Most companies require background checks of their applicants and employees.  These background checks are designed to ensure the accuracy of the information that the applicant or employee supplies the employer.  As part of their background checks, employers often conduct credit checks by obtaining consumer reports from outside credit reporting agencies.  Employers legitimately obtain and utilize such information to reduce or prevent theft or liability for negligent hiring.  Employers conducting such background checks should be mindful that federal agencies, including the Equal Employment Opportunity Commission and the Federal Trade Commission (“FTC”) are taking a heightened approach to screening employers’ screening processes.  See EEOC’s E-Race Initiative, http://www.eeoc.gov/eeoc/initiatives/e-race/goals.cfm; see also Employment Background Screening Company to Pay $2.6 Million Penalty for Multiple Violations of the Fair Credit Reporting Act, http://www.ftc.gov/opa/2012/08/hireright.shtm.

Employers obtaining and utilizing such information must be alert to the requirements of the Fair Credit Reporting Act (“FCRA”).  Section 604(b) of the FCRA requires an employer who intends to obtain a consumer report for employment purposes to disclose this to the applicant or employee and to obtain the applicant’s or employee’s written permission.  The FTC, charged with enforcing the FCRA, allows employers to combine a disclosure and authorization.  In its authorization for a credit check, an employer may include language that the applicant or employee gives the company the right to conduct a background investigation and that such individual releases from “all liability all persons, companies, schools and corporations supplying such information.”

An employer may not, however, ask the applicant or employee to waive his or her FCRA rights.  Inclusion of such a waiver is in and of itself a violation of the FCRA.  So, if an employer uses an application with an authorization and also includes a waiver of any rights or claims the applicant may have for releasing background information, the entire authorization is invalid under the FCRA.