If You Do Background Checks, Here’s What You Need to Know to Avoid a Lawsuit

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Jul 14, 2017

“Double, double toil and trouble…” Although Shakespeare surely had something else in mind, it’s easy to see how these words could conjure images of compliance woes.

The double compliance trouble you’re facing springs from two well-intentioned provisions that, nevertheless, complicate parts of the hiring process: ban the box and adverse action.

While the jury is still out on the long-term efficacy of ban-the-box efforts, there’s no doubt that the patchwork of these fair chance laws makes employment screening more complicated.

And the adverse action provisions of the federal Fair Credit Reporting Act have become a major lawsuit trigger, even without the added complications of specific ban-the-box adverse action requirements.

But don’t worry. I’ve whipped up a recipe for compliance that will let you rest easy at night.

How ‘adverse action’ works

Adverse action describes the process employers must follow when rejecting, terminating, reassigning, or failing to promote an individual due, in part, to the results of a background check. The FCRA sets out three important steps that employers must follow when taking adverse action:

  1. Pre-adverse action: You must notify the candidate that a decision is pending and that background check results are under review. A copy of the candidate’s background check and a “Summary of Rights under the Fair Credit Reporting Act” must also be provided.
  2. Waiting period: You must wait at least five business days before taking final adverse action.
  3. Final adverse action: If, after the waiting period, you decide you still want to take adverse action on a candidate due to the results of a background check, you must send a final adverse action notice. The FCRA requires this notice contain specific information to help the candidate get a free copy of the background check and to contact the background screening company to dispute information.

The whole process is neatly laid out in this adverse action checklist.

Ban the box

The grassroots ban-the-box campaign aims to improve the likelihood that people with criminal records can find jobs after release from prison. It began with a simple goal – to remove the question that asks whether the job applicant has been convicted of a crime from all employment applications.

Over time, this campaign expanded into regulations that delay the timing of a background check, require certain notices to be provided to candidates prior to interviews, and require specific information be provided to candidates if employers take adverse action against them.

In some jurisdictions, ban-the-box laws set out adverse action requirements that are much more robust than those prescribed under the FCRA. Hundreds of states, counties, and cities have passed their own versions of a ban-the-box law, leaving employers to navigate both federal and local laws when using background checks.

The double compliance recipe

To mitigate lawsuit risks, make sure you’re complying with both federal law and any local laws in effect. Don’t be fooled into thinking that federal law preempts or trumps local laws when it comes to ban-the-box requirements.

So the first ingredient is an understanding of your federal obligations for adverse action, which I described above.

The second is an understanding of the city, county, and state you operate in to determine if a ban-the-box law regulates adverse action. Use the National Employment Law Project’s ban-the-box guide to quickly determine if you’re in one of these locations.

Compliance FAQs

If you’re not located in a ban-the-box jurisdiction, you can focus on complying with the three-step adverse action process set out under the FCRA. However, if you are in a ban the box jurisdiction, you should answer the following questions:

1. Am I an “employer” as defined by the ban-the-box law?

In some locations with ban the box, not all employers are covered by the statute. For example, Illinois’ ban-the-box law only applies to employers with 15 or more employees, while Washington, D.C.’s only applies to employers with 11 or more employees working in the district. Additionally, some ban-the-box laws apply to only public employers or only private employers.

2. Do the adverse action requirements under this ban-the-box law apply regardless of whether I used a background check from a consumer reporting agency (CRA)?

Generally speaking, ban-the-box laws apply to employers whether they conducted a background check on their own or used a CRA to run it.

This is a key difference between ban-the-box laws and the FCRA. The FCRA only applies when a consumer report has been procured from a CRA, but ban-the-box laws apply across the board. An employer who inquires into the criminal history of its applicants must follow local ban the box laws, regardless of whether the employer obtained a consumer report (such as a background check).

3. Do the adverse action requirements under the applicable ban-the-box law differ from FCRA requirements?

Some ban-the-box jurisdictions merely delay the timing of a background check. Others regulate how an employer must perform adverse action. If the adverse action requirements under the ban-the-box law are the same as those under the FCRA, then you can perform adverse action by following the three step adverse action process outlined under the FCRA.

If, however, the FCRA’s adverse action requirements differ from those required under the applicable ban-the-box statute, you must comply with both laws in a way that most benefits the candidate.

For example, San Francisco requires that employers wait seven days after they send the pre-adverse action to send the final adverse action. Because the FCRA has a shorter five-day waiting period, the employer must wait the full seven days because it satisfies both the FCRA and the local requirement. However, Seattle only requires employers to wait two business days between pre-adverse action and final adverse action. Because the FCRA favors the consumer by providing a longer waiting period, the Seattle employer must follow five-day waiting periods in the FCRA.

4. Which areas of adverse action should I scrutinize for differences?

Ban-the-box laws usually target three different areas of adverse action. They may require:

  • a different waiting period between sending pre-adverse action and final adverse action
  • an explanation of the specific information in the background check that led to the adverse action
  • specific notifications to the candidate, such as a notice of their right to meet with HR and provide evidence of inaccuracy of the background check or rehabilitation after a conviction.

5. I’m a covered employer and some of these requirements are more robust than those under the FCRA. What now?

Remember, you must always comply with the FCRA’s adverse action process, no matter what. So, make sure your adverse action process always includes providing a pre-adverse action notice, a five business day waiting period, and a final adverse action notice.

Next, make sure you’re giving your candidates all the benefits provided under the ban-the-box law. If the local law requires that the pre-adverse action notice includes a written statement as to what information in the report may lead to denial, then adjust your FCRA compliant adverse action notice to include this statement.

If the local law requires you to highlight areas of the report that are problematic, do that! Make sure you’re performing your federal law obligations while also expanding them in the way required by ban the box.

Start with the FCRA

The FCRA adverse action process will always be your foundation. Use local ban the box requirements to build on that foundation and provide those additional rights to your applicants. As always, we recommend working with an attorney to make sure all of your adverse action procedures are compliant with federal, state, and local law.

This is a lot to remember, but you can use this easy-to-follow decision flowchart to make it easier. You’ll know which laws apply based on your answers to just five simple questions.

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