Employers Must Comply with Detailed Requirements When Having a Third Party Perform Background Checks

Q: Are there certain rules an employer must follow when conducting background checks on employees and prospective employees?

A: The Fair Credit Reporting Act (“FCRA”) is an often overlooked federal law that imposes stringent technical requirements on employers wishing to procure a “consumer report” from a third party “consumer reporting agency” for hiring or other employment purposes. Individual FCRA lawsuits and class actions are on the rise and failure to comply with the FCRA can result in harsh financial penalties.  This blog post provides a brief overview of the FCRA.

The FCRA’s definition of a “consumer report” is quite broad and includes, but is not limited to, credit reports, criminal history reports, and driving records obtained from a “consumer reporting agency.” Nearly every third party background check provider will qualify as a “consumer reporting agency” under the FCRA.  Before obtaining a consumer report to be used for employment purposes, employers are required to provide applicants and employees with a written disclosure stating that the employer plans to conduct a background check and employees/applicants must provide written authorization for the employer to obtain a consumer report prior to the employer actually obtaining the consumer report. The disclosure and authorization must be in a stand-alone document and cannot be part of the employment application.

After obtaining a consumer report, but prior to taking any adverse action based on the consumer report (e.g., not hiring an applicant because of her criminal record), the employer must provide an applicant with a “pre-adverse action” notice that includes a copy of the consumer report at issue and written notice of an applicant’s rights under the FCRA. The purpose of this requirement is to give the applicant the opportunity to correct any wrong information in a consumer report prior to the employer taking adverse action. Although the FCRA does not specify how long in advance the pre-adverse action notice must be given prior to taking adverse action, a period of at least five (5) business days generally is considered appropriate.

If an employer eventually decides to take adverse action, the employer must provide oral, written, or electronic notice of the adverse action and provide the applicant with certain information required by the statute. Although a written adverse action notice is not required by the FCRA, it is a good business practice to provide written notice so that documentation of compliance with FCRA requirements is available in the event of litigation.

A willful violation of the FCRA can result in statutory damages of $100 to $1,000 per violation, punitive damages and attorneys’ fees. Even if an employer is merely negligent in violating the FCRA, an applicant can still sue for any actual damages plus attorneys’ fees.

Before conducting any employment-related background checks or taking any adverse action based on a consumer report, be sure to also consult local and state laws. Certain states (such as California) have requirements in addition to those imposed by the FCRA. In addition, certain states restrict an employer’s use of the results of a background check. For example, Pennsylvania law only permits employers to consider criminal convictions “to the extent to which they relate to the applicant’s suitability for employment in the position for which he has applied.”

Employers should consult with legal counsel before implementing any type of background check program.

–Lee Tankle

Background Checks in the Era of Ban the Box

Q: What does it mean to “ban-the-box,” and how does it affect our hiring process?

 A: Ban-the-box legislation is quickly spreading throughout state and local jurisdictions.  Even if your jurisdiction has not adopted such legislation yet, it is likely that it will do so in the not-so-distant future. Therefore, it is vital to understand both the rationale behind the legislation and how it will affect your organization’s hiring processes.

The “box” that is the subject of so much controversy is the commonly used checkbox on job application forms that asks whether an applicant has a prior criminal record. Limiting an employer’s access to a prospective employee’s criminal history at the initial stage of the hiring process is thought to decrease the likelihood that an employer will discriminate against an ex-offender, thereby reducing employment barriers for those individuals.

Ban-the-box laws attempt to effectuate this policy goal by limiting (1) what can be asked of applicants prior to hiring, (2) when inquiries into criminal history can be made, and (3) the type and age of offenses that may be considered by employers in making hiring decisions. Some research studies have suggested that “banning the box” has resulted in the unintended consequence of broader discrimination against minority applicants because of employer bias that such applicants are more likely to be ex-offenders.

Nevertheless, the movement continues to gain momentum. Recently, Connecticut joined the State of New Jersey, New York City, Philadelphia and many other states, cities and localities in enacting ban-the-box legislation for private employers.  In addition, President Obama has banned the box by prohibiting federal agencies from inquiring into the criminal record of an applicant until the final phase of the application process.

It is important to note, however, that ban-the-box laws do not prohibit employers from ever inquiring into the criminal history of applicants. The laws concentrate on when and in what manner such inquiries may be made.  The Philadelphia ordinance, for example, permits employers to inquire into an applicant’s criminal history after a conditional offer of employment has been made.  The employer is then required to engage in an individualized assessment of the applicant, which includes consideration of the nature of the offense, the time that has passed since the offense, the particular duties of the job being sought, evidence of rehabilitation, previous employment history, and any character references provided by the applicant.  In contrast, the New Jersey ban-the-box law allows an employer to inquire into criminal history after the applicant’s first interview.  The New Jersey law is also much narrower than the Philadelphia ordinance; other than the timing requirement, it only prohibits an employer from considering expunged convictions and does not require that employers undertake any “individualized” assessment of the applicant’s conviction history.

Even if your jurisdiction has not yet been affected by ban-the-box, it is wise to begin adjusting your hiring procedures now so that you are prepared once such legislation arrives. At minimum, employers should make the following changes:

  • Remove the “box,” i.e., eliminate questions regarding criminal history from employment applications.
  • Ensure compliance with the federal Fair Credit Reporting Act , which requires disclosure and consent before running a criminal background check, as well as disclosures before taking any adverse action because of the results of the background check,
  • Train managers on what they can and can’t ask during job interviews. Where “ban the box” is in effect, questions regarding an applicant’s criminal history, whether oral or in writing, should be asked only when permitted by the applicable statute.
  • Take action to eliminate any unconscious bias against certain demographic groups in the recruiting process.
  •  Keep abreast of pending ban-the-box legislation in your jurisdiction; once enacted, such legislation might place limitations on how an applicant’s criminal history may be considered in the hiring process.

– Tracey E. Diamond and Laura Kleinberg