A new joint publication of the Federal Trade Commission (FTC) and Equal Employment Opportunity Commission (EEOC) serves as a reminder to employers of the risks that come with the use of background information when making personnel decisions, including hiring, retention, promotion, and reassignment. Titled “Background Checks: What Employers Need to Know,” the publication seeks to guide employers on how to comply with both the Fair Credit Reporting Act (FCRA) and federal nondiscrimination laws in obtaining background information, as well as using and disposing of such information.

Regarding FCRA compliance, the publication reviews the requirements that apply when background information is obtained from a company that acts as a consumer reporting agency under the FCRA. Those requirements address advance notice, written employee consent, and certification to the information provider. The publication also reviews the FCRA’s adverse action requirements, which include a pre-action notice and summary of FCRA rights and a post-action notice, and the FCRA requirement for secure disposal of background reports.  

In addition to the risk of FTC enforcement, nonbank employers other than auto dealers can alsobe the subject of FCRA enforcement actions by the Consumer Financial Protection Bureau (CFPB) even if they are not providers of consumer financial products and services. The CFPB and FTC share FCRA enforcement authority regarding such nonbanks, and the CFPB can also enforce the FCRA against large banks.  

In the area of compliance with federal nondiscrimination laws, the publication includes warnings about: 

  • Obtaining background checks on applicants or employees based on an individual’s race, national origin, color, sex, religion, disability, genetic information (including family medical history), or age (40 or older)
  • Basing employment decisions on background information that has a disparate impact on certain protected classes
  • Obtaining genetic information from applicants and employees and seeking medical information before extending a conditional offer of employment

The publication also discusses the need to apply standards equally to all applicants and employees and the importance of considering making exceptions for problems caused by disabilities. EEOC and U.S. Department of Labor record retention requirements are discussed in the publication as well. (See our prior legal alert regarding two lawsuits filed by the EEOC last year alleging that employers’ use of criminal background checks to screen job applicants disproportionately excluded African Americans from employment in violation of federal nondiscrimination laws. In addition, a recording of our webinar titled “New Hazards in Hiring: Criminal Background Checks and Beyond” is available here.) 

While focused on federal law, the publication notes that some states and local governments regulate the use of background information and advises employers to also review applicable state and local laws.  

Lawyers in Ballard Spahr’s Consumer Financial Services Group regularly advise clients on FCRA compliance and defend them in FCRA lawsuits and enforcement matters. The firm’s Labor and Employment Group routinely assists employers in complying with federal and state laws governing the hiring process, including employment background checks, and defends employers accused of employment discrimination.  

For more information, please contact CFS Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com, John L. Culhane, Jr., at 215.864.8535 or culhane@ballardspahr.com, or Patricia A. Smith at 856.873.5521 or smithpa@ballardspahr.com.  


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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

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