The Dos and Don’ts of Background Checks

Tips to avoid liability once you have narrowed the applicant pool

2. DO Have the Right Forms. Regardless of whether your company uses its own forms or standardized forms from a consumer reporting agency, they need to be properly formatted and contain all the required information under the FCRA. Unlike most documents used during the application process, the disclosure/authorization form required by the FCRA must be a standalone document. In California, it must contain certain specific information about the consumer reporting agency that will be used to collect the background (or consumer) information. By not having the proper forms, a company exposes itself to class action liability.


3. DO Select a Knowledgeable and Reputable Consumer Reporting Agency. The consumer reporting agency that is responsible for running the background check can be a key partner in a company’s process for obtaining background or credit information. Make sure you discuss the agency’s process to ensure you are getting reports in a timely fashion, and, if applicable, ensure that the forms they use comply with federal and state law by speaking with your employment counsel.


4. DON’T Rely On A Consumer Reporting Agency’s Word Alone. Just because a Consumer Reporting Agency has a well known name or says that it has been in the business for a long time, do not simply rely on their word alone. Shop around. Using the knowledge you learned from talking to your employment counsel, grill each potential consumer reporting agency. Do not be afraid to take the forms to your employment counsel to be reviewed for compliance with federal and state law.

5. DO Make an Informed Decision About When to Seek a Background Check. One of the easiest ways to reduce potential exposure when using background checks is to limit the number of applicants sent to the consumer reporting agency in the first place. As such, you should make an informed decision about when in the application process to submit applicants to the consumer reporting agency for background checks. Some companies may want or need to submit all applicants to a consumer reporting agency for background checks; others may want to submit a smaller pool of applicants after a round or two of interviews have been conducted. Finally, some may choose to submit a single applicant to the consumer reporting agency after making an offer contingent on passing the background screening process. If you are unsure of when in the application process to submit applicants for background checks, call your employment counsel and work through the issue.


6. DO Keep All Background Check Records. For every background check that is run, a company should have a standalone disclosure, must have an authorization signed by the applicant and additionally create a formal report. There may be additional documents such as Summaries of Rights under the FCRA or corresponding state law, as well as pre- and/or post-action notices depending on the particular circumstances and jurisdiction. It is important to maintain all of these documents, not just the authorization signed by the applicant. These documents will be very important for a company’s defense in the event of litigation. Incomplete documentation of the process can make it difficult or impossible to establish that applicants received all of the statutorily required paperwork.


7. DON’T Assume That You Can Search Public Records and Avoid Liability. An employer may want to try and avoid the burdens imposed by the FCRA when using a consumer reporting agency by doing its own search of public records. This strategy does not always steer clear of potential liability. Various states, such as California, have specific laws in place (and penalties for non-compliance) that impose obligations on these types of public records searches. If your company is running searches on its own using public records, ensure that you are complying with the particular statutory requirements in your jurisdiction related to this type of search.


8. Do Review Each Report Carefully to Determine if There is a Job-Related Basis to Disqualify an Applicant. Employers should not use background checks, and the resultant report, as a means of automatic disqualification for an applicant. There should be a legitimate job-related basis for using information from a background check to disqualify an applicant.