CoAdvantage – Background checks can be fraught territory. They can be pivotal to avoiding major headaches and, in extreme situations, reputationally harmful scandals. But they are also a minefield of compliance requirements, with a wide array of federal, state, and local regulations affecting how and when background checks may be conducted.
The Equal Employment Opportunity Commission (EEOC)
The EEOC enforces a series of regulations intended to protect against discrimination based on factors like race, color, national origin, sex, religion, disability, age, and more. The key here is to make sure practices and policies are consistently and equally applied. For example, you may opt to do certain background checks on executive roles but not minimum wage roles. However, you must then do those checks on ALL executive roles and NO minimum wage roles. You also cannot ask about a person’s protected class, e.g., you can ask a person about their race or their age.
In general, it’s a good idea to have clearly formulated policies governing when and how background checks will be used, and recruiters and interviewers should be trained to avoid questions that could fall afoul of anti-discrimination laws.
The Federal Trade Commission (FTC)
The FTC enforces the Fair Credit Reporting Act, which governs how and under what conditions third parties can access a person’s credit reports. In general, you must formally disclose with written notice that you will be accessing a person’s background information. Employees have a right to know the nature of scope of the background investigation and must provide their written permission.
How You Use the Information Is Also Protected by Law
Again, apply the same standards to everyone, regardless of demographic or differentiating factors. This can sometimes be tricky territory. For example, you cannot reject applicants of one ethnicity for a certain criminal or financial history but not other ethnicities with the same criminal or financial history. That’s discriminatory under the law.
However, you must also be conscientious about “disparate impact.” As the FTC itself notes, “Take special care when basing employment decisions on background problems that may be more common among people of a certain race, color, national origin, sex, or religion; among people who have a disability; or among people age 40 or older.” For example, you may need to make exceptions for problems that may have been caused by a disability if the person can demonstrate his or her ability to do the job.
Taking Adverse Action
If you take adverse action based on information in the background report, you must give the applicant or employee a copy of the report used to make the decision and a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act,” which should be provided by the company that performs the background check. The person then has the right to dispute the accuracy or completeness of the report.
The information generated from the background investigation should be stored in accordance with recordkeeping requirements (e.g., employment records typically need to be preserved for one year after the personnel decision or action was taken). This may require secure storage if the information include personal identifying information. Then, when no longer needed, the information should be securely and permanently destroyed.
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