When I first started practicing law, only a few of my clients conducted background checks on prospective hires. Today, my clients who don’t conduct background checks are the exception. But while there are good business reasons to learn something about prospective candidates, background checks can get employers into a lot of trouble.

First and foremost, make sure that your procedures for conducting background searches comply with the Fair Credit Reporting Act (“FCRA”). If you are ready to hire someone but want to run a background check first through or with the help of a third party, you must clearly and conspicuously disclose that you may obtain a background check in a stand-alone, written document. The FCRA explicitly states that you may place the request for authorization on the same document as the disclosure, but any extraneous information — e.g., waivers of liability — should not be included.

Second, if a background check turns up information that you believe disqualifies a job candidate, you — or the relevant consumer reporting agency (a term of art under the statute) — must provide the job candidate both a copy of the report and a summary of their rights under the law before taking any action adverse to them. Ultimately, this is not only a legal requirement, but a smart thing to do. You don’t want to miss out on the perfect employee because it was the other Dave Johnson from Lafayette who spent some time in the pen.

Third, don’t assume that failing to comply with the FCRA is simply a “technical” violation. Employers who don’t follow the FCRA can be liable for actual damages, statutory damages, punitive damages, and attorney’s fees. This can quickly become costly, especially when defending against a class action lawsuit where you accepted a large volume of applications using non-compliant forms or procedures.

Last, do not assume compliance with the FCRA alone insulates you from liability; it is important to talk to your lawyer or human resources specialist about specific state laws analogous to the FCRA that impose additional requirements.

In future posts, I will talk about the risks of rejecting candidates on account of the information discovered through the background check process as well as “background checks” that are conducted by a company’s own personnel into a candidate’s social media presence. While the latter are not subject to the FCRA, they pose their own legal risks.