As the name implies, FCRA governs credit reporting activities.  The Fair Credit Reporting Act also sets guidelines and standards for gathering information about employee applicants. Every ‘consumer report’ which relates to ‘character, general reputation, personal characteristics, and mode of living’ about a person is regulated by the FCRA.  Background screening reports prepared by a consumer reporting agency are included in the reports under the regulation of the FCRA.

There are several good reasons to make background screening a part of your hiring process. If your employees handle the personal data of others, it is critical to know who you hire. If your business involves handling financial or health information for customers, you must comply with electronic data privacy requirements. Not checking on an applicant’s background and whether they are suitable for the job can be very expensive, especially if that employee later causes injury to another person. You will have opened yourself to a negligent hiring lawsuit that could be easily avoided with background screening. Reviewing background and credit is simply a great way to review applicant reliability. Keep in mind, however, that you cannot refuse to hire based simply on the fact that a person has filed bankruptcy.

Beyond the obvious purpose of determining an applicant’s ability to do the job and fit into your company, there are other considerations when preparing your interview questions. Even when asking for information that it is legal to request, you can cross the line into discriminatory (and therefore illegal) questions by the way you ask. It is perfectly acceptable to ask if an applicant is authorized to work in the U.S. It is illegal to ask if they are a U.S. citizen. It’s important to research these issues to be sure you are clear: color, race, religion, sex, birthplace, national origin, disability, age, and family or marital status.

You would expect to receive certain benefits from screening applicants for employment, such as being able to know a resume is accurate, or that you aren’t hiring someone with a criminal background. By actually saying in your employment advertising that you use background screening, you also receive another benefit. Most people who have a criminal background won’t even apply for the job, and all applicants are much more likely to provide a complete and truthful application or resume. You’ll save time and money in the hiring process, before you even begin reviewing applications.

The Fair and Accurate Credit Transactions Act of 2003 (FACTA) states that all background screening and credit report information must be disposed of properly. All paper records must be shredded or otherwise destroyed in a way that there is no way that the information can be reconstructed. Any information of the same type that exists on a computer must be completely erased before that computer can be sold, donated, or disposed of.

According to FCRA (Fair Credit Reporting Act), you must obtain signed consent from the applicant prior to performing a background check. The FCRA applies to these kinds of reporting activities, in addition to credit reports. Also, state laws differ as to what can be included in a background check, and to how that information can be used in the process of screening applicants. You should check with your attorney, or hire a background screening company with experience in your state, before you start screening employee applications.

No. Even though other HR-related laws often change with the size of the company, the Fair Credit Reporting Act applies to all large corporations and small business owners alike. Any information you request that is considered a consumer report, and is received from a consumer reporting agency, falls under the rules of the FCRA, without consideration given to the number of employees you have.

The ADA (Americans with Disabilities Act) is one of several federal civil rights laws. The purpose of the ADA is to help persons with disabilities become part of mainstream society, and to prevent them from being discriminated against. The ADA regulations are enforced by the Equal Employment Opportunity Commission (EEOC).

ADA Compliance and Protection

Every business with 15 or more employees must comply with the ADA. Protections are provided by the ADA to every person with a mental or physical disability that substantially limits one or more major life activities (such as standing, sleeping, or sitting), or who has a record (even in the past) of such a substantially limiting impairment. It also applies to a person who is treated or regarded by an employer as though they have such an impairment (such as an employer having a fear of hiring a person who has had cancer but is now in remission because there might be a recurrence). Only applicants who would otherwise be qualified for a job are protected by the ADA, so employers are not required to hire a disabled person over a more qualified applicant.

The 1996 Workplace Violence Survey, by The Society for Human Resource Management, reported that background screening was being used by only 66% of companies. HR professionals now are reporting that number is up to 96%. Due primarily to concerns about corporate scandal, workplace violence, and security, screening employees is now a routine.

As an employer, you’ve likely been advised by your attorney and/or insurance agent that you should have insurance that will protect against negligent hiring claims. It’s also important for you to know that insurance isn’t likely to cover all the costs of negligent hiring activities. If an employee commits assault, rape, murder, or armed robbery, against another employee or customer, there can be equally damaging non-financial costs. The potential of a negligent hiring lawsuit is just one more reason to perform thorough pre-employment background screening before you hire!