Release Date: 06/ 02/ 2006
Hiring and retaining qualified and honest employees is critical for the success of any business. A recent study showed that nearly half of all job applicants submitted false or inaccurate information to their potential employees. Every state has different laws regulating when and how an employer conducts a background check. Many businesses have turned to credit report agencies to conduct their background checks.
Federally, the Fair Credit Reporting Act regulates agencies involved in the acquisition and use of background information for employment purposes. When a credit report agency is hired, and even when the check is conducted in-house, employers should be aware of the basic legal rules and boundaries in FCRA. Employers are advised to contact legal counsel to conform to state and federal laws to conduct efficient background checks while avoiding potential legal problems.
FCRA requirements on employers
- Disclosure: An employer must notify the employee or prospective employee that a report from a consumer reporting agency has been or may be ordered and the scope of the information to be investigated.
- Use a separate form: Disclosure of the report must be in writing and in a separate form with no other information appearing on the form.
- Written consent: An employer must obtain an applicant's written consent before requesting a consumer report from an outside agency.
- Notification of rights: Employers must advise the applicant of their right to request details of the report from the reporting agency.
- Order form advice: When a report is ordered, the employer must advise the employee in writing no later then three days after the date the report is ordered.
- Copy of the report: An employer must supply the applicant with a copy of the report and provide written notification if the employer intends to deny the applicant the job based on information contained in the report.
- Adverse actions: If an employer denies the applicant employment based on the report, the applicant must be given the name and address of the reporting agency.
Penalties for violations of the FCRA
- A civil penalty, up to $2,500, imposed by the Federal Trade Commission for each knowing violation
- Actual damages to the applicant if the employer willfully fails to comply
- Possible punitive damages up to $1,000 for each negligent or willful violation
- Reasonable cost of attorney's fees for bringing a successful action
For a complete copy of this law or any other information, please refer to the U.S. Federal Trade Commission at (877) 382-4357 or visit their Web site.
