employee/applicant about his or her right to see the information reported about him or her and to correct any inaccurate information.  The notice must include: the name, address and phone number of the CRA that supplied the report; a statement advising the employee/applicant that the CRA that supplied the report did not make the adverse employment decision and cannot give specific reasons for why the adverse action was taken; notice of the person’s right to dispute the accuracy of the report and to get an additional free report from the company if he or she asks for it within sixty (60) days.  Background checks are an important tool for employers, but it is equally important to comply with your obligations under the FCRA.