January 14th, 2015 | Sterling

Top 4 Background Check Compliance Takeaways From 2014

Top 4 Background Check Compliance Takeaways From 2014


In November 2014, the Federal Trade Commission (FTC) released a follow-up guide expanding on a document released earlier in 2014 that informs both applicants and employees about what they need to know concerning background checks. The two publications discuss the rights of applicants and employees under the Fair Credit Reporting Act (FCRA) and detail employer responsibilities.

2014 was a very active year for legislative changes and litigation in the background screening industry. The landscape continues to shift and change, prompting employers to be vigilant in their screening practices. Some of the hot topics of 2014 included ban-the-box legislation, the Equal Employment Opportunity Commission’s (EEOC) guidance on background checks, and the use of credit reports as a screening tool.

1. Ban the Box

When pondering the changes affecting the background checking industry in the past year, one thing is certain: ban-the-box is here to stay. State and local ordinances in various forms have been popping up all over the country and are designed to remove the criminal history question from job applications. While each ban-the-box regulation is different, the objective remains the same and that is to give everyone, including convicted criminals, a fair and equal opportunity at gaining employment based on their skills and qualifications. In 2015, employers can expect to see more jurisdictions adopting ban-the-box or similar legislation.

2. Disclosure & Authorization Forms

As one of the most litigious years that the background checking industry has seen, there are certain areas of compliance that all employers should consider. As most employers are aware, they are required to abide by the FCRA when conducting background checks for pre-employment purposes. One of their obligations is to provide disclosure and authorization forms. It may seem simple enough, but employers are finding themselves in hot water by failing to meet the requirements surrounding permitted content on these forms.

The disclosure must be in a stand-alone document, meaning that it cannot contain any extraneous information, although it may include the authorization. One of the most common examples of extraneous information to avoid including in your forms is a waiver of liability in favor of the employer or CRA. Your consent and disclosure form(s), in addition to any separate required state law disclosures, must be provided to the applicant prior to ordering a background check.

Applicant tracking systems can further complicate this issue because the disclosure and authorization forms are often delivered to applicants in one scroll box or within one document. It is recommended that employers take the time to thoroughly review their forms to ensure they are compliant regardless of the format (paper-based or electronic), or who originally developed them (employers themselves, legal counsel, background screening providers, etc.).

3. Adverse Action

Another area of concern for employers is the adverse action process. Before taking any adverse action, an employer must provide:

  • A copy of the report
  • A Summary Rights under the FCRA
  • Any relevant documents as dictated by state law.

Once this pre-adverse action notice is sent to the applicant, employers must wait a reasonable amount of time before taking an adverse action. This waiting period is designed to provide applicants with an opportunity to dispute the contents of the report – for example, if a criminal record did not belong to them or if the crime was a misdemeanor and not a felony. Employers may find themselves in trouble if they have a decentralized approach to issuing pre-adverse and adverse action notices. Companies with multiple locations should ensure that each office is handling adverse actions in the same way and in accordance with all relevant legislation.

4. Credit Reports

The use of credit reports in background screening has also been hotly debated this past year. Ten states now have legislation restricting the use of credit reports in addition to bills in local jurisdictions that have been passed. Credit reports should only be used when it is relevant to the position and even if your jurisdiction doesn’t restrict the use of credit reports, your policy on when and how they are used should be clearly documented.

Ultimately, the one thing that employers can take away from the background screening legislative changes that have occurred in 2014 is that regular review of forms and policy is of the utmost importance. Employers should at minimum conduct an annual compliance review of their screening policy and disclosure and authorization forms.

For more information on this topic, request a copy of our webinar: HR COMPLIANCE 2015: ARE YOU READY?


Sterling is not a law firm. This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.