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Utah SHRM- Background Checks and the FCRA
Posted on Aug. 13, 2012

This is Utah SHRM Legal-mail no. 2012-17 prepared for Salt Lake SHRM, the Human Resources Association of Central Utah (HRACU), the Northern Utah Human Resources Association (NUHRA), the Color Country Human Resources Association (CCHRA), the Bridgerland Society for Human Resource Management and Utah at-large members of the national Society for Human Resource Management (SHRM).

CONTENTS:

-  INTRO- BACKGROUND CHECKS AND THE FCRA

-  STEP ONE- BEFORE YOU GET A CONSUMER REPORT

-  STEP TWO- BEFORE YOU TAKE ADVERSE ACTION

-  STEP THREE- AFTER YOU TAKE ADVERSE ACTION

-  REMEMBER THE EEOC’S RECENT GUIDANCE TOO

-  THESE UPDATES NOW ON A BLOG

 

INTRO- BACKGROUND CHECKS AND THE FCRA: I have had a lot of calls lately about what an employer needs to do if it wants to reject an applicant for employment based on credit or criminal conviction history.  Thus, we will devote this whole update to this issue.  The main governing federal law is the Fair Credit Reporting Act (FCRA).  Some states also have laws that govern this issue, so check for them too.  The FCRA is enforced by the Federal Trade Commission (FTC).  The FTC has issued a great guidance for employers on this point, see: http://business.ftc.gov/documents/bus08-using-consumer-reports-what-employers-need-know  The FTC guidance notes that employment background checks done by third parties “also are known as consumer reports. They can include information from a variety of sources, including credit reports and criminal records.”  The FTC explains, “When you use consumer reports to make employment decisions, including hiring, retention, promotion or reassignment, you must comply with the Fair Credit Reporting Act (FCRA).The Federal Trade Commission (FTC) enforces the FCRA.”  The FTC guidance then explains the three main steps (outlined below) an employer must follow to comply with the FCRA in this process.  Because the FTC guidance on these three steps is so clear, I have included it below almost verbatim.

 

STEP ONE- BEFORE YOU GET A CONSUMER REPORT:  Before you even get a report, you must do the following:

 

  • Tell the applicant or employee that you might use information in their consumer report for decisions related to their employment. This notice must be in writing and in a stand-alone format. The notice cannot be in an employment application. You can include some minor additional information in the notice, like a brief description of the nature of consumer reports, but only if it does not confuse or detract from the notice.
  • Get written permission from the applicant or employee. This can be part of the document you use to notify the person that you will get a consumer report. If you want the authorization to allow you to get consumer reports throughout the person's employment, make sure you say so clearly and conspicuously.
  • Certify compliance to the company from which you are getting the applicant or employee's information. You must certify that you:
    • notified the applicant or employee and got their permission to get a consumer report;
    • complied with all of the FCRA requirements; and
    • will not discriminate against the applicant or employee or otherwise misuse the information, as provided by any applicable federal or state equal opportunity laws or regulations.

It's a good idea to review applicable laws of your state related to consumer reports. Some states restrict the use of consumer reports – usually credit reports – for employment purposes.

STEP TWO- BEFORE YOU TAKE ADVERSE ACTION: Before you reject a job application, reassign or terminate an employee, deny a promotion, or take any other adverse employment action based on information in a consumer report, you must give the applicant or employee:

 

Giving the person the notice in advance gives the person the opportunity to review the report and tell you if it is correct.

STEP THREE- AFTER YOU TAKE ADVERSE ACTION: If you take an adverse action based on information in a consumer report, you must give the applicant or employee a notice of that fact – orally, in writing, or electronically.

An adverse action notice tells people about their rights to see information being reported about them and to correct inaccurate information. The notice must include:

  • the name, address, and phone number of the consumer reporting company that supplied the report;
  • a statement that the company that supplied the report did not make the decision to take the unfavorable action and can't give specific reasons for it; and
  • a notice of the person's right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get an additional free report from the company if the person asks for it within 60 day

 

REMEMBER THE EEOC’S RECENT GUIDANCE TOO: One more point. I also recommend a brief memo to the file explaining why an applicant has rejected because of his/her criminal convictions or credit history.  This should include a specific explanation on how the conviction or credit problem disqualifies the persons for the job...example...”we did not hire this applicant to be our van driver because within the recent past he has 2 DUI convictions, 1 reckless driving conviction and 3 speeding tickets.”  This will give you the contemporaneous documentation you need in case someone alleges you are using credit or history as a ruse to discriminate.  This particular point is one that the EEOC has empathized recently.  For example, see the EEOC Guidance- Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964 (issued on 4/25/12), found at:

http://www.eeoc.gov/laws/guidance/arrest_conviction.cfm  As you will recall, we discussed that guidance in an update a few months ago. Happy Background Checking!

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Author

mikeAttorney Michael
Patrick O'Brien

Mike O’Brien is an experienced and accomplished employment attorney, media lawyer and courtroom litigator.  He is active in SHRM and has received the highest possible reviews from rating services like Martindale - Hubbell (AV rating), Chambers USA, Utah Business Legal Elite, Best Lawyers in America, Who’s Who Legal USA, and SuperLawyers.  HR Executive Online has named him as one of America’s most powerful 100 employment lawyers, but keep in mind, this does not mean he is good at moving heavy furniture.

Awards and Recognition

OBrienAV

OBrien Best

Chambers 2011 Attorney

Super Lawyers
Michael Patrick O'Brien
 

Best Lawyers In America, “Salt Lake City Best Lawyers Employment Law Lawyer Of The Year,” 2011-2012

Best Lawyers In America, First Amendment Law, Labor And Employment Law, 2005-2012

Chambers USA, Labor & Employment, 2003-2011

Employment Lawyer Of The Year, Utah State Bar, 2001

Human Resources Executive, Nation’s Most Powerful Employment Lawyers In America, 2010

Mountain States Super Lawyers, 2007-2012

Utah Business Magazine, Legal Elite, Labor And Employment, 2006-2012