Federal law heavily regulates the use of background checks in employment as well as in credit or insurance applications.
It is normally not unusual or illegal for an employer to run a background check on a job applicant or employee. But there are federal protections under the Fair Credit Reporting Act, known as FCRA, to help ensure that background checks, officially called consumer reports, are accurate and only used for legal purposes.
Similar protections are in place when a company from which you apply for credit or insurance wants to obtain consumer reports about you.
Certain companies create credit reports on individuals with information about credit accounts, payment histories, bankruptcies and similar financial information that reflect on creditworthiness. Most people know about credit reports because the companies that create them assign credit scores or credit ratings based on their contents. The scores may be used as a basis to approve or deny consumer credit.
The FCRA has detailed requirements for employers concerning the use of information in credit reports to take negative employment actions like refusing to hire, firing, demoting, failing to promote or increase wages and so on.
Before an employer procures a credit report, it must tell you in writing that it might use the information it learns from the report to make decisions about your employment. It also must get your written permission to order the report.
The employer must certify to the company from which it obtains the report that it has complied with its duties to you, that it has complied with FCRA in total and that it will not misuse or use in a discriminatory fashion anything it learns from the report.
After the report is reviewed, but before taking any negative employment action, the employer must give you a copy of the consumer report and a copy of a federal document about your FCRA rights.
Then, if the employer takes adverse employment action against you based on a credit report, the employer must give you notice of the negative action verbally, in writing or electronically. The notice must contain specific information that allows you to take action to correct the report if it contains errors and tells you about your rights vis-à-vis that report and the company that furnished it.
The rights of a job applicant or employee as well as the responsibilities of an employer concerning notice and permissions as they relate to consumer reports that include criminal record information or information from other public records are similar to those explained above concerning credit reports. However, the employer also must take certain actions to try to be sure the information is true.
In addition, there are complicated legal issues that can arise concerning the use of arrest or conviction records by employers in making negative employment decisions that relate to anti-discrimination laws.
Investigative consumer reports
An employer may order a more extensive investigative report about an applicant or employee that is based on interviews with people who know the person. The interviewees are asked about things pertaining to the employee's "character, general reputation, personal characteristics, and mode of living" - taking the information gathering to a higher level of privacy and involving other people and their opinions.
Accordingly, these reports require an employer to take additional, specific actions to protect the applicant or employee. For example, there are detailed notice requirements to the subject of the report as well as certification requirements to the agency creating or providing the report that the employer has adhered to the law.
The subject of the investigative report may request details about the "nature and scope" of the investigation to which the employer must respond with complete written disclosure.
In addition, the agency creating an investigative report is also heavily regulated by federal law concerning verification of the accuracy of certain public information included as well as procurement of negative information from third parties. Adverse information from interviews with people like neighbors, colleagues and friends may not be included in the report unless "reasonable procedures" have been followed to verify the negative information from another reliable source or the "person interviewed is the best possible source of the information."
The law also restricts employer access to other kinds of information like certain medical or genetic history.
Anyone with questions about consumer reports such as credit checks, especially if a report may have had a negative impact on an employment decision or in an application for a loan or for an insurance policy should seek legal advice as soon as possible from a lawyer with experience in consumer protection matters. In addition to federal protections, there may be applicable state or local laws that apply as well.
Attorney Tom Breeden of the law office of Thomas R. Breeden, P.C., in Manassas advises clients in Northern Virginia about their rights concerning consumer reports and represents them in enforcing those rights.