Do you do background or credit checks?

When employers conduct a check of their employee’s background (including credit, criminal, past employer checks) using a third party, the background check is covered by The Fair Credit Reporting Act of 1970 (FCRA).

When an employer wants to rely upon that background check for an “adverse action” (denying a job application, reassigning or terminating an employee, or denying a promotion), the employer must first follow certain steps to ensure compliance with the FCRA, and fairness to the employee.

Step 1: Before the employer takes the adverse action, the employee must be given, in writing, a pre-adverse action disclosure that includes a copy of the individual’s consumer report and a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act” — a document prescribed by the Federal Trade Commission. The Credit Reporting Agency (CRA) that furnishes the individual’s report should give the employer the summary of consumer rights.

Step 2:          The employer must allow the individual a reasonable period of time (at least seven calendar days) to dispute the accuracy of the disqualifying information.

Step 3:          After you’ve taken an adverse action, the employer must give the individual notice — orally, in writing, or electronically — that the action has been taken in an adverse action notice. It must include:


  1. The name, address, and phone number of the CRA that supplied the report;
  2. A statement that the CRA that supplied the report did not make the decision to take the adverse action and cannot give specific reasons for it; and
  3. A notice of the individual’s right to dispute the accuracy or completeness of any information the agency furnished, and his or her right to an additional free consumer report from the agency upon request within 60 days.