The Fair Credit Reporting Act & How Employers Can Avoid Costly Mistakes

Image and video hosting by TinyPic  As employers increasingly utilize background checks, and even social media research, to inform their hiring decision, it is important to remember that the use of this type of information is carefully governed by the Federal Government's Fair Credit Reporting Act (FCRA). The FCRA rules that employers have obligations when making use of these types of reports:

  • Inform the applicant that you may conduct a background check by providing an authorization/consent form in a document COMPLETELY separate from the employment application and any other material. This document is to be provided as a stand-alone item.
  • The applicant must sign this document providing their consent to the background check
  • If the employer does not wish to hire the applicant based in whole, or in part, on any information discovered in the report, a letter must be delivered to the applicant and a grace-period provided for disputing purposes
  • If the applicant does not dispute the information in the report and the employer does not hire the applicant, a final, Adverse Action letter, must be provided to the applicant
In all cases, the employer must provide a copy of the applicant's rights under the FCRA.

Background screening companies are consumer reporting agencies, and their reports are generated from public record. The Federal Trade Commission, which governs the FCRA, recently stated that when social media background checks are included, this information is also considered part of the consumer report.

It is vital that companies understand their obligations for the use of these reports to avoid costly errors.