Employer Guide to Background Check Compliance

Employment background checks are a valuable tool for making informed hiring decisions, but they are heavily regulated. The Fair Credit Reporting Act (FCRA) and numerous state and local laws impose specific requirements that employers must follow. Non-compliance can result in class action lawsuits and significant statutory damages.

FCRA Requirements

When using a consumer reporting agency (CRA) to conduct background checks, the FCRA requires:

Before the background check:

• Provide the applicant or employee with a clear, standalone written disclosure that a background check may be obtained (not buried in the application)
• Obtain written authorization from the individual before requesting the report
• Certify to the CRA that you have complied with disclosure and authorization requirements

Before taking adverse action based on the report:

• Provide the individual with a pre-adverse action notice that includes a copy of the report and a summary of rights under the FCRA
• Allow a reasonable period (typically five business days) for the individual to dispute the report before making a final decision

After taking adverse action:

• Provide an adverse action notice identifying the CRA that provided the report
• Inform the individual of their right to dispute the accuracy of the report
• State that the CRA did not make the adverse decision and cannot explain why it was made

State and Local Ban-the-Box Laws

Many states and municipalities have enacted ban-the-box laws that restrict when and how employers can inquire about criminal history:

• Some laws prohibit asking about criminal history on the initial job application
• Others delay criminal history inquiries until after a conditional offer of employment
• Many require individualized assessment of criminal records rather than blanket exclusions
• Some laws apply only to public employers while others cover private employers as well

Always check the specific requirements in every jurisdiction where you hire.

Criminal History Considerations

The EEOC has issued guidance on the use of criminal records in employment decisions under Title VII:

• Blanket policies excluding all applicants with any criminal record may have a disparate impact on protected groups
• Employers should conduct an individualized assessment considering the nature and gravity of the offense, the time elapsed, and the nature of the job
• Arrests alone, without convictions, generally should not be used as a basis for employment decisions
• Consider whether the criminal conduct is related to the job in question

Types of Background Checks

Employers may conduct various types of checks depending on the position:

• Criminal history: County, state, and federal records
• Employment verification: Confirming prior job titles, dates, and sometimes reasons for leaving
• Education verification: Confirming degrees and certifications
• Credit reports: Relevant for positions with financial responsibilities, but restricted in many states
• Motor vehicle records: Essential for positions involving driving
• Professional license verification: Confirming active licenses in good standing
• Drug testing: Subject to state-specific rules

Best Practices

To maintain a compliant and effective background check program:

• Use FCRA-compliant disclosure and authorization forms reviewed by legal counsel
• Apply background check criteria consistently for all applicants for the same position
• Never use a background check as a pretext for discrimination
• Train hiring managers on proper use of background check information
• Develop written criteria for evaluating criminal records that are job-related and consistent with business necessity
• Document individualized assessments when criminal records are a factor
• Keep background check reports confidential and store them separately from personnel files