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Background Checks

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Background Checks

  • Course: Employment Law 101
  • Module: Hiring Process
  • Lesson Type: Video
  • Lesson Duration: 6:53

Lesson Content

With regards to background checks, businesses do them for all kinds of reasons. It might be to verify a resume or a application form with regards to work history or education. It also might deal with whether or not a candidate has a criminal record, financial history and especially if you're in a position where people are giving financial advice that might be relevant, medical history and also interestingly, more and more the use of social media, especially with employees having the ability to essentially publish to a very, very broad audience. It's something that more and more businesses are exploring as use for background checks.

The administrative agency that deals with that is called the Federal Trade Commission and the Federal Trade Commission enforces an act called the Fair Credit Reporting Act. Now the Fair Credit Reporting Act is much broader than dealing just with credit reports. It deals with all sorts of background check information and it's very important for employers to comply with the requirements of the Fair Credit Reporting Act.

If an applicant is applying and you're going to do a background check, you need to first, think about who's doing it. If you're going to have a third-party background check company do the background check, then the terms of the Fair Credit Reporting Act have to be met. That's not necessarily the case if you do it internally but third-party vendors, if you will, usually have more resources. They have access to databases you likely don't and they can generally do a more thorough job. So those are things to weigh.

So let's presume going forward here that a third-party is doing this and we're going to need to comply with the Fair Credit Reporting Act. First thing you're going to want to do is get the applicant or the employee's permission to do the background check and that needs to be on a document that is not the application. It needs to be a separate standalone sheet of paper and you need to let the applicant give you permission and, in addition, you need to let the applicant know that you are going to be searching for information in the applicant's background and that’s that's very important.

If you're going to draft your authorization to allow for you to get background reports throughout the course of that applicant's employment that needs to be very clearly stated on the notice.

Let's talk about what happens. If you decide that you want to do an investigative report which is a little different than just a background check because an investigative report you're going to actually conduct personal interviews and find out about characteristics and reputation and lifestyle and if that is part of the background check that you choose to conduct then you have to let the applicant know that and let them know that nature and scope of what you are asking. And that is part of the Fair Credit Reporting Act as well.

Before the hire, you need to make sure that your certified to the credit reporting agency, the consumer reporting agency is what it's called in the Act, but the third-party that's conducting it, you have to tell them and certify that you have notified the applicant and that you have permission to do the background check. You also have to assure the third-party vendor that you have complied with the requirements of the Fair Credit Reporting Act and then you also have to make sure that you don't misuse that information or use it in any sort of discriminatory way and it's required under the act that you advise that third-party vendor that your intent has nothing to do with discrimination or misuse of the information.

After you've done that certification to the vendor, then you can get the information and make a decision. Should you choose to make it what we call an adverse action, in other words, you decide not to hire the person or if it's an employee you decide to discipline or terminate then there is more information that you need to do with regards to the Act. You need to, before any action is taken, give the applicant a copy of the information that you're going to use as a basis for your adverse action and give them notice and, also, a document that can be found on the FTC’s website which is a summary of that application that applicant’s right under the Fair Credit Reporting Act.

So should you, let me recap again, should you decide to use a third-party vendor, you have to give proper notice. You have to get it in writing. You have to then certify all sorts of information that we've already discussed to the third-party background check company, the consumer reporting agency. Then, after that, you have to, if you make a decision that you're going to undergo an adverse action based upon information in the background check, then you need to provide a copy of that information to the applicant as well as a document that should be provided by the third-party consumer reporting agency called a summary of your rights under the Fair Credit Reporting Act which is located in kept easily accessible on the Federal Trade Commission's website.

Now the reason that you're doing that is because the the applicant needs to have an opportunity to address that information that’s on the background check. In other words, if you have an applicant and that reason is sure not going to consider that applicant further is because of something that was reported to you by a third-party than that individual applicant has a right to dispute the viability of that information and that is why it's really important that you follow all the steps because if you have information that you learn you can't act on it unless you've done everything to comply with a law in getting that information or you're going to create some tremendous liability for your business.

Mark Addington


Mark Addington

Mark A. Addington, Esq. advises and advocates on behalf of businesses concerning Labor & Employment Law, Business Regulatory Compliance, Restrictive Covenants (Non-Competition, Non-Solicitation, and Confidentiality), Wage & Hour, Privacy, Technology,...

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