How Can You Ensure Your Background Checks are Compliant with FCRA and EEOC Regulations?

Do you have the appropriate strategy for navigating background check compliance and regulation successfully? Both the FCRA and guidelines by the EEOC must influence how you build your policies. See how to ensure you comply with these rules in this quick guide.

Background Check Compliance and Regulation Tips: Complying With the FCRA and EEOC

The subject of background check compliance and regulation is one that every business owner should consider carefully. While there are many laws you must follow, those surrounding the background process are of particular importance. Violating these laws can lead to hefty fines, lawsuits, and other headaches that can cause long-term problems for your business. Ensuring you know your obligations is a can't-miss step in building a better hiring framework.

There are two key sets of guidelines to follow: legislation such as the Fair Credit Reporting Act, or FCRA, and regulations defined and explained by the Equal Opportunity Employment Commission, or EEOC. Let's briefly explore each of these elements, then break down your obligations.

Understanding the FCRA and the EEOC

Background check compliance and legislation go hand in hand. The FCRA as a whole was created to rein in credit reporting practices that actively harmed many consumers over decades. Today, there are much stricter rules in place around obtaining consumer reports and how you may use them, especially for hiring. As a matter of FCRA compliance, a background check counts as a type of consumer report. Therefore, if you plan to use screening services as part of your hiring process, you must follow this law closely.

The EEOC is the regulatory body responsible for upholding and enforcing laws related to employment. This includes the FCRA and other legislation, such as the Americans With Disabilities Act and many more. In the context of background checks, the EEOC has published extensive guidance on using them in alignment with the law.

Knowing your responsibilities under the FCRA and EEOC guidance is vital. Let's look at each of those elements in turn.

How Can You Comply With EEOC Directives?

The EEOC does not make legislation, but only enforces it. Employers have a moral and ethical reason to follow these guidelines, as they create a more equal playing field for workers. However, practically speaking, you will also want to avoid regulatory action while building a fast enough process to fill open positions in a timely manner.

Don't make decisions using protected classes.

You can't make employment decisions, such as choosing when to hire someone or when to use background checks, based on certain protected classes. You can't single someone out for vetting based on their origin, race, religion, sex, age, and other related factors. Doing so would violate the Civil Rights Act. Recently, the EEOC has also clarified that genetic testing information can't be used as a basis for hiring or screening individuals.

Be consistent in your application of standards.

No matter the differences in the applicants you receive, you cannot provide anyone with special treatment. Likewise, you should not single out individuals for even more screening simply because of the space they occupy in a protected class. As a rule, you should avoid blanket bans on hiring certain types of individuals. For example, banning certain criminal record holders for consideration could be unlawful if it "significantly disadvantages" a particular group of people.

Use the "EEOC factors" for criminal history considerations.

The EEOC encourages employers to perform individual assessments of all applicants with criminal records rather than denying them outright. Over time, a series of "factors" for record evaluation have emerged that simplify the individual assessment. Across the country, many "ban the box" rules now include these factors as codified law, too. What are they?

In short, when looking at someone's criminal record, you should think about:

  • How serious the crime was and what its details were.
  • How long it has been since the crime was committed and the individual served their punishments.
  • How the crime relates to the job's nature, and whether certain job roles should exclude those with convictions as a matter of safety or security. A clear link between a crime and a job role can be disqualifying.

Using these factors helps improve EEOC compliance while also making your process more fair.

Keep good records.

The EEOC says businesses must hold on to all records they create during the hiring process for one full year after their date of origin. This period resets if you hire someone and then later take additional action, such as firing them. State governments and schools must retain these records for two years. After this time, you must dispose of them in a manner approved by the FTC, such as shredding or permanent deletion. Keeping these documents on hand is important in the event of any background check regulation compliance audits, or concerns.

Exploring FCRA Compliance Requirements

No less important than the EEOC's guidelines, your requirements under the FCRA deserve special scrutiny. Litigious individuals and opportunistic law firms often seek opportunities to launch lawsuits over FCRA violations—even seemingly minor ones. Despite seeming minor, these suits have resulted in millions of dollars in judgments against businesses. Pay close attention to these guidelines.

Use background checks appropriately.

You may only use background checks to evaluate candidates for employment or as part of an ongoing monitoring program. You cannot use them as a retaliatory measure or for other purposes. Have a written policy that thoroughly defines your steps, procedures for evaluating records, and other key attributes.

Provide a standalone disclosure.

The disclosure requirement is one of the most important parts of the FCRA as a piece of background check legislation. Under the law, you must provide a disclosure form stating your intent to use background checks for employment purposes and containing information in the statute about an individual's rights and options. You must provide this document to applicants in a "standalone" manner, without other information attached or included.

Gain an applicant's consent.

You will also need every applicant's written consent before using a background check. If an applicant declines to provide consent, you can legally move on to another applicant without further action on your part. Otherwise, you can move to the next steps. Collecting an applicant's signature as part of the FCRA's standalone disclosure is acceptable.

Use the pre-adverse action process.

If something in a background report raises red flags and you decide you may need to deny an applicant, you'll have to follow the "adverse action" process outlined in the FCRA. In brief, this is a requirement to:

  • Notify the applicant of your intent.
  • Provide a copy of the background report.
  • Inform the applicant of their rights under the FCRA.
  • Wait an appropriate period for a response.

Applicants may be able to provide evidence that your information is in error or outdated, and should have the opportunity to correct the record with you. Though there is no absolute time limit, five business days is usually a reasonable time to wait for clarifying information.

Make changes or send your final adverse action notice.

If you do not need to change your decision, you must issue a final adverse action notice terminating the application procedure. Again, there is a defined list of things to include in this notice, such as telling the applicant they may request another copy of their background report within 90 days. You must provide information about the agency that provided the report and another statement of their rights. 

Build a Compliant, Thorough Policy You Can Use With Confidence

Navigating background check compliance and regulation takes time and study. Sometimes, you may even wish to consult with an employment lawyer for certainty in the soundness of your policies. With an informed approach and the right partner providing support for background check compliance, you can hire with confidence—both in the quality of your applicants and the legality of your process.

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Michael Klazema

About Michael Klazema The author

Michael Klazema is the lead author and editor for Dallas-based with a focus on human resource and employment screening developments

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