An employer’s background check of a job candidate (or current employee) can range from contacting the candidate’s previous employers and listed references to a more thorough check of the candidate’s work history, compensation history, criminal records, court records, credit history, driving records (motor vehicle reports or MVRs), vehicle registration, bankruptcy filings, sex offender information, property ownership, E-Verify, Form I-9, military records, medical records, drug test results, Office of Inspector General (OIG) background checks, social media, and more.
When an employer uses a third-party service to conduct a background check on a job applicant or current employee the federal law known as the Fair Credit Reporting Act (FCRA) applies and determines how the employer must obtain and handle the information. The FCRA is located in the U.S. Code at 15 U.S.C. §§ 1681-1681x and governs how employers, lenders, and other persons or entities obtain and handle consumer reports, including background checks for employment purposes.
An FCRA investigative consumer report is any written, oral, electronic, or other communication of information by a consumer reporting agency that relates to a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living. The FCRA does not apply when an employer does its own investigation of a job applicant or employee and does not get an investigative consumer report from another company.
The Federal Trade Commission (FTC) requires an employer that wants to get an FCRA investigative consumer report on a job applicant or on a current employee to:
• Tell the applicant or employee the employer might use information in their investigative consumer report for decisions related to their employment. This notice must be in writing and in a stand-alone format. The notice cannot be in an employment application. The employer can include some minor additional information in the notice, like a brief description of the nature of investigative consumer reports, but only if it does not confuse or detract from the notice.
• Get written permission from the applicant or employee. This can be part of the document the employer uses to notify the applicant or employee that the employer will get an investigative consumer report. If an employer wants the authorization to allow the employer to get investigative consumer reports throughout the person's employment, the employer should be sure to say so clearly and conspicuously in the written document.
• Certify compliance to the third-party service provider from which the employer is getting the applicant’s or employee's FCRA investigative consumer report. The employer must certify that the employer:
o notified the applicant or employee and got their permission to get an investigative consumer report;
o complied with all of the FCRA requirements; and
o will not discriminate against the applicant or employee or otherwise misuse the information, as provided by any applicable federal or state equal opportunity laws or regulations.
Before an employer rejects a job application, reassigns or terminates an employee, denies a promotion, or takes any other adverse employment action based on information in an investigative consumer report, the employer must give the applicant or employee:
• an oral, written, or electronic notice that includes a copy of the consumer report the employer relied on to make the decision; and
• a copy of the document titled A Summary of Your Rights Under the Fair Credit Reporting Act, which should be provided by the company that secured the applicant’s or employee’s investigative consumer report for the employer.
Such an adverse action notice tells job applicants and employees about their rights to see information being reported about them and to correct inaccurate information. The notice must include:
• the name, address, and phone number of the consumer reporting company that supplied the investigative consumer report;
• a statement that the company that supplied the report did not make the decision to take the unfavorable action and can't give specific reasons for it; and
• a notice of the person's right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get an additional free report from the company if the person asks for it within 60 days.
Under the FCRA an employer that hires a third party to conduct an investigation into alleged employee misconduct—such as embezzlement, theft, sexual or other harassment, workplace violence, or noncompliance with laws, rules, regulations, or employer policies) is not required to disclose the investigation to the employee or get the employee’s permission prior to the investigation—but such an employer is required to provide the employee with a summary of the nature and substance of the investigation. The employer is not required to identify the sources of the information obtained in the investigation.
If the employer gives the job applicant or employee the notice and a copy of the investigative consumer report in advance of any employment-related decision, the job applicant or employee will have the opportunity to review the report and tell the employer if any part of it is incorrect.
In Texas, as in all states, the Fair Credit Reporting Act (FCRA) governs the use of background checks by employers when they use third-party services to conduct these checks on job candidates or current employees. The FCRA requires employers to provide written notice to the individual that a background check may be used for employment decisions and to obtain written permission from the individual. Employers must also certify compliance with the FCRA to the third-party service provider. If an employer takes adverse action based on the background check, such as denying employment or promotion, they must provide the individual with a notice that includes a copy of the consumer report and a summary of their rights under the FCRA. This notice must also include the contact information of the reporting agency and a statement that the agency did not make the adverse decision. Employers are not required to disclose third-party investigations into employee misconduct unless they take adverse action, in which case they must provide a summary of the investigation to the employee. Texas employers must also comply with any applicable state laws regarding background checks and employment decisions.
