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Most of our small business clients have never conducted pre employment screenings. As the economy has tightened the need to hire the best suited candidate has become more of a focus (The cost of a bad hire can be upwards of $50,000). So smaller employers have sought to conduct pre employment screenings to give them more information about their candidates. They know the hiring basics (formal employment applications, conduct interviews, etc) but rarely have they delved into an applicants’ character and past. When they do, most have fallen into stereotypical hiring process traps that put them in jeopardy of a court visit. Last year alone there were millions of dollars awarded in class action suits for Fair Credit Report Act (FCRA) violations.

Some common mistakes employers make are:

• Failure to have a disclosure of the screening separate from the application
• Burying the disclosure of the screening with application questions
• Failure to provide proper pre-adverse action and/or adverse action notices
• Failure to include a copy of the report or a Summary of Rights with the pre-adverse notice

Small business owners don’t have the benefits of human resource departments. They have either just started a business or have been in business for many years. Whichever the case, the Fair Credit Reporting Act and guidelines set by the Equal Employment Opportunity Commission are news to them. They are not intentionally trying to violate the rights of potential employees; they just don’t know the rules.

Fair Credit Reporting Act 

The Fair Credit Reporting Act  (FCRA) was passed by Congress in 1996 and went into effect September 30, 1997. As the Act is titled, it was initially passed to regulate the collection and use of credit information by credit bureaus. The goal being to provide consumers a way to access information contained in their credit bureau files. Due to the ever growing amount of incorrect information contained in these files, the act also provided a mechanism in which consumers could dispute the records. Basically, it is designed to protect the privacy of consumers and to guarantee that the information supplied by reporting agencies is as accurate as possible.

The FCRA has been amended several times since being passed. With negligent hiring and privacy issue complaints increasing since the passage of the Act, the FCRA was amended to apply to all consumer type reports. Too include the pre employment screenings completed during the hiring process. A consumer report (the information collected during the pre employment screening}, contains information about the applicant’s personal and credit characteristics, character, general reputation, and lifestyle.

The FCRA also provides procedures for obtaining consumer information and how it is to be used and disseminated during a pre employment screening. The Federal Trade Commission enforces all aspects of the FCRA.

Equal Employment Opportunity Commission

The FCRA regulates how consumer report data is collected and used. Part of that data are criminal records. The Equal Employment Opportunity Commission (EEOC) ensures that the information found in the criminal records collected during the pre employment screening is not used to discriminate against the prospective employee. This is where the employers’ fall victim-How they react to and use the criminal record data.

The Civil Rights Act of 1964, Title VII, states that employers cannot reject or fire qualified individuals who have criminal records when the criminal history has no bearing on the individual’s fitness or ability to perform the job. The EEOC is quite clear in its position on employers’ use of criminal background checks for employee hiring and retention: “Using such records as an absolute measure to prevent an individual from being hired could limit the employment opportunities of some protected groups and thus cannot be used in this way.” In making a decision, the employer must consider the nature of the job, the nature and seriousness of the offense, and the length of time since it occurred.

The FCRA states that the applicant has a right to view the information contained in the consumer report and have a chance to dispute the record.  Following this lead, the EEOC encourages the employer to personally interview the applicant and allow them the chance to refute and/or explain the criminal record.

It’s all about being fair. The employer wants to make the right decision to avoid later costs and problems. The applicant is seeking employment. As with the decisions made in other areas of the business, the employer needs to make informed decisions by reviewing and understanding all of the information gathered during the screening process. This review process should include a personal interview so the employer has the chance to hear the rest of the story.

Scroll through our Information and Resources page regarding the FCRA, EEOC, and for helpful information.