United States: Two Federal Agencies Co-Publish New Guidance On Employee Background Checks

Many employers already know that rules about employee background checks are jointly enforced by two federal agencies. Thus, while the Equal Employment Opportunity Commission (EEOC) oversees background checks to prohibit unlawful discrimination, the Federal Trade Commission (FTC) monitors background checks to enforce the notice and fair play provisions of the Fair Credit Reporting Act (FCRA). Some employers may be unaware, however, that, on March 10, 2014, the EEOC and FTC co-published two new technical assistance documents relating to their intersecting enforcement roles. The new documents, entitled Background Checks: What Employers Need to Know and Background Checks: What Job Applicants and Employees Need to Know, are available on either agency's website. And while there is little information in either document that is new, the new guidance nevertheless provides a useful refresher that underscores key points concerning this area of employment law. The key points are as follows:

1. Employers still are allowed to ask job applicants and employees for a wide range of individual background information, and it generally is not illegal to require that an applicant or employee submit to a background check.

2. But regardless of how background information is obtained, an employer that uses the information to make an employment decision must comply with three sets of laws. They are federal laws protecting individuals from employment discrimination, the FTC's rules relating to enforcement of the FCRA, and any state or local laws that apply.1

3. Before obtaining job applicant or employee background information from a company that is in the business of compiling such information, an employer must do all of the following to comply with the FCRA:

  • The employer must tell the applicant or employee that it might use the information for decisions about his or her employment. This notice (a) must be in writing, (b) must be in a stand-alone format, and (c) cannot be in an employment application. The employer "can include some minor additional information in the notice (like a brief description of the nature of consumer reports), but only if it doesn't confuse or detract from the notice."
  • If the employer is asking a company to provide an "investigative report" (i.e., a report based on personal interviews concerning a person's character, general reputation, personal characteristics, and lifestyle), then the employer also must tell the applicant or employee of his or her right to a description of the nature and scope of the investigation.
  • The employer must get the applicant's or employee's written permission to do the background check. This can be part of the document used by the employer to notify the person that the employer will get the report. If the employer wants the authorization to allow background reports throughout the person's employment, then the notice must say so "clearly and conspicuously."
  • The employer must certify to the company from which it is getting the report that the employer (a) notified the applicant and got his or her permission to get a background report, (b) complied with all FCRA requirements, (c) will not discriminate against the applicant or employee or otherwise misuse the information in violation of federal or state equal opportunity laws or regulations.

4. When taking an adverse action against a job applicant or employee (for example, not hiring an applicant or firing an employee) based on background information obtained through a company in the business of compiling background information, the employer is required by the FCRA to give the applicant or employee all of the following: (a) a notice that includes a copy of the consumer report relied on to make the adverse decision, (b) a copy of "A Summary of Your Rights Under the Fair Credit Reporting Act" (which the employer should have received from the company that provided the report), and (c) "notice in advance . . . [that the applicant or employee] has an opportunity to review the report and explain any negative information."

5. After taking an adverse action against an job applicant or employee, the employer is required by the FCRA to tell the applicant or employee (orally, in writing, or electronically) all of the following: (a) that he or she was rejected because of information in the report; (b) the name, address, and phone number of the company that sold the report; (c) that the company selling the report did not make the hiring decision and cannot give specific reasons for it; and (d) that he or she has a right to dispute the report's accuracy or completeness, and to get an additional free report from the reporting company within 60 days.

6. There also are limitations on the subject matter of an employer's lawful inquiry. Employers are not allowed to ask for medical information until a job is offered. And only in rare circumstances may employers ask a job applicant or employee for genetic information, including family medical history. Indeed, even in those rare circumstances when an employer can ask for genetic information, the employer should not use it to make an employment decision.

7. All the usual non-discrimination laws apply in this area. Whenever an employer asks a job applicant or employee about his or her background, or uses the information obtained from such an inquiry, the employer must do so without discriminating on the basis of race, national origin, color, sex, religion, disability, genetic information (including family medical history), older age (40 or older), or other protected status.

8. Improperly obtaining or using a background check can constitute unlawful discrimination either as "disparate treatment" or "disparate impact." For example, it would be unlawful "disparate treatment" to reject job applicants of one ethnicity with criminal records, but not reject other applicants with the same criminal records. Likewise, according to the EEOC, it would be unlawful "disparate impact" if the employer's policy or practice (a) excludes people with certain criminal records to the disadvantage of individuals of a particular race, national origin, or other protected characteristic, but (b) does not accurately predict who will be a responsible, reliable, or safe employee. Or to state the latter point more simply, any employer policy or practice with a "disparate impact" has to be "job related and consistent with business necessity."

9. And this final point may be the most important. Any job applicant or employee can ensure that mistakes in his or her own report are corrected before they cause problems. He not only can ask the background reporting company to fix the mistake and send a copy of the corrected report to the employer. He also can tell the employer about any mistake or report directly. It does not cost an individual anything to fix mistakes in advance, before they are seen by an employer. A diligent job applicant or employee can get a free copy of his or her credit report either by visiting www.annualcreditreport.com or calling 1-877-322-8228.


1. For example, Massachusetts has its own non-discrimination laws (see M.G.L. c. 151B) and consumer credit reporting laws (see M.G.L. c. 93, §§ 50-69), has placed special limitations on employer inquiries into criminal offense information (see M.G.L. c. 151B, §§ 9, 9˝), and has established a separate agency and regulatory framework to handle requests for criminal offender record information (see M.G.L. c. 6, §§ 167-178Q).

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

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