In recent years, more employers have opted to implement stringent background checks on potential employees. The hiring process is already complex, though adding these additional precautions can help ensure that you are hiring the perfect employee for the position you are working to fill.
While the benefits of using background checks in a hiring environment are notable, some essential rules and regulations have been implemented to protect the people undergoing the checks. As an employer, you must know and abide by these rules to ensure you are within your limits and that you’re fully compliant with the Fair Credit Reporting Act (FCRA).
In this guide, we’ll discuss what you need to know about FCRA regulations and what you can do to ensure you remain fully compliant when implementing background checks throughout the hiring process.
What Is FCRA Compliance?
To understand how FCRA regulations can impact you as an employer, you must start with a solid foundation of knowledge about this legal ruling.
FCRA, or the Fair Credit Reporting Act, was enacted in 1970. As the Federal Trade Commission defines it, this Act was developed to “protect information collected by consumer reporting agencies such as credit bureaus, medical information companies, and tenant screening services.”
As an employer, it’s vital that you fully understand the implications of this Act and how it impacts your powers when implementing background checks. The overarching goal of this Act is to protect consumers and ensure that their privacy and personal information are kept safe.
While you have every right to require future employees to undergo background checks, you must abide by the rules set out by the FCRA to ensure you’re acting in full compliance. One of the most important rules to follow is to make sure you fully disclose your reasoning for wanting a specific background check and which level of check you intend to request.
FCRA Disclosure Requirements
The FCRA disclosure requirements are an additional level of protection, though they work to protect both the employer and job candidate as the background check process is administered. Ignoring these requirements can cost you your business, so they’re absolutely necessary to abide by and will ensure you’re fully compliant with the rules set by the FCRA.
While the FCRA covers a broader span than just background checks, the overarching goal of this act is to keep things above board and ensure that people are protected from being extorted in all aspects of life. Private information is meant to remain private and should not be used against anyone or for an ulterior motive.
Disclosure requirements are another fail-safe in the hiring process. They ensure that employers and job candidates are on the same page and have a common expectation of the types of background checks that will take place.
These disclosure requirements are forms that must be signed off by both parties. They should clearly state why the background check has been ordered, what level of check will be completed, and all intentions regarding what will come of the information you will receive once the check has been completed.
Over-communicating during this time period is in your best interest as an employer. It ensures that you not only fulfill your obligations to the rules of the FCRA but also work on building trusting relationships with your future employees.
Why Do Employers Need To Be FCRA Compliant?
The simplest answer to this question is that employers who don’t abide by the FCRA’s compliance regulations can face heavy penalties and even lose their business. That being said, there are other more meaningful reasons why the FCRA protections are so important to follow.
The FCRA was established strictly to protect people’s privacy and ensure they’re not being taken advantage of in situations like background checks. No employer can require background checks without first fully disclosing their intentions to the job candidate. This is entirely in an effort to protect individuals and to keep all aspects of the hiring process above board.
Abiding by these rules means you receive full consent from an individual to administer the agreed-upon background checks. This is the only way to act in compliance with the FCRA and will help ensure your business’s security and longevity.
How to Conduct an FCRA Compliant Background Check
Many employers opt to use third-party companies to administer background checks on potential job candidates. Though these companies should also act in compliance with the FCRA, there are some steps you need to follow to ensure you are fully compliant and acting in the best interest of your future employees.
Fill Out Designated Disclosure Agreements
Once you decide to require a background check on a job candidate, you must fill out the proper disclosure agreement form. This form should state your intention of requesting the background check and your intentions of asking for it in the first place.
Please note that it’s imperative that this disclosure form is clearly separate from the application. The job candidate should not have to guess what this form is for. Make it clear that you’re asking for a background check to be administered, and explain your reasoning as to why this is a requirement for the role they’re applying for.
Received Signed Disclosure Agreements
Once the disclosure agreements have been sent, the job candidate will have time to review them and ensure that everything listed on the request is in line with their expectations. If everything looks good on their end, you can expect to receive a countersigned copy. This signed document is legally binding and serves as a guideline for the next steps as you and the candidate work toward setting up the designated screening.
Order Background Check
Now that the paperwork is signed, you’re ready to order the background checks that were agreed upon. Pre-employment background checks are pretty standard in the hiring process and are easily scheduled with the help of a third-party service like ScoutLogic. Scheduling these checks takes no time at all, and the ball will soon be back in the candidate’s court as they work to get the check completed.
Receive and Review Results
After completing the check, you’ll receive a report showing the results in their entirety. These results must remain confidential and should only be used as a deciding factor for the job at hand, nothing else.
Take the time to review them in depth with your team and see if any adverse results or findings may impact your decision to hire your next employee.
Make Your Decision
Now that you have all the necessary information, it’s time to decide. Is this person qualified to work at your company? Were there any results from the background check that worried you? Did you have follow-up questions based on the results? Now is the time to work on getting answers to these questions.
If all is well with the results, you can schedule additional interviews and proceed with the hiring process.
5 Ways To Avoid FCRA Violations
Be Clear With Your Requests
Honesty is and always will be the best policy when it comes to abiding by the rules set in the FCRA. If you require a background check for a future employee, you must make your request incredibly clear and state exactly what you need and why. As long as you don’t leave any aspect of your request up to interpretation, you should remain safely within your rights as an employer.
Fill Out The Proper Forms
You cannot just verbally ask a candidate for a background check. Rules and regulations were put in place in response to the FCRA, and you must follow them. These forms are simple and can be accessed through your local government’s websites. Do some research to ensure you are filling out all of the required documentation prior to sending it to the candidate.
Give Adequate Notice
While requesting and administering a background check can move swiftly, it is not required to do so. Your potential future employee has a right to review the forms you sent before signing. Make sure to allow ample time on both ends so that neither you nor the candidate are under any unnecessary pressure to complete things.
Do Not Misuse Information
Once the background check has been administered and you have received the results, you must uphold your duty as the employer to use the private information you have gathered only for its intended use. If you use this information for any reason other than what was agreed upon in the disclosure agreements, you’re violating the FCRA and could face harsh penalties.
Consult an Attorney
If you are still unsure of your rights as an employer, your best bet is to seek additional assurance with the help of an attorney. By using legal help, you can rest easy knowing that you have an educated source backing your decisions throughout the entire hiring and background check process.
Frequently Asked Questions
What Does FCRA Mean on a Background Check?
The FCRA was enacted to protect potential job candidates during background checks. This Act protects the personal and private information collected from these checks and ensures it is only used for its intended purpose.
What Does FCRA Stand For?
FCRA stands for the Fair Credit Reporting Act. This act was established in the 1970s to protect consumers’ privacy from misuse or extortion.
Final Thoughts
Employers should implement background checks prior to hiring employees. This will allow them to find the exact candidate they’re looking for and save time that would have been wasted on candidates who may not be suited to work at their company.
The details in this guide will help you ensure that you are acting in full compliance with the FCRA. Becoming knowledgeable of this Act and its regulations will help you run a successful business and build a team of individuals you can be proud of.
Click here to undergo a free background screening assessment and to learn more about how ScoutLogic can help you build a strong and trustworthy team of employees.
David Garcia, co-founder and CEO of Scout Logic, is an industry leader in the bulk background check world. With his strategic acumen and expertise in the HR sphere, specifically in hiring, recruiting, legal compliance, background checks, and resume screening, he’s an invaluable asset and consultant.
David's counsel extends across the boards of ScoutLogic, YipitData, and Supplier.io, drawing from his impactful stints on the boards of Infutor and Avetta. With an extensive 25-year journey, he champions unparalleled B2B commercial leadership within data & analytics, significantly shaping the HR landscape.
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