Background/Credit Checks are covered by two federal laws: Title VII and the Federal Fair Credit Reporting Act (FCRA).
Some states also have their own laws regarding the background/credit checks so employers need to understand the implications between the federal and state laws. Currently, 11 states (California, Connecticut, Hawaii, Illinois, Maryland, New Jersey, Ohio, Oregon, Pennsylvania, Vermont and Washington) limit an employer’s ability to run credit background checks.
If an employer receives negative information about the applicant or employee, the FCRA requires that a pre-adverse-action letter be sent to the individual if there is potential for an adverse employment action. Title VII requires the employer to conduct an individualized assessment and send an action letter. The individualized-assessment process must give the applicant or employee an opportunity to provide additional facts or context to explain why the background check’s findings should not be applied in his or her case.
To avoid charges of disparate treatment or disparate impact based on a background/credit checks, an employer should follow four essential steps:
- Determine whether the employer can request a check.
- Employers need to know how they may request a check.
- Determine how the employer may consider and use the information obtained through a check.
- Appropriately communicate a notice of an adverse employment action based on a check.
Employers should make sure that any background/credit check they perform is job-related and consistent with business necessity. According to the Equal Employment Opportunity Commission (EEOC), employers must ensure there is a direct connection between the type of background check performed and the individual applicant’s or employee’s job duties. The type of background check must be consistently done for all applicants and employees in certain positions! For example, there may be a business justification to conduct a credit check on an Accountant but not for a Receptionist.
Reference: Using Credit and Criminal Background Checks , SHRM.org
5/16/2013, By Susan R. Heylman
