Background checks can provide employers with a variety of job-related information to use when evaluating prospective employees' qualifications, such as work history and education, criminal records, and driving records.
However, federal, state and local laws set limits on obtaining and using background check information to make employment decisions. Employers must ensure compliance with these laws. Here’s a checklist to help employers when conducting background checks.
Extend a written offer of employment.
Many states and local jurisdictions require employers to wait until the employer has extended a conditional job offer before conducting background checks. Even in jurisdictions without such restrictions, it is considered a best practice to wait until a conditional job offer has been extended.
Generally, a conditional job offer is contingent on the satisfactory completion of certain steps, such as a background check, reference check, drug test, and proof of work eligibility. Any contingencies that could lead to the withdrawal of the offer should be clearly indicated in the written job offer.
Provide disclosure and obtain written authorization.
The federal Fair Credit Reporting Act (FCRA), and similar state laws, have specific rules for conducting background checks, including requiring that employers provide written notification to, and obtain authorization from, any individual subject to background checks performed by third parties (usually, a professional background screening company). Under the FCRA, these third parties are known as consumer reporting agencies or “CRAs.”
Under the federal law, you must:
- Tell the applicant or employee that you might use information in their 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 the reports, but only if it doesn't confuse or detract from the notice.
- Get written permission from the applicant or employee. If you want the authorization to allow you to get reports throughout the individual's employment, make sure you say so clearly and conspicuously.
Conduct background checks within the limits of federal guidelines.
Under federal guidelines, the use of criminal records must be job-related and based on business necessity. According to the U.S. Equal Employment Opportunity Commission, since an arrest is not evidence of guilt, an exclusion based on arrest information is not job-related and consistent with business necessity (and therefore typically violates federal law).
To establish that an exclusion based on a criminal conviction is job-related and consistent with business necessity, the employer must show a link between the specific criminal conduct, and its dangers, and the risks inherent in the duties of a particular position. Employers must avoid broad exclusions based on a criminal conviction and typically must conduct individualized assessments. For more information, see the federal guidance here.
Conduct background checks within the limits of state and local laws.
Some states and local jurisdictions further restrict the types of information that may be obtained and/or used in a background check.
For example:
- Many states and some local jurisdictions have specifically prohibited, restricted, or advised against the use of arrest records to make employment decisions.
- Several states have enacted laws restricting employer access to applicants' credit history.
- Nearly 20 states and several local jurisdictions have enacted laws that include a provision prohibiting employers from asking about salary history.
- Many state and local jurisdictions have enacted laws that echo and amplify the individualized assessment requirements mentioned above.
Check your state and local laws to ensure compliance.
Follow required pre-adverse-action procedures (if applicable).
Under the FCRA, before taking adverse action based in whole, or in part, on a consumer report, an employer must provide the individual with:
- A copy of their consumer report (background check);
- A Preliminary Notice of Adverse Action; and
- A copy of “A Summary of Your Rights under the Fair Credit Reporting Act.”
Adverse action is defined broadly and includes, but is not limited to, denying a job application, reassigning or terminating an employee, or denying a promotion.
By giving the candidate the notice in advance, they have an opportunity to review the report and explain any negative information.
Some state and local laws require employers to provide additional information to applicants and employees before taking adverse action, beyond what is required by the FCRA. Understand what state and local laws apply to your candidate before considering taking adverse action.
Follow required adverse-action procedures (if applicable).
If you ultimately decide to take adverse action after completing all of the previous steps, the FCRA requires you to provide a final notice to the individual that:
- Identifies the action taken;
- Lists the name, address, and phone number of the consumer reporting agency (CRA) that supplied the report;
- Includes a statement that the CRA did not make the decision to take adverse action and is unable to give specific reasons for it; and
- Notifies the individual of their right to dispute the accuracy or completeness of any information the agency furnished, and their right to an additional report from the CRA within 60 days of a request.
Retain records for at least the required retention period and then dispose of them properly.
Keep background check records secure at all times and limit the information only to those with a “need to know.” Background checks should generally be kept separate from personnel files in a confidential file. In general, background checks must be kept at least one year after the records were made, or after a personnel action was taken, whichever is later.
However, some states and local jurisdictions require a longer retention period. Additionally, the statute of limitations under the FCRA is the earlier of two years after discovery by the individual of the alleged violation or five years after the date on which the alleged violation occurred. As such, employers may want to retain documents demonstrating compliance with the FCRA for at least its statute of limitations.
Following the conclusion of the retention period, records must be disposed of properly, so they cannot be read or reconstructed.
Conclusion
Background checks must be performed in accordance with federal, state and local laws. Make sure you understand the rules that apply to your business before conducting background checks.