You have vacancies at your company you need to fill or are considering promoting an employee from within the company. Once you have identified the candidates you wish to consider further, you’ll probably want to run background checks through a third party company whose business it is to compile such information for you. These checks tap into a variety of sources such as criminal records and credit reports. However, when you use these consumer reports to make employment decisions such as hiring, retention and promotion, you must make sure your actions comply with the Fair Credit Reporting Act (FCRA). Enforcement of the FCRA is done by the Federal Trade Commission (FTC).
Some recent court cases show how important following FCRA rules can be. K-Mart is the most recent employer felled by those FCRA regulations and announced that it will pay $3 million to settle claims that it failed to properly warn job applicants that employment could be denied them based on information found on background checks. Under the FCRA, an employer must notify applicants if adverse action could occur based on findings in the background checks. The class of more than 60,000 affected job applicants claimed that they were denied employment without being given a chance to challenge negative information unearthed in these background checks. K-Mart and its parent company Sears denied any wrongdoing, but agreed to the January 25, 2012 settlement to avoid protracted litigation.
In another case, a federal judge in the United States District Court for the Northern District of Illinois approved a $5.9 million settlement in a class action lawsuit against Ohio-based FirstGroup. That case involved claims that criminal background checks were done without the applicants’ authorization. FirstGroup was accused of denying employment based on the findings without providing copies of these reports to the applicants. The FCRA requires that before you reject a job application, deny a promotion or terminate an employee based on information in a consumer report, you must give the applicant or employee a notice that includes a copy of the consumer report you relied on to make your decision along with a copy of A Summary of Your Rights Under the Fair Credit Reporting Act. Giving the person the notice in advance of any gives the person the opportunity to review the report and refute it if necessary. If you take an adverse action based on information in a consumer report, you must give the applicant or employee a notice of that fact, orally, in writing, or electronically. In fact, one key element to always include in your hiring and promotion process is to get the applicant’s consent in writing, granting you permissions to conduct the back ground check.
Keep in mind, though, that in addition to federal regulations, businesses need to make sure they are operating within the guidelines of their respective state. For example, Arizona requires that job applicants for certain positions like school bus drivers must agree to a criminal history check as a condition of employment.
To make sure you are operating within the myriad of regulations that dictate what you should do before you get a consumer report, before and after you take an adverse action, you would be well-advised to consult with an experienced employment law attorney to make sure you’re coving all the bases. The employment law experts at Udall Law Firm, LLP are available now to answer any questions you may have or to further evaluate your company’s course of action. Call (520) 623-4353 or visit www.udalllaw.com.
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