In today’s competitive employment market, companies must act quickly to secure top talent. Often, background checks are conducted after a candidate has started working or are applied across the board for high-volume recruiting in sectors like retail, restaurants, and hospitality. However, this speed can complicate compliance with legal standards, making it essential for employers to follow a structured and lawful screening process.
Employers routinely use background checks when making hiring, retention, promotion, or reassignment decisions. While it’s generally legal to ask about an applicant’s or employee’s background (excluding restrictions around medical and genetic information), employers must be mindful of federal, state, and local laws that govern the use of such information.
Most companies use background screening to help identify risks, such as criminal history, substance abuse, or discrepancies in employment records, aiming to create a safe, productive workplace that supports a strong employer brand.
Legal Compliance and Background Checks
Whenever background information is used in employment decisions, employers must comply with anti-discrimination laws enforced by the Equal Employment Opportunity Commission (EEOC). These laws prohibit discrimination based on race, color, national origin, sex, religion, disability, genetic information, and age (40 or older). All applicants and employees must be treated equally throughout the screening process.
Additionally, when background checks are conducted through a company that compiles consumer reports, employers must follow the Fair Credit Reporting Act (FCRA), enforced by the Federal Trade Commission (FTC). The FCRA governs how employers obtain and use consumer reports, which include criminal background checks, credit reports, and employment verifications.
Key FCRA Requirements for Employers
Before conducting a background check through a consumer reporting agency (CRA), employers must:
- Provide a clear, standalone written disclosure that a background check will be conducted.
- Obtain written authorization from the candidate or employee.
- Certify to the CRA that the information will be used only for employment purposes.
If the employer intends to take adverse action based on the background check – such as not hiring a candidate or rescinding a job offer – the FCRA requires a two-step notification process:
- Pre-Adverse Action Notice: The employer must provide the candidate with a notice that includes a copy of the background report and a document titled “A Summary of Your Rights Under the FCRA.” This gives the candidate an opportunity to review and dispute any inaccurate information.
- Adverse Action Notice: After allowing the candidate a reasonable amount of time to respond (at least five business days, though 15 days is recommended), the employer can issue a final notice if the adverse action will proceed. This notice should be in writing and include the required FCRA disclosures.
This process ensures candidates are treated fairly and given a chance to address any potentially damaging errors in their reports. It also protects employers from legal liability related to unfair or non-compliant hiring practices.
What is Adverse Action?
Adverse action refers to a decision that negatively affects a candidate’s or employee’s job status, such as denial of employment, promotion, or reassignment based on background check results. Pre-adverse and adverse action notices help keep the process transparent and legally sound.
While the FCRA allows for flexibility in how these notices are delivered (verbally, electronically, or in writing), providing written documentation is best practice. Many CRAs offer model notices to help employers stay compliant.
Best Practices for Background Check Compliance
To streamline your hiring process while remaining compliant:
- Develop a background screening policy and incorporate it into job postings or application processes.
- Train HR and hiring managers on legal requirements, including FCRA and EEOC compliance.
- Include language in employment offers stating that the offer is contingent upon a successful background check.
- Ensure secure storage and limited access to sensitive information gathered through background screenings.
Final Thoughts: Following FCRA Guidelines
As hiring volumes increase and turnaround times shrink, having a structured and legally compliant background check process is more important than ever. Following FCRA guidelines, treating all candidates equally, and clearly communicating expectations through the hiring process not only protects your company but also builds trust with job seekers.
Background checks are an essential part of mitigating risk and promoting a safe, reputable workplace. When used correctly and compliantly, they contribute to better hiring decisions and a stronger workforce.
Jessica Miller-Merrell is a workplace change agent focused on human resources and talent acquisition. She’s also the founder of Workology (formerly Blogging4Jobs) and can be contacted on X at @jmillermerrell.