Background screenings are governed by strict federal laws which include the Fair Credit Reporting Act. At The Applicant Manager, we want to understand these laws so you can reduce your legal liability. Thanks to one of our partners, Verified First, for sharing their insight with us.

Because background screenings are closely regulated by the Fair Credit Reporting Act (FCRA), it’s important to ensure compliance. One of the most common screening mistakes employers make is not providing a legally mandated disclosure to the candidate and obtaining written consent to conduct a background check. Many companies have suffered costly lawsuits for not complying with these requirements.

If an employer fails to meet FCRA requirements, applicants can allege statutory FCRA violations without suffering damages. If an employer is found in violation of FCRA requirements, each applicant provided the disclosure form may seek recovery, frequently through Class Action lawsuits. Additionally, punitive damages for willfully violating the FCRA may also apply.

Requirements for Employers

When an employer conducts background reports, they must follow all FCRA regulations. Before running a background screening report on a candidate, the employer must complete the following:

• Obtain Authorization. Written permission must be obtained from the candidates before any background searches are run. This authorization may be printed or electronic.
• Provide Disclosure. Applicant must be told, in writing, that information obtained may be used for a hiring decision. This document may be printed or electronic, but according to section 604(b)(2) of the FCRA, it must be “clear and conspicuous” and must be a “document that consists solely of the disclosure.”

Best Practices for Employers

These requirements may seem fairly straightforward. However, there’s a few common mistakes employers make in providing a legal disclosure form. For example, in recent years, a multi-million-dollar lawsuit was filed against Home Depot. The plaintiff claimed that the disclosure form had “extraneous provisions” that confused him about the nature of the background check and his rights under the FCRA. This is one of many lawsuits filed because of issues with the disclosure form.

To mitigate liability, it’s important to understand the guidelines from the Federal Trade Commission (FTC), which enforces FCRA regulations. The FTC recommends the following best practices with the disclosure form:

1. Keep the disclosure and authorization form as separate documents. Failing to comply with the stand-alone disclosure requirement has been the cause of many class action lawsuits.
2. Don’t include a liability waiver.  According to the FTC, “Don’t include language that claims to release you from liability for conducting, obtaining, or using the background screening report.”
3. Don’t ask candidates to certify accuracy of their application on the form. The FTC states, “Don’t include a certification by the prospective employee that all information in his or her job application is accurate.”
4. Don’t require candidates to confirm you make hiring decisions for non-discriminatory reasons. The FTC warns employers to, “Delete any wording that purports to require the prospective employee to acknowledge that your hiring decisions are based on legitimate non-discriminatory reasons.”
5. Don’t request authorization to release non-FCRA compliance information. The FTC advises, “Get rid of overly broad authorizations that permit the release of information that the FCRA doesn’t allow to be included in a background screening report – for example, bankruptcies that are more than 10 years old.

Avoid extraneous information on the disclosure form. When cases have gone to court, judges have found some types of additional information on the disclosure form to be in violation of FCRA regulations. This includes:

• Burying the FCRA disclosure within a job application.

• Ramifications of falsified information, such as, “I understand that submission of false information on this form may result in non-selection or termination if hired.”
• Statements explaining how background information is collected and the sources used.
• Procedures detailing how to dispute report information and time frames to challenge report findings.
• Name, address, and the contact information of the consumer reporting agency.

Avoid Lawsuits ­­— Keep Yourself Compliant

After seeking expert legal counsel, it’s helpful to have a screening company that understands the complexities. With a 97% customer satisfaction rate and an in-house team of screening and compliance experts, Verified First is well-positioned to help employers with their screening needs.

Through our integration with Verified First, we mitigate many of the pitfalls with disclosure and authorization forms. To learn how we accomplish this, click here.