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August 17, 2012

HR Fact Friday: Background Checks and the FCRA (Part 1 of 2)

What does an employer needs to do if it wants to reject an applicant for employment based on credit or criminal conviction history?   The main governing federal law is the Fair Credit Reporting Act (FCRA).  Some states also have laws that govern this issue, so check for them too.  The FCRA is enforced by the Federal Trade Commission (FTC).  The FTC has issued a clear guidance for employers on this point, click here.  The FTC guidance notes that employment background checks done by third parties “also are known as consumer reports.  They can include information from a variety of sources, including credit reports and criminal records.”  The FTC explains, “When you use consumer reports to make employment decisions, including hiring, retention, promotion or reassignment, you must comply with the Fair Credit Reporting Act (FCRA).”  The FTC guidance then explains the three main steps (outlined below) an employer must follow to comply with the FCRA in this process.  Because the FTC guidance on these three steps is so clear, I have included it below almost verbatim.



Before you even get a report, you must do the following:

Tell the applicant or employee that you might use information in their consumer report for decisions related to their employment.  This notice must be in writing and in a stand-alone format. The notice cannot be in an employment application. You can include some minor additional information in the notice, like a brief description of the nature of consumer reports, but only if it does not confuse or detract from the notice.

Get written permission from the applicant or employee.  This can be part of the document you use to notify the person that you will get a consumer report.  If you want the authorization to allow you to get consumer reports throughout the person’s employment, make sure you say so clearly and conspicuously.

Certify compliance to the company from which you are getting the applicant or employee’s information.  You must certify that you:

  1.  notified the applicant or employee and got their permission to get a consumer report;
  2. complied with all of the FCRA requirements; and
  3. will not discriminate against the applicant or employee or otherwise misuse the information, as provided by any applicable federal or state equal opportunity laws or regulations.

It’s a good idea to review applicable laws of your state related to consumer reports. Some states restrict the use of consumer reports – usually credit reports – for employment purposes.

Interested in learning more? Check back next Friday, August 24 for part two of this post.

Thanks to Jones Waldo Employment Attorney Michael Patrick O’Brien for contributing to this post (


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