The Federal Trade Commission (FTC) enforces the Fair Credit Reporting Act (FCRA), while the Equal Employment Opportunity Commission (EEOC) enforces federal laws that protect applicants and employees from discrimination. While you would not necessarily think these agencies would share a common interest, they do when it comes to background checks. The FTC monitors compliance with how background checks are conducted, while the EEOC seeks to ensure that use of background checks does not disparately impact protected groups such as racial minorities. In support of this common goal, on March 10, 2014 the FTC and EEOC jointly issued informal guidance concerning the legal pitfalls employers could face regarding the use of background checks.
The FTC portion of the guidance sets out the steps that must be taken in order to comply with the FCRA. These steps include:
- Informing the individual that you might use the information for decisions about his or her employment through a written, stand-alone document that is not part of an employment application.
- Informing the individual of his or her right to a description of the nature and scope of the investigation if an "investigative report" based on personal interviews concerning a person's character, general reputation, personal characteristics, and lifestyle is to be obtained.
- Obtaining the individual’s written permission to do the background check.
- Certifying to the company from which you are getting the report that you notified the individual and got their permission to get a background report, complied with all of the FCRA requirements, and won't discriminate against the individual or otherwise misuse the information in violation of federal or state equal opportunity laws or regulations.
- Before taking an adverse employment action, give the applicant or employee a notice that includes a copy of the consumer report you relied on to make your decision and a copy of "A Summary of Your Rights Under the Fair Credit Reporting Act."
- After taking an adverse employment action, telling individual (orally, in writing, or electronically) that he or she was rejected because of information in the report, the name, address, and phone number of the company that sold the report, that the company selling the report didn't make the hiring decision, and can't give specific reasons for it, and that he or she has a right to dispute the accuracy or completeness of the report, and to get an additional free report from the reporting company within 60 days.
The EEOC portion of the guidance reminds employers that they need:
Make sure they are treating everyone equally and not base decisions on a person's race, national origin, color, sex, religion, disability, genetic information (including family medical history), or age (40 or older).
Except in rare circumstances, don't try to acquire an applicant's or employee's genetic information, which includes family medical history, and don't use it to make an employment decision.
Don't ask any medical questions before a conditional job offer has been made, and if the person has already started the job, don't ask medical questions unless you have objective evidence that he or she is unable to do the job or poses a safety risk because of a medical condition.
Apply the same standards to everyone, regardless of their race, national origin, color, sex, religion, disability, genetic information (including family medical history), or age (40 or older).
Take special care when basing employment decisions on background problems that may be more common among people of a certain race, color, national origin, sex, or religion; among people who have a disability; or among people age 40 or older. In other words, avoid decisions that could lead to a disparate impact and make sure that the policy or practice is job related and consistent with business necessity.
Be prepared to make exceptions for problems revealed during a background check that were caused by a disability. Remember, employers have a broad duty to accommodate disabilities, unless the employer can show that the accommodation would cause significant financial or operational difficulty (undue hardship).
It is important that these requirements be followed, as FCRA related suits are on the rise, with multiple multimillion dollar class action settlements being reached in 2013, and the EEOC increasingly bringing suits based on claims that an employer’s use of background checks disparately impacted a protected class of employees.