Employers’ Guide to Compliance with Background Screening Laws

Oct 27, 2019

The process of vetting and hiring the most suitable employees for your organization, while at the same time ensuring fair and legal hiring practices can be surprisingly complicated for many employers. In theory it may sound simple, as surely most employers treat their employees with fairness and respect their rights. But in practice, many find compliance challenging. In this article, we summarize the main guidelines for employer compliance with the federal laws that regulate employment background checks.

Employers have an obligation to avoid negligent hiring and keep their companies safe for employees, customers, and associates; a serious concern, with statistics showing that about 2 million American workers are victims of workplace violence each year. But minimizing this risk while complying with laws that restrict their ability to vet new employees can often feel like an impossible balancing act. Employers must hold themselves and their representatives accountable by developing and implementing a comprehensive compliance policy that details rules for every process and procedure in order to ensure that no lines are crossed when dealing with background checks.

Another obstacle to compliance is the complexity of our system of government. As humans and societies grow and evolve, there are periods, usually after decades of stasis, when we suddenly go through a plethora of  legislative activities. We seem to be experiencing this at the moment. These frequent updates and influx of new regulations, that are issued by legislative bodies across multiple levels of the government, can be hard to keep up with, to say the least. Having to make changes to your procedures and policies, editing forms, and re-training personnel each time a rule is amended or a guideline clarified, can be a considerable undertaking. More so for large companies and staffing agencies. For many, the hardest part is understanding their obligations in the first place. It really does take a law degree to make sense of it all. Interpreting and implementing rules that span and intersect among federal, state and local laws is a lot easier with the assistance of expert legal advice.

Regardless of how we feel about these laws, the price of non-compliance is something no employer wants to have to pay. The financial damages, crippling sanctions and not to mention the blow to company morale and reputation can be devastating to a business. Non-compliance with employment background check laws is no exception.

Employers spend millions of dollars every year settling claims of violations of the FCRA and the EEOC federal employment screening rules. Factor in the 35 states and over 150 cities and counties that impose additional screening regulations, and one can see how one slip could trigger an avalanche of penalties that may be hard for a company to recover from.

Since we agree that non-compliance is not an option, let’s discuss some key obligations employers have when running employment background checks.

Two federal agencies enforce employer responsibilities in respect to the use of consumer reports. These are the FTC (Federal Trade Commission) and the EEOC (Equal Employment Opportunity Commission). They regulate the way employers obtain, use, store, and dispose of applicants’ background reports, and ensure consumer rights to fair treatment and privacy as employees, applicants or independent contractors of your company.

The Fair Credit Reporting Act (FCRA), is the law enforced by the FTC and the Consumer Financial Protection Bureau (CFPB) that regulates the collection, dissemination, use and disposal of consumer reports (background checks and credit reports). Its concern is that consumer reports are accurate, that they are used in a fair manner and that consumers’ personal information is kept confidential and secure from unauthorized use.
When a company uses a Consumer Reporting Agency (CRA), such as Diligent Screening, to obtain consumer reports (background or credit checks) in employment screening, both the CRA and the employer have obligations to fulfill. On the CRA side, the FCRA imposes rules that limit what information we can include in our reports, requires procedures to ensure the accuracy of the information we compile, and enforces our responsibility to provide recourse for consumer disputes and correct any errors on the report in a timely manner.
Of employers, the FCRA requires that when using consumer reports in screening for the purpose of assignment, promotion and hiring of employees and contractors you must comply with their rules for proper disclosure, authorization, adverse action and disposal of consumer reports.

An employer’s main obligations under the FCRA screening regulations are:

Before requesting a background check

  • Provide consumer with a clear and conspicuous written, stand-alone disclosure that you are seeking a consumer report and that any information in it might affect your hiring decision.
  • Provide notice to the consumer that they have a right to request additional disclosures and a summary of the scope and substance of the report.
  • Obtain consumer’s written, signed consent to procure their background report.
  • Provide consumer with the document, “A summary of your rights under the Fair Credit Reporting Act
  • Certify to the CRA that:
    1. You have complied with the FCRA’s disclosure and authorization requirements
    2. You will only use the information on the report for employment purposes
    3. You will not use it to discriminate against the employee/applicant or otherwise violate any federal or state equal opportunity law or regulation.
    4. You will follow proper Adverse Action procedures

    Before you take any adverse action based on any negative information on the report you must give the consumer:

  •  A notice that an adverse action is being considered based on information in the report
  • The contact information of the CRA with a notice of the consumer’s right to dispute any errors on the report
  • A copy of the consumer’s background check results report
  • A copy of “A Summary of Your Rights Under the Fair Credit Reporting Act”

If the consumer does not respond or dispute the accuracy of the report after a reasonable waiting period of at least 5 business days, and if you wish to continue with the adverse action, you must:

  • Notify the consumer of your decision, in writing, orally, or electronically of your final decision. The notice must also include:
  1. The contact information for the CRA
  2. A statement that the CRA did not make the adverse decision and is not able to explain the reason for the decision
  3. A statement that the consumer has a right to obtain a copy of the report from the CRA within 60 days.
  4. A statement that the consumer has a right to dispute any errors on the report directly with the CRA.

Once you no longer have a need for the consumer report:

  • Securely dispose of the report and any information from it in a way that makes it impossible to be read or reconstructed.

These are only broad guidelines, for a more detailed information about your obligations under the FCRA, as well as additional guidelines, please refer to the FTC’s guidance document, Using Consumer Reports: What Employers Need to Know.

The EEOC however, is less clear cut in specific requirements and leaves too much room for interpretation. Its Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964 regulates the use of criminal history in employment decisions.

 The EEOC’s guidelines on employment screening are the most difficult to understand and implement as they are quite vague and lack clear definitions and specific requirements. This leaves much of the liability of defining compliance in the hands of employers themselves. Many believe that they are being perfectly compliant, with all their duckies in a row, until they find themselves standing in front of a judge and found guilty of EEOC violations. Sometimes, it just comes down to wrong interpretation of some ambiguous word or vague phrasing in the statute. This happens a lot and usually leads to further clarification and guidelines; and to a flurry of employers in a mad scramble to quickly update their own policies. Despite recent setbacks in Texas where the Courts of Appeals ruled that the EEOC mandate is unenforceable, the agency has been reaffirming its commitment to enforcing its 2012 guidelines with continued civil action against employers in other states. 

Per the EEOC’s 2012 guidelines employers may not refuse to hire someone solely because they have a criminal record (Except when such exclusions are required by law). The law argues that because historically, minorities in particular have been systematically targeted by racial profiling in the criminal justice system, using the existence of criminal history as proof of unfitness for employment affects said individuals to a disproportionate degree, and has a ‘disparate impact’ on these Title VII-protected groups. Thus your screening practices should focus on eliminating bias against individuals with a criminal past and affording them a fair chance at obtaining and retaining employment.

With this in mind, here are some broad guidelines from the EEOC about screening for criminal history in the hiring, promotion, reassignment and retention of employees.

The gist of it:

  • Excluding people from employment due to their criminal history is a violation of the Civil Rights Act.
  • Develop a company wide written policy on candidate screening. It is important that employers have guidance in place for every step in the screening process. It should include detailed job functions, description of disqualifying offenses, the justification behind any exclusions along with sources of research that support your reasoning. This not only serves as a procedural guide for your hiring personnel but it will also be your defense in the event of litigation.
  • Train managers and hiring personnel on the proper implementation and application of your EEOC compliant screening policy
  • Treat all applicants/candidates/employees equally. Background checks should not be used selectively. Because It is illegal to ask about or look into an applicant’s criminal history because of their race, color, religion, sex, or national origin, picking and choosing which of your candidate will be getting their background checked can lead to a ‘disparate treatment’ of people in Title VII-protected groups. This is a violation of the Civil Rights Act of 1964. If you wish to screen be sure that your company policy dictates that all applicants/new hires must be screened.
  • Protect individuals’ right to privacy. Keep information about criminal history confidential. ensure that background reports are only used for the intended permissible purpose and are kept secure from unauthorized access.
  • Any exclusion of criminal conduct must be job related and consistent with business necessity. It is imperative that companies’ screening policies do not include blanket exclusions of any criminal offense. If your policy excludes a conviction from eligibility for employment, you must document in your screening policy the sources of data or research that shows that the offense in question has a direct negative impact on the specific duties of the position applied for.
  • Search only for offenses that are relevant to the position in question. Records of arrests should not be considered as they do not prove a crime was committed.

When considering an adverse action based on any criminal offense in an employment screening report:

  • Perform an individualized assessment.

When considering criminal conduct that constitutes an exclusion according to your company policy, you must perform an individualized assessment of the offense within its particular circumstances. For example, consider the severity of the offense, the length of time since it was committed, and the number of convictions reported to see if the exclusion really is incompatible with the job functions and a business necessity.

If you wish to move forward with the adverse decision, you must give the applicant:

  • A copy of their report
  • A pre-adverse action notice
  • A summary of their rights under the FCRA
  • A letter indicating the problematic offense and the reasoning and sources behind your policy
  •  Options for dispute of any errors or for providing evidence of mitigating circumstances that could demonstrate their fitness for the position.

The burden of proof is on the employer to show that they have a reasonable justification to barring a candidate based on criminal history. Employer compliance with these goals are being closely monitored as individuals become more aware of their rights. Good intention is not enough to keep your business safe from the devastating consequences of noncompliance.

Keep in mind that your state, county or city may impose additional obligations that exceed those listed here. Diligent Screening stresses again, the importance of obtaining legal counsel to help your business comply with all applicable laws.

Even more crucial is due diligence in selecting a Consumer Reporting Agency as an employment screening partner. With so many websites selling online “background checks”, employers must be cautious when choosing where to obtain consumer reports. Much of what you see advertised online as ‘background checks’, are nothing but database searches that commonly return data that is inaccurate, incomplete, outdated and not legally compliant for use in hiring decisions. These searches are meant to be used only by the CRAs as guidance to where potential hidden records might be found by researching the applicable court’s records in  a manner consistent with FCRA guidelines. In short, employers should only obtain background reports from a legitimate CRA. Run’ don’t walk, away from ‘instant online searches’ or you will soon find yourself in hot waters.

Diligent Screening is a CRA and all our processes, including research methods, reporting guidelines, quality assurance procedures, data privacy standards and cyber-security protocols are in strict compliance with the FCRA, as well as all applicable federal, state, and local laws and regulations. We provide background screening reports that accurate, reliable, current, and legally compliant; which is the foundation for any compliant screening policy.

In addition, our selection of compliance tools and resources help companies fulfill their legal obligations and facilitate employer compliance with requirements for disclosures, authorization, adverse action, individualized assessment, data security, and report retention and disposal. Diligent Screening Services can help bridge the gap between peace of mind for employers, and fair equal treatment for all employees.

Schedule a personalized demo online to learn more about our employer compliance tools and how Diligent Screening can help improve your screening program.

Resources: https://www.eeoc.gov/laws/guidance/arrest_conviction.cfm




NOTE: Diligent Screening Services does not provide or offer legal services or legal advice of any kind or nature. Any information on this website is for educational/informational purposes only. We recommend you consult your attorney or legal department if you want assurance that our information, and your interpretation of it, is appropriate to your particular situation.

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