Employee Background Checks: USA

Background check and employment screening are popular and useful tool for employers to collect and analyse data about prospective new employee. However, they come with several legal strings attached. Employers should know their legal obligations when performing pre employment screening to ensure that they comply with the law to avoid expensive litigation.

What are the requirements of the Fair Credit Reporting Act (FCRA)?

The Fair Credit Reporting Act (FCRA) is a federal law that requires employers to make a disclosure to employees or job applicants informing them that the employer will obtain an adverse credit report from a Credit Reference Agency (CRA) about them for pre employment screening. The legislation requires that the form of the disclosure fulfil extremely strict standards. Specifically, the FCRA requires employers must provide a “clear and conspicuous” written notice that consists “solely of the disclosure.” In simple words, the disclosure must be

• clear and conspicuous
• exist as a standalone document

What are Pre-Adverse Action Requirements under the FCRA?

If an employer uses a third-party background check company to conduct a background check, even if the report reflects only the criminal history of the applicant, the Fair Credit Reporting Act (FCRA) applies. Under the FCRA, employers have several obligations. For example, if an employer decides to withdraw an offer based on information based on a screening report, then before taking the adverse action the employer must provide the applicant with

• a copy of the background check report; and
• a written summary of consumer rights

The potential employee is then given a fair amount of time to question the report's veracity. The employer must also meet several requirements after taking the adverse action.

An employer in the USA recently won under the FCRA in SC Data Center, Inc.Schumacher v., Inc., 33 F.4th 504 (2022) an Eighth Circuit U.S. Court of Appeals case. The plaintiff Ria Schumacher stated on her job application that she had never been convicted of a felony. The employer (defendant) SC Data Center INC d/b/a Colony Brands INC offered her a position, subject to a clear background check. After a third-party screening company conducted the background check it came to light that she had been convicted of murder and armed robbery and had served 12 years in state prison. The employer withdrew the offer without first providing Ria Schumacher with a copy of the screening report. The applicant did not dispute the conviction but sued in part because she had not been provided with an opportunity to explain the conviction. The court concluded that while the employer had violated the FCRA when it failed to provide the plaintiff, Ms Schumacher, the plaintiff could not succeed under the FCRA despite being provided with a copy of the report prior to withdrawing her employment offer because applicants do not have the right to explain the context behind factual but unfavourable material discovered on reports. Of course, employers can avoid similar lawsuits by providing individuals copies of reports prior to withdrawing job offers.

Title VII Considerations

The defendant benefits in Schumacher v. SC Data Center, Inc., 33 F.4th 504 (2022). However, employers should pause before refusing to allow applicants a chance to explain any negative information. In such situations Title VII of the Civil Rights Act of 1964 may also come in play along with the Fair Credit Reporting Act (FCRA).

Complygate offers following background checks for international clients looking to hire employees in the USA:

• Credit check for employment
• Criminal record check
• Employment reference check
• Education Verification
• Social media check
• Global Sanctions Check