Federal Notice for Employment Background Checks Updated

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Employment background checks are usually used by employers to verify information provided by applicants, such as their employment history, education, criminal records, and professional qualifications.

If you are conducting background checks on employees and/or applicants, please note that the “Summary of Your Rights Under the Fair Credit Reporting Act” notice has been updated. This notice is required by the Consumer Financial Protection Bureau before taking any adverse employment action based on a consumer report.

Fair Credit Reporting Act Rules Governing Background Checks

Employers conducting background checks should be aware of the federal Fair Credit Reporting Act’s (FCRA) requirements for obtaining and using background checks within their businesses. These requirements include, among other things, that before obtaining a “consumer report”, the applicant:

  • must be provided with a disclosure that the report may be obtained for employment purposes; and
  • the disclosure must be in a document that consists only of the disclosure (e.g., NOT part of an employment application), and may not contain any form of waiver of liability or rights.

The applicant must authorize the report in writing before it is obtained, and the employer must provide the applicant with a Summary of Consumer Rights before taking any adverse action based on the report.

What Does the Fair Credit Reporting Act Have to Do with Employment Background Checks?

While the name of the Act includes “Credit Reporting,” it is not limited to credit-related matters. Its scope more broadly applies to all consumer reports.

A standard background check for employment should not negatively impact an applicant's credit score.

However, the FCRA aims to promote transparency and accountability to ensure that the information used in background checks is accurate and used fairly. Therefore, the statute sets clear guidelines for obtaining and using consumer reports, including those used for background checks.

Be Aware of State Laws Limiting Background Checks

In addition to the requirements of the FCRA, many states have further limitations on how employers may use information obtained via background checks. In Texas, for example, state law limits employers to a seven-year background check for positions offering to pay less than $75,000. For jobs that pay more than $75,000, employers may look back to the age of 18.

At Hendershot Cowart P.C., our labor & employment attorneys can assist you in reviewing your employment policies and processes to safeguard against violating state or federal background check guidelines. Contact our firm to schedule a consultation at your convenience.

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