Background Checks: Why the FCRA Basics Are Important

by Michael Haberman on April 26, 2011 · 5 comments


In my opinion ALL hiring organizations should conduct thorough background checks. The expense is not all that great and the problems it may save you more than offset the cost. However, if you are going to do it there are rules you have to follow. In my consulting and teaching I find that many smaller organizations don’t know that to conduct a background check you have to follow the rules of the Fair Credit Reporting Act. These are the same rules that have to be followed if you as an individual were applying for a credit card. These include:

  • You must have the applicants permission and signature authorizing the background check.
  • The authorization that is signed must clearly spell out what the nature of the check may be
  • If you find out something that makes you decide to not hire the individual that is called an adverse action and you must inform the person of the adverse action by letter, supply them with a copy of the report and allow them to respond to the report.

This last bullet point is especially important in this day and age of identity theft. Failing to follow these rules can cause a company a great deal of heartache and a great deal of money. Case in point is the story of Vitran Express.

Vitran Express had a class action suit filed against it by 1500 claimants that “… alleged that the freight services provider secretly obtained criminal background checks on applicants seeking employment with the company.” In one particular case the background company providing the check  mistakenly identified him as having 27 felony convictions of crimes involving morale turpitude. (For those of you not sure what that is it means depravity.) The case contends that Vitran did not hire him on the basis of the report, did not inform of the reason for not hiring him, and did not learn a thing until he got a copy of the report, along with a nasty letter, from the consumer reporting company. Needless to say he was upset. So he filed suit, as a class action suit, for everyone who had applied with the company for a period of 5 years. The suit claimed the following:

“The complaint alleged that Vitran violated the FCRA when it:
(1) failed to provide clear and conspicuous written disclosure that a consumer report may be obtained for employment purposes, in a document that consists solely of that disclosure; (2) did not obtain a valid authorization in writing to procure a consumer report for employment purposes; and (3) did not provide a
copy of the consumer report on which it based its decision not to hire (in whole or in part) before taking the adverse employment action.”

Vitran Express claimed no wrong doing but they have opted to settle on the lawsuit rather than letting it go to court.

This alleged lack of following the rules has ended up costing them $2.6 million. Vitran has since changed their practices to more closely follow the rules of the FCRA.

Perhaps you should pay attention to these rules as well.

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{ 2 comments… read them below or add one }

Nick Venturella April 26, 2011 at 9:59 am

Mike,

Great article! I work for Insperity’s Time and Attendance division, but Insperity does have an Employment Screening service, if that’s helpful for you to know in your consulting. The site specific to that service is: http://www.insperity.com/solutions/employment-screening/

Thanks for the blog/info.

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Vicky April 28, 2011 at 8:12 am

They wish to implement screening into the hiring process everywhere, so people won’t really have anything to hide from their past. I think it’s for the best, as most people will often lie about any criminal past they might’ve had and some of them land jobs that are probably not really suited for them. I fully support background checks but I’m also hoping it won’t be extra-intrusive on my freedom. We shall see.

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