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Are Background Checks Legal?

By Michael Klazema on 4/12/2018

Whether you are an employer devising a candidate screening policy or a job seeker navigating the gauntlet of job applications and interviews, it’s probably a good idea to spend time familiarizing yourself with the legality of background checks. You might ask, “are background checks even legal?” After all, aren’t they an invasion of privacy?

In short, background checks are legal. Employers have the right to know who they are hiring. Furthermore, anything that comes up on a background check—be it a criminal conviction, a traffic violation, the record of a civil court case, or a college degree—is technically public record. Employers can research this information and take it into account when making hiring decisions. Most employers exercise this right, too: according to a survey conducted by CareerBuilder, 72% of employers conduct background checks on every new employee.

With that said, an employer’s right to conduct background checks is not absolute or unlimited. There are laws and regulations that limit when and how employers can run background checks and use background information in their decision-making. All job applicants also have rights of their own that the employer must observe while using background checks in the job screening process.

Background Check Laws and Limitations

There are several laws and ordinances that limit an employer’s ability to use background checks to screen candidates or make adverse decisions about their hiring. Some of these laws are applicable nationwide. Others are state laws or local ordinances. Because of the variation, employers and candidates alike should check what is legal where they live.

Here are a few of the limitations that often apply to employment background checks:

FCRA Compliance

The Fair Credit Recording Act (FCRA) is one of the most important documents in any conversation about the legality of employment background checks. The FCRA does not prohibit employers from conducting background checks on applicants. Rather, it provides steps that employers must follow before and after running background checks on prospective employees. 

Before the check, an employer must follow a rigid set of rules to obtain a candidate’s written consent to the background check. Specifically, the employer must provide the candidate with disclosure and authorization forms presented independently of any other application materials or consent forms. 

After the background check, if the employer wishes to make an adverse hiring decision based on the findings of the report, it must first:

  1. Notify the candidate of the decision, in writing
  2. Provide the candidate with a copy of the background check report that led to the decision
  3. Give the candidate details about the company that prepared the background check report
  4. Tell the candidate the background check company did not make the hiring decision, despite preparing the relevant report
  5. Inform the candidate that he or she can request an additional copy of the report from the background check company
  6. Notify the candidate of his or her right to contact the background check company and dispute the accuracy of the report

Failure to follow any or all these steps voids the legality of the background check and leaves the employer vulnerable to an FCRA lawsuit.

EEOC Guidance

The background check guidance laid forth by the Equal Employment Opportunity Commission is not nearly as rigid as what is stipulated by the FCRA. However, employers must be aware of EEOC guidance and how it protects candidates from discrimination. 

First, employers must treat every candidate the same. The background check process must be the same for all candidates for a given job. If a person of a certain race faces a criminal history check, a credit history check, and an education verification, then all other candidates for the same job must receive the same treatment. Background checks can vary a bit from position to position, but not from candidate to candidate within those positions.

In using background check information, employers must be mindful of discrimination issues. For instance, an employer cannot simply bar all candidates with any type of criminal history. Instead, employers need to look at the positions they are trying to fill and figure out which types of criminal history records are relevant to the job responsibilities. Just because a person has a criminal conviction does not mean it impacts their ability to perform the job at hand.

Employers must apply the same standards to everyone when it comes to background check information. If a petty theft conviction from 10 years ago wouldn’t disqualify a Caucasian applicant for the job, it cannot disqualify a black candidate.

Finally, employers must be careful about establishing any background check standard that “significantly disadvantages individuals of a particular race.” This practice is known as “disparate impact” and it is a common source of EEOC-related lawsuits. 

Prohibitions on Credit History Checks

It used to be that employers would look at credit history checks to get a sense of a candidate’s character, financial responsibility, and willingness to commit fraud or embezzlement. These checks have value for jobs that involve handling money or other financial responsibilities. However, an increasingly common argument is that bad credit is the result of circumstance and doesn’t provide concrete insight into a person’s skills, temperament, or likelihood to commit a crime. 

As a result, several states and cities have passed laws banning or limiting the use of credit history checks for employment. States with these laws include California, Illinois, and Washington. Affected cities include New York City and Chicago. Employers should check local laws before using credit history checks.

Ban the Box Policies

Ban the box laws do not actually ban background checks. Instead, they make it illegal to ask questions about criminal history on job applications. Usually, these policies require employers to delay the background check either until after the first interview or a conditional offer of employment. Employers should check if they are beholden to any ban the box laws or ordinances before planning their background check policies.


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