Conducting Background Checks.

Q: Is consent required prior to hiring an agency to investigate the background of an employee or an applicant for employment?

A: Yes. The federal Fair Credit Reporting Act imposes notice, consent, and disclosure requirements on employers who engage consumer reporting agencies to conduct what are known as "consumer reports" for purposes of making employment decisions. FCRA applies to background checks conducted by such agencies for any individual, partnership, association, or other entity.

If an outside firm is engaged, regardless of whether the investigation is being conducted on an applicant for employment or a current employee, FCRA requirements must be satisfied. Since FCRA does not apply to in-house background checks, the notice, consent, and disclosure requirements are not an issue if an association intends to use its own personnel to conduct the investigation.

Before asking a consumer reporting agency to prepare a report, an employer must 1) disclose to an employee or applicant that a consumer report may be requested, and 2) obtain the individual's written consent.

For an employment applicant, authorization to obtain the report may appear on the employment application. However, disclosure of the intent to seek a consumer report must appear in a document separate from the employment application or other forms. If a current employee signed an authorization document during his or her application for employment there is no need to seek additional authorization to prepare a report. If the employee has not provided previous authorization, the association must provide the employee with a disclosure form and obtain authorization to obtain the report.

The consumer reporting agency will require verification that disclosures have been made and written consent has been received prior to producing a consumer report. If an employer intends to take adverse action based wholly or in part upon information contained in the consumer report, it must provide the employee or applicant with a copy of the report and the Federal Trade Commission's summary of consumer rights before taking the action. In addition, prior to moving forward with the adverse action, the employee or applicant must be provided with an adverse action notice. Under FCRA, this notice may be provided orally, in writing, or electronically.

Submitted by Lauren W Bright, Shaw Pittman, Washington, D.C. The "Legal" item is not intended as legal advice but rather as an educational overview.