The Ins and Outs of Hiring a Consumer Reporting Agency
There are many reasons that employers -- both large and small -- may wish to investigate the backgrounds of job applicants and employees. Identifying job candidates who lie on their resumes or job applications is one reason; complying with state or federal laws that require background checks for certain categories of jobs is another. But conducting accurate and timely background checks can be tricky and time consuming for many businesses. Hiring an outside company known as a consumer reporting agency, or CRA, to perform a background check can help almost any business, no matter its size. A CRA can help uncover applicants who submit false information when applying for a job.
The federal Fair Credit Reporting Act (FCRA) has a number of requirements for employers who wish to use a CRA to conduct background checks on job applicants or current employees. The report a CRA provides to the employer is called a “consumer report.” If an employer uses a CRA to perform background checks on job applicants or current employees, it must:
- Clearly tell the candidate or employee that the employer is going to conduct a background check. The disclosure must be made on a separate document. It cannot be part of the employment application; and
- The individual must first sign a document authorizing the background check.
If an employer decides to take an “adverse action” based on the information in the consumer report (such as not hiring an applicant or terminating an employee), the FCRA has other requirements an employer must follow when notifying the individual of its decision. First, prior to taking the adverse action (sometimes referred to as the pre-adverse action), the employer must provide the applicant or employee two notices:
- A copy of the report obtained from the CRA; and
- A summary of the individual’s rights under the FCRA. This summary is a standard document created by the Federal Trade Commission
After giving the applicant or employee these notices, the employer is required to wait for approximately five days before actually taking the adverse action. After the adverse action is taken, the employer must provide a number of other notices to the applicant or employee:
- Notice of the adverse action taken;
- The name, address, and toll free telephone number of the CRA that provided the consumer report;
- A statement that the CRA did not make the decision to take the adverse action and is unable to provide the consumer the specific reasons why the adverse action was taken;
- Notice of the consumer’s right to obtain a free copy of the consumer report from the CRA within 60 days; and
- Notice of the consumer’s right to dispute the accuracy or completeness of any information in the consumer report furnished by the CRA.
When ordering a background check from a CRA, employers need to be aware of particular laws regarding the use of such information. For example, although the FCRA allows the reporting of arrest information going back seven years, some states prohibit employers from considering whether a job applicant has ever been arrested (but not convicted) of a crime. Therefore, employers need to make sure they are familiar with the specific laws of their state before making an employment decision based on the information from a background check.
Although instituting a background checking program can be a big step for an employer, the benefits are almost always worth the time and effort. The costs of instituting a good background check process are slight compared to the costs that can be associated with hiring an individual who lies on his or her resume or job application and who later goes on to steal from the company, drive a company car while drunk, engage in workplace violence, or worse. The background check process can help employers reduce or eliminate such risks.
None of the information provided herein constitutes legal advice on behalf of Monster.