Employment background checks also are known as consumer reports, and include information from a variety of sources, including credit reports and criminal records.

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) enacted in 1970 to regulate the fair purchase, preparation, and use of consumer reports as prepared by consumer reporting agencies (CRAs) such as RiskAware. The Federal Trade Commission (FTC) enforces the FCRA.

FCRA Laws manage the relationship between the parties involved in informational transactions and protect an individual’s rights by promoting accuracy, fairness, and privacy of information. Below are the elements of the Fair Credit Reporting Act that are most important to understand when performing background screening:

  • Disclosure/Consent requirements: Prior to initiating a background check, employers are required by FCRA to confirm applicant’s receipt of a clear disclosure document stating that a report may be requested. The employer must also separately obtain written consent from the applicant confirming this disclosure and permitting the performance of a background check.
  • Notification requirements: If the employer intends or decides not to hire the applicant based in whole or in part on the contents of the consumer/background report, the FCRA requires notification before you reject a job application, reassign or terminate an employee, deny a promotion, or take any other adverse employment action. The notice gives the applicant or employee notice of the found adverse information, and provide opportunity to dispute and correct the report before action is taken. This is called Pre-Adverse Action. The employer must provide the individual with a copy of the report and a summary of consumer’s rights under the FCRA. If the employer proceeds with taking the Adverse Action it must provide the individual with a final adverse action notice that contains CRA contact information; a statement a CRA did not make the decision not to hire the individual and cannot provide the reasons for the adverse action; as well as notice of the individual’s right to dispute the report and request an additional free report within 60 days.

FCRA Limitations on Reporting

Employers who use “investigative reports” – reports based on personal interviews concerning a person’s character, general reputation, personal characteristics, and lifestyle – have additional obligations under the FCRA. These obligations include giving written notice that you may request or have requested an investigative consumer report, and giving a statement that the person has a right to request additional disclosures and a summary of the scope and substance of the report. (See 15 U.S.C. section 1681d(a), (b)).

The following items cannot be reported by a CRA on a consumer report EXCEPT, when the expected annual salary of the applicant meets or exceeds $75,000 per year ( the “salary cap” exception).

  • Civil suits, civil judgments and records of arrest that from the date of entry precede the report by more than 7 years or until the governing statute of limitations have expired, whichever is longer.
  • Bankruptcies can be reported for only 10 years
  • Tax liens can be reported for only 7 years
  • Accounts placed for collection can be reported for only 7 years
  • Other adverse information can be reported for only 7 years.