Understanding the Legal Guidelines for an effective Background Screening Policy

Understanding the Legal Guidelines for an effective Background Screening Policy


Talent acquisition is a tedious process for any employer. Right from sourcing the talent to assessment to pre-employment background screening, each step involves a multitude of selection criteria, failing which the process has to be repeated over and over again. Add to this, the rise in litigation against employers for unlawfully employing background checks. 

The background screening policy will likely be one of the key issues to be addressed if a complaint is made against an enterprise around candidate experience during the screening process. 

To ensure minimal damage, demonstrate that there is a policy in place and that there is enough paperwork to demonstrate that the policy is being followed. EEOC regulations and FTC standards highlight the information needed in the background check policy. 

Note: When making any legal decisions, do refer to the relevant consumer reporting laws of the specific state and not rely on only this blog. Make sure that your background screening policy complies with all applicable federal, state, and local laws by consulting an attorney.

The Equal Employment Opportunity Commission (EEOC)

According to the EEOC, any background information you obtain from any source may not be used to engage in discrimination in contravention of federal law. Think about incorporating language demonstrating your devotion to anti-discrimination laws into your policy. As a business: 

It is illegal for an employer to discriminate against a job applicant because of his or her race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability, or genetic information.  

Be particularly cautious when making employment decisions based on past issues that might be more prevalent among individuals of a particular race, color, national origin, sex, or religion; among those who are disabled; or among those 40 years of age or older.

For instance, if a practice severely disadvantages people of a certain race, national origin, or other protected trait and makes no realistic predictions about who will be a trustworthy, dependable, or safe employee, employers should not utilize it. According to legal standards, the policy or practice is not “job-relevant and compatible with the business requirements ”and has a “disparate impact ”if it is discriminatory in nature. 

The Federal Trade Commission (FTC)

Enterprises must adhere to the Fair Credit Reporting Act (FCRA), enforced by FTC, when purchasing a consumer report (often known as a background check) from a company specializing in gathering background information (Consumer Reporting Agency or CRA).

As a business, you must inform the applicant or employee that you might consider the data when making employment choices. This notice must be given in writing and be presented separately. If it doesn ’t confuse readers or take away from the notice, you can add a little extra information (such as a succinct explanation of how consumer reports work) to the notice. Keep it straightforward and independent of the application.

If you want a corporation to give you an ‘investigative report’ about a potential employee ’s character, general reputation, personal traits, and lifestyle, let the applicant or employee know. The applicant or employee must be informed of their right to a description of the nature and scope of the investigation in this situation.

Obtain written consent from the candidate or employee before conducting the background check. This could be a component of the letter you send to the person informing them that you will get the report. Make sure to state your request for permission to get background checks clearly and prominently if you wish to be able to do so throughout the employee ’s employment.

Inform your CRA in writing that you:

  • Notified the applicant and obtained their consent before obtaining a background check;
  • Are fully compliant with FCRA regulations; and
  • Don ’t use the applicant ’s or employee ’s information unfairly or in any other way that might violate any federal or state regulations or laws governing equal opportunity.

How should you handle your consumer report?

The EEOC and the FTC both have opinions on how to use background check data. The language in your policy should outline the procedures you follow to decide whether you will take unfavorable action based on information from a report and how you will advise the employee of your plan to do so.

According to EEOC – 

The EEOC gives detailed instructions on how to use arrest and conviction records when making a hiring decision. In your policy, you might mention this advice. Before taking adverse action as an organization, you should consider:

  • The nature and severity of the behavior or crime
  • The amount of time that has passed since the offense, behavior, or sentence was completed.
  • The type of work that is being held or sought

According to FTC – 

The FCRA has additional requirements if, following this evaluation process, it is determined that adverse action is justified based on background data collected from your CRA – 

  • Give the applicant or employee the information before taking an adverse employment action
  • Receive notice that unfavorable action is being taken in light of the data discovered during their background investigation, along with a copy of the consumer report you consulted before making your choice.
  • You should have received a copy of ‘A Summary of Your Rights Under the Fair Credit Reporting Act’ from the CRA that shared the report.
  • By providing the applicant with an advance warning, the applicant is given the chance to evaluate the report, explain any unfavorable information, or refute inaccurate information. In addition to being just, this is also the law.
  • You must communicate with the applicant or employee (orally, in writing, or electronically) the following after taking an adverse employment action:
    • The facts in the report that caused the rejection;
    • The CRA ’s name, address, and phone number that provided the report;
    • The company providing the report did not hire the individual and cannot explain why.
    • The person has a 60-day window where they can request another free report from the reporting company if they disagree with the accuracy or comprehensiveness of the report.

Additional details to consider incorporation into the policy – 

  • Who controls the procedure
  • Access rights to information
  • Who authorizes the decision to take adverse action
  • An adverse action checklist
  • Disposing of Background Information
  • Consider including information regarding the disposal of information in your policy.

According to EEOC – 

Any personnel or employment records you create or maintain (including all application forms, whether or not the applicant was hired, and other hiring-related records) must be kept for one year following the creation of the records or one year following the taking of a personnel action, whichever occurs later. The EEOC raises this requirement for educational institutions, as well as state and local governments, to two years. The Department of Labor also extends this obligation to two years for federal contractors who have at least 150 employees and a government contract worth at least $150,000. You must keep the records around if an applicant or employee complains of discrimination until the issue is resolved.

According to FTC – 

You may discard any background reports you obtain once you ’ve complied with all relevant recordkeeping requirements. However, the law mandates that you safely discard the reports and any information obtained. See Disposing of Consumer Report Information for details. 

The recommendations in this article are based on recommendations from the EEOC and FTC. To create a comprehensive and compliant policy, be sure to consult an employment attorney.