Employers are Checking our Backgrounds, but Who’s Checking the Background Checkers?

For years, employers have used background checks in making hiring and promotion decisions.  Since the advent of the internet, and particularly since the 9/11 terrorist attacks, more and more employers are requiring background checks as a condition of applying for employment—and they are increasing their reliance on such checks.  Moreover, the internet has provided the companies who perform background checks with powerful tools to learn information about a job applicant’s history, allowing them to search not only for any past criminal activity, but also for a person’s credit history, past employment, and even hobbies and activities.  Unfortunately, some of the information that background checks turn up on a job applicant is erroneous, outdated, or otherwise potentially harmful to the person’s chances to obtain employment.

Although employers are generally permitted to perform background checks if they follow certain requirements, both federal and California state law provide protections for job applicants as well as legal remedies if an employer or a third-party background check company fail to follow the specified guidelines, procedures, and requirements.

Two key statutes that help protect job applicants in California when employers seek to perform background checks on them are the federal Fair Credit Reporting Act (or “FCRA”) and California’s Investigative Consumer Reporting Agencies Act (or “ICRAA”).  States outside of California have similar laws regulating an employer’s use of credit reports—among them Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland Nevada, Oregon, Vermont, and Washington.  

 The key protections provided by the federal FCRA are discussed below.  Note, however, that the FCRA protections apply only when a background check is to be prepared by a third-party background check or screening company (called a “Consumer Reporting Agency” or “CRA” under the statute).  FCRA’s protections do not apply when the employer does not use a CRA but instead performs the background check itself.  (A future blog post will discuss the protections for California job applicants provided by the ICRAA, which, unlike the FCRA, also covers employers who perform their own background checks.)

FCRA’s Protections for Job Applicants

The FCRA includes protections of job applicants before, during, and after a background check is performed.  

Before a background check can be run on a job applicant by a third-party background check company, the prospective employer must   

  • Provide a disclosure that the background check will be performed

Before running a background check on an applicant, a company must disclose to the applicant that a background check may be performed for employment purposes.  The employer’s disclosure cannot be buried within a longer job application or part of an employment handbook or other document; it must instead be a separate, stand-alone document that consists of only the disclosure.  Many employers disclose that a background check will be run, but improperly include the language as one of many paragraphs within a job application form.

  • Get consent for the background check from the job applicant

Before running a background check, the potential employer must also obtain the job applicant’s written consent.  The consent form can be part of the disclosure document identified above, but the consent form should not also contain a release of liability relating to the background check or the disclosure of information.  Employers often include such releases on their consent forms, but at least two courts have held that doing so violated the FCRA.

A potential employer may have violated your rights if it did not provide you with a proper disclosure or did not obtain your written consent before having a third-party background check company perform a background check.

During the background check . . .

Pursuant to the FCRA, when preparing a background check, a consumer reporting agency must do the following:

  • Follow reasonable procedures to assure maximum possible accuracy of the information

Because of the importance of background check data (and the potential for a report of incorrect data to harm a job applicant), the FCRA requires that the background check company follow  “reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.”  If, for example, a background check company fails to have written procedures for researching the records of job applicants who have common names or fails to require employers to provide middle names for applicants for the purpose of matching a criminal record to a job applicant, it may be found not to have followed the “reasonable procedures” required by the FCRA.  

  • Provide the Background Check Information upon Request

If you know (or suspect) that a background check has been run on you, you have the right to request and receive a copy of the report.  The FCRA further requires that a background check company, upon request, must disclose to a job applicant all information in the applicant’s file at the time of the request.  If a background check company fails to do so after a request has been made, it may be found liable for violating the statute.

  • Refrain From Providing Certain Information

The FCRA also identifies items that should not be included on background checks, including the following:

  1. Inaccurate information—such as reporting an arrest as a conviction, reporting a misdemeanor as a felony, or reporting a charge that has been dismissed;
  2. Out-of-date information:  the FCRA prohibits the reporting of negative information that is more than seven years old (though bankruptcies and non-dismissed criminal convictions may be reported beyond this period):
  3. Information about someone else:  such as criminal record information regarding a family member or someone with a similar last name.

After the background check is performed . . .

Once the background check is run, if your potential employer plans to refuse to hire you because of information on the background check, it must follow each of the following procedures:

  • Send you a pre-adverse action notice

If a potential employer receives your background check and is considering not making a job offer, rescinding a job offer, hiring the applicant for a lesser position, or denying a promotion, it must first give you a notice that it is considering doing so.  That way, you have the opportunity to dispute any inaccurate information that may appear in the background check.  This notice is referred to as a “pre-adverse-action notice.”

  • Send you a copy of the background check

As noted above, you are entitled to the background check upon request; in addition, if the potential employer is going to make a negative decision based on it, the employer must send you a copy, regardless of whether you request it.  It must also send you a summary of your rights under the FCRA.

  • Provide you with time to correct the background check

Your potential employer must also give you time to correct any errors that are in the background report before it makes a negative decision based on the background check.  Many employers fail to do this—making the decision not to hire the applicant as soon as it receives the background check and before giving him or her any time to dispute what is contained in it.

After the negative decision is made . . .

If an employer makes a negative decision after a background check is performed—for example, it decides not to hire you based on the background check—the potential employer must

  • Provide a second, post-adverse-action notice telling you that it has made the adverse decision, identifying the name, address and telephone number of the background check company that furnished the report, and telling you that you have the right to obtain a free copy of the report from the background check company;
  • Inform you of your right to dispute with the background check company the accuracy or completeness of any information in the report;  
  • Inform you that the background check company did not make the adverse employment decision and cannot give specific reasons for it.

Cases have been brought against companies who took adverse actions against job applicants without first providing them with a copy of the background check report or informing them of their rights to dispute the accuracy of the information in the repot.

Rukin Hyland handles cases in on behalf of individuals and classes of job applicants in lawsuits against potential employers and the background check companies that they use.  Feel free to contact us if you were required to submit to a background check and you suspect (or know) that the background check prevented you from getting hired or promoted, or if you learned that the background check was inaccurate, out of date, or not performed in accordance with the procedures outlined above.  As noted above, a future blog post will describe California job applicants’ rights under the ICRAA, which generally provides greater protections to job applicants then the FCRA.

See Also: Severance Agreements in California: Understanding the Whats, Whens & Hows