Understanding the FCRA and EEOC is critical to compliant background checks. Here’s what HR teams should know.
Your HR team found a qualified candidate and presented them with a job offer. But your hiring process might include one more step—completing a background check.
Although a pre-employment background check might appear to be simple (and should be, if you're working with a reliable partner), there are potential pitfalls if your screening process fails to comply with federal, state, or local regulations. To safeguard your company and create a seamless background screening process, it’s important to familiarize yourself with relevant laws and guidelines in order to avoid potential risks.
What is the FCRA?
The Fair Credit Reporting Act (FCRA) is a federal law that governs how companies order and consider information contained in consumer reports (including background or credit checks). Enacted in 1970, it was originally designed to provide safeguards for consumer information in credit reports. Since then, the FCRA has been expanded to cover other types of data gathered by consumer reporting agencies (CRAs), including background check providers like Checkr.
How does the FCRA protect candidates?
The FCRA promotes the accuracy, fairness, and privacy of consumer information. Thus, consumers are provided A Summary of Your Rights Under the Fair Credit Reporting Act.
These include the right to:
- Grant their consent before a background check can be performed
- Know what information is contained in their background check report
- Dispute any information that is incomplete or incorrect
- Be notified if information in their background check is used to deny employment
Note: The CFPB announced minor changes to “A Summary of Rights Under the Fair Credit Report Act'' disclosure form, such as updating federal agency contact information. The updated form will be effective on April 19, 2023 (but will not be required until March 20, 2024). The form will be automatically updated in Checkr’s platform by the end of April 2023.
How does the FCRA impact background checks?
The FCRA requires that employers take certain actions to ensure they are performing compliant background checks. These include:
- Providing written disclosure of your intent to conduct a background check. This disclosure must be written in simple language and must clearly indicate that a background check will be used to inform a hiring decision. It must be a stand-alone document, not part of a job application form or surrounded by disclaimers. Some states, like California, also have additional disclosure requirements to follow.
- Obtaining written authorization from the candidate before you proceed. The candidate can sign the authorization document either electronically or physically. The employer may want to keep the signed original and give the candidate a copy.
- Reviewing the results and providing a copy to the candidate. After reviewing the completed background check, if the employer might decline to move forward with the candidate, before making a final hiring decision, the employer must inform the candidate of their rights under the FCRA and offer them the opportunity to review and correct their report.
- Complying with legal guidelines. When appropriate, employers should consider EEOC guidance and follow any applicable state or local Ban the Box laws when considering arrest and convictions records shown on a background check.
- Documenting and following the adverse action process. If a background check leads to a decision against hiring, retaining, or promoting a candidate, the employer must follow the appropriate adverse action steps, including issuing pre- and final adverse action notifications.
What is the EEOC?
The Equal Employment Opportunity Commission (EEOC) was founded in 1965 to enforce Title VII of the Civil Rights Act of 1964, which forbids employment discrimination based on race, sex, color, religion, or national origin. Today, the EEOC also enforces federal laws against workplace discrimination based on pregnancy, gender identity, sexual orientation, age, disability, and genetic information.
How does the EEOC impact employment background checks? Hiring policies that disproportionately impact Title VII protected classes may be deemed discriminatory even if the discrimination isn’t intentional. Because people of color are disproportionately impacted by the criminal justice system, employers considering criminal records in employment decisions may want to examine and understand their business reasons for doing so.
To avoid unintentional discrimination, the EEOC recommends employers conduct the “nature-time-nature” test which considers the nature of the criminal offense, how long ago it occurred, and whether it’s relevant to the position in question. You may want to conduct an individualized assessment, allowing the candidate to provide more information and context around the offense.
If you still decide to deny employment based on criminal history, it's a good practice to keep records documenting your individualized assessment process and the reasoning behind your decision. In some municipalities, like New York City, you may be required to provide candidates with a written analysis of your decision. Even where it’s not, this record can help protect you in case of future legal action.
Compliance best practices to consider
Navigating the complex landscape of compliance rules and regulations doesn’t have to be overwhelming. Here are some best practices to help enable compliance:
- Know your industry’s compliance requirements. Thoroughly familiarize yourself with compliance requirements specific to your field and stay abreast of any updates in employment law. Closely monitoring local legislation is especially critical for companies operating in multiple cities and states. Setting a standard policy that adheres to the laws of the strictest markets can save valuable time and resources.
- Continually refine your hiring process. Successfully recruiting top talent requires optimizing your team’s hiring procedures. Aim to constantly assess your system’s effectiveness. Working with partners who can provide data-driven insights can help you make well-informed improvements.
- Ensure full transparency throughout the process. There’s a lot of nuance and detail between the FCRA, employment and privacy laws, Ban the Box policies, and more. But all have a common theme of transparency—specifically to your potential employees. It’s crucial to be clear about why you are running background checks, as well as your process of evaluation.
Simplify compliance with Checkr
Adherence to the FCRA and the EEOC guidelines may help mitigate risk while fostering equitable recruitment practices. Navigating the complexities of employment regulations can be challenging, but partnering with a qualified background check provider can help simplify compliance.
Checkr's compliance tools can help you hire faster with less risk. Our platform helps you better manage regional compliance regulations and provide more consistent adjudication, while our FCRA-trained support team is always here to help.
The resources and information provided here are for educational and informational purposes only and do not constitute legal advice. Always consult your own counsel for up-to-date legal advice and guidance related to your practices, needs, and compliance with applicable laws.