Background Check Regulations and Limitations

Background check and other pre-employment screenings are regulated by the Federal Fair Credit Reporting Act, which defines such “consumer reports” as “…any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living….” 

In addition to the Federal law, there are state regulations that govern prospective employment screening and employment background checks.  Both the third-party background check service and your business are required to follow all applicable regulations.  Among other requirements, the FRCA mandates that you give a reason for requesting the report, affirm that the prospective employee has consented to the background check, and certify that you will only use the information for employment purposes.

Obtaining certain information requires the express consent of the subject of the background check beyond just notification.  For example, the subject must “affirmatively consent” to the release of medical information. Some information cannot be obtained at all- for example, a consumer reporting agency may also only provide medical information if it is relevant to the job.

You also have specific responsibilities under the FCRA and state laws if you choose not to hire someone based on the information contained in the report.  In most cases, you are required to give the employee a pre-adverse action disclosure form, along with a copy of the report, before you officially make your decision.  Once you take the “adverse action,”  (deciding not to hire a person) you will need to identify the source of the report (the background check agency) and provide a notice of the right to dispute the information it contains.  There are specific procedures you must follow, whether your decision was based on information contained in a criminal background check or a credit report.

You’ll also need to ensure that any reference information obtained does not violate state or federal employment laws.  For example, you may not inquire about certain information from past employers.  It’s especially important to choose an employment screening firm that understands the applicable laws- if they don’t comply, your business may be found responsible.  Make sure you choose a company with a good reputation, and ask for references before you make a decision. 

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