New FCRA forms for background checks

by Kara E. Shea

Do you use a third-party service to conduct background checks on job applicants or employees? If so, then you should take note of the new forms you are required to use for that purpose, effective January 1. The “new” forms originally were issued last year but had to be revised because of errors, so you’ll need to make sure you have the most recent version of the forms.

Background
The Fair Credit Reporting Act (FCRA) is a federal law that imposes requirements on employers that use third-party consumer reporting agencies (CRAs) to obtain consumer reports (e.g., background checks, reference checks, and credit checks) and investigative reports on job applicants or current employees. Previously, the Act was administered by the Federal Trade Commission (FTC), but it’s now administered by the Consumer Financial Protection Bureau (CFPB), which issued the revised forms. Employers should expect heightened scrutiny of FCRA compliance under the new administrative regime. Additionally, FCRA class action lawsuits have been popping up around the country. In case you need a refresher on FCRA compliance, there are four basic steps you need to take if you intend to use consumer or investigative reports from third parties as a basis for making hiring or employment decisions.

• Step 1: certification to the CRA. Each employer that engages a CRA to conduct a background search must certify to the CRA that it has provided or will provide appropriate notices to the job applicant or employee who is the subject of the requested report. The employer also must certify to the CRA that it will obtain the required authorizations from the job applicant or employee to receive copies of the report and use any reports received solely for purposes permissible under the FCRA.

• Step 2: notice and authorization to the applicant or employee. An employer that uses consumer or investigative reports as part of its applicant screening process must disclose—in writing to each job applicant—that (1) consumer or investigative reports may be requested and (2) employment decisions may be made based on the content of those reports.
  The content of the disclosure depends on the type of report you are requesting—more detailed disclosure requirements apply when investigative (as opposed to consumer) reports are requested. Regardless, you must obtain written permission from the applicant to request a report. In addition, when an investigative report is requested, you must provide the employee with a form titled “A Summary of Your Rights Under the FCRA.” (It’s one of the newly revised forms, so you’ll need to make sure you have the most current version.) You then must timely provide additional information if it’s requested by the employee.

• Step 3: preadverse action notice. If you intend to rely on the information in a report as a basis for an employment decision, then you must provide the applicant or employee with a copy of the report and a “summary of rights” form before taking the adverse action. Doing so provides him an opportunity to contact the CRA to dispute or explain an inaccurate report.

• Step 4: adverse action steps. If you decide to take adverse action (such as not hiring an applicant) based on what you find in a report, then you must (1) inform the applicant or employee (preferably in writing) that you intend to do so and (2) provide detailed information about how he can go about contacting the CRA and disputing the report.

Bottom line
Remember, the FCRA doesn’t in any way limit your ability to make employment decisions based on the content of a background search report. Rather, the law simply requires you to provide appropriate notices and obtain authorization before using one. You don’t have to hire any individual who refuses to consent to a background check. However, if you fail to follow the proper procedures, you could be subject to penalties and damages. Experienced employment attorneys can help you draft appropriate forms and checklists for FCRA compliance, so be sure to get help if you need it!

Kara Shea is an attorney with Butler Snow, practicing in the Nashville, Tennessee, office. She can be reached at 615-503-9112 or kara.shea@butlersnow.com.