‘Background checks’ of employees may violate federal law

In the past, employers typically required background checks only for high-level jobs with security clearances. But the Internet has made background information much more readily available, and employers are taking advantage of this fact, particularly in a tight job market where they can afford to be selective. Today, background checks are routinely performed on potential telemarketers, fast-food cashiers, and pizza cooks.

But many employers who conduct these checks – and many job applicants who are subject to them – are unaware that a federal law strictly limits how they can be conducted.

Employers who don’t fully comply with the law can be sued, and if they routinely conduct these checks, they could be subject to a class action. Recently, Wal-Mart paid $6.8 million to settle a class action under the law, and the company that owns the Greyhound bus service paid $5.9 million.

 

Many employers have gotten into trouble because they buried a background check disclosure in the middle of other material for the applicant to sign, or relied on a ‘catchall’ waiver at the end of a document.

The federal Fair Credit Reporting Act covers credit reports, criminal background checks, and public records searches for liens, court judgments and bankruptcy filings. Unlike many federal laws that apply only to larger companies, this one applies to any employer who conducts a background check – even a mom-and-pop business.

Under the law, anyone who obtains a report must get authorization from the person in a disclosure document. And this must be a “stand-alone” document; it can’t be hidden in with other disclosures. Many employers have gotten into trouble because they buried a disclosure in the middle of other material for the applicant to sign, or relied on a “catch-all” waiver form at the end of a document.

Employers who collect job applications online need to be particularly careful, because it’s not clear whether a “click-on-the-box” consent to a background check is sufficient under the law.

The law also requires employers to notify a rejected applicant if the employer made a decision based on information in a report. And the employer must then provide a reasonable amount of time for the applicant to dispute and correct the information.