Taking adverse employment actions based on background checks

The Fair Credit Reporting Act (FCRA) was enacted to promote accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies (CRA). Employment background checks are a form of consumer report, so employers that conduct background checks on job applicants or employees must follow the procedures outlined in the FCRA. Failure to comply with the FCRA could result in penalties issued by the Federal Trade Commission (FTC) or civil liability for damages. Although Arizona doesn’t have a state counterpart to the FCRA, some states do, so employers should confirm whether a state counterpart requires additional action.

Important considerations

What steps must be taken before running a background check? You must provide job applicants with written notice that a consumer report may be used for employment decisions. The notice must be in a stand-alone format, meaning it can’t be combined with other forms such as an employment application. It should include a written authorization, which must be signed by the applicant, before pulling the consumer report.

What constitutes an adverse employment action under the FCRA? An adverse action under the FCRA encompasses any decision made by an employer that adversely affects a current or prospective employee based on information gleaned from a consumer report (e.g., denial of employment, demotion, termination, or denial of a promotion).