71 The Alabama Lawyer 146 (2010). What's The Scoop? Background Checks and the Fair Credit Reporting Act.

• Author: By C. Paige Goldman and Elizabeth Huntley

Alabama Lawyer

2010.

71 The Alabama Lawyer 146 (2010).

What's The Scoop? Background Checks and the Fair Credit Reporting Act

What's The Scoop? Background Checks and the Fair Credit Reporting ActBy C. Paige Goldman and Elizabeth HuntleyWhat's more prevalent than marshnmllows in a cone of Rocky Road ice cream? Background checks for potential and even current employees. If you want to get a taste, run a quick search on Google. It will yield countless companies that will tell you everything you want to know and then some about job applicants. Not surprisingly, given this new wealth of information, lawyers on both sides of the aisle are looking for a bite of the action. Plaintiff's firms are advising employees and job candidates about what is and is not permissible in background checks for various purposes, including employment. Defense firms and trade associations are providing the same information from an employer's perspective.(fn1)

Credit reports, one of the key ingredients in background checks, are a particular concern of Representative Steve Cohen of Tennessee (D). He points to the following Catch 22-people lose their jobs, fall behind on bills, perhaps file for bankruptcy; then, when they try to find a job, they are often denied opportunities for employment due to poor credit scores.(fn2) Representative Cohen has introduced a bill in the House of Representatives called the Equal Employment for All Act.(fn3) The purpose of the bill is to "amend the Fair Credit Reporting Act to prohibit the use of consumer credit checks against prospective and current employees for the purposes of making adverse employment decisions."(fn4)

As the authors write this article, Congress has a lot on its plate: the country is embroiled in a national battle over healthcare, the economy appears to be sputtering back toward a recovery and unemployment numbers are somber. We can only tell you to stay tuned to see whether Cohen's bill is successful. But we can satisfy your appetite for information about the current state of affairs for using background checks including credit reports, medical information, driving records, criminal information, and the like. If you are advising a job applicant who believes he has been wronged or an employer who wants to be sure her company's practices adhere to the law, here is what you need to know:

Obtaining Background Checks

An employer's use of background checks is governed in large part by the Fair Credit Reporting Act (FRCA). 15 U.S.C.S. § 1681 et seq. The FCRA refers to background checks as "consumer reports."

The FRCA was originally enacted by Congress in 1970, in part, to balance the consumer or job applicant's interests against the employer's interests. Substantial changes requiring, inter alia, specific notice prior to taking adverse action occurred in 1997.(fn5) When an employer uses a background check in hiring or promoting, the employer is ensuring a safe work place and is protecting itself from losses associated with theft, embezzlement, negligent hiring and harassment. On the other hand, when a potential employee consents to the use of a background check, he or she should have an expectation that the employer will rely on confidential, accurate and relevant information. Also, the applicant should be able to trust that the employer will not misuse or be careless with the information obtained.

The FCRA is triggered when employers use a consumer reporting agency(fn6) to conduct background checks. Indeed, many of the requirements of the FCRA may be avoided if employers simply conduct background investigations in-house. However, employers often find themselves unable to dedicate the time and human resources necessary to perform background investigations in-house.

There are two types of reports usually generated by consumer-reporting agencies for background checks-consumer reports and an investigative consumer report. The consumer report is written or oral information provided by a consumer-reporting agency that may include credit reports, driving records, reference checks, lawsuits, criminal records, educational verification, and any information that bears on a person's general reputation, personal characteristics or mode of living.(fn7) The investigative consumer report is a special component of a consumer report which is obtained through interviews.(fn8) Inquiries for a consumer report and an investigative consumer report are permissible for employment purposes. However, a consumer-reporting agency shall not make an inquiry for the purpose of preparing an investigative report on a consumer for employment purposes if the making of the inquiry by an employer or prospective employer would violate any applicable federal or state equal employment opportunity law or regulation. Therefore, an employer should make sure that the information sought is relevant to employee or applicant's work or potential work.(fn9)

There are some general requirements an employer must follow when obtaining and using consumer reports. To get permission to obtain a consumer report from a job applicant or current employee, the employer must notify the applicant in writing in a document consisting solely of this notice and obtain his or her written authorization. Further, if the employer seeks medical information, he or she must get affirmative consent and make sure that the information is relevant to the job. If the employer wants to obtain an investigative consumer report, he must give the applicant notice that the consumer report will include interviews. The employer should disclose the nature and the scope of the requested report. If the applicant asks for additional information, the employer should give a written disclosure telling the applicant how to get a copy within five days of the request.(fn10)

Prior to taking adverse action (such as declining an offer of employment or promotion) based on information from a consumer report, the employer must give the applicant...