I. CRIMINAL BACKGROUND CHECKS, CREDIT REPORTS AND THE FAIR CREDIT REPORTING ACT
In some industries, background checks are routine for every potential employee, for other employers, background or credit investigations are only used for certain highly sensitive positions. Whenever an employer seeks background for credit information, she should be aware that the Federal Fair Credit Reporting Act, as well as state laws in several states, imposes obligations upon employers that use "investigative reports" from "consumer reporting agencies" or "investigative agencies". See 15 U.S.C. &#sect; 1681 et seq. The Fair Credit Reporting Act dictates a procedure that an employer must follow in order to obtain a consumer credit report on a prospective or current employee. The FCRA also imposes disclosure requirements on employers who want to use consumer reports as a basis for adverse employment actions.
To obtain a consumer report, an employer must first make a clear, conspicuous, written disclosure, notifying the individual that a consumer report may be obtained for employment purposes. The disclosure must be in a document consisting solely of the disclosure. In addition, the individual must authorize the procurement of the report in writing. The employer may then request a consumer report for employment purposes by certifying to the credit reporting agency that it has made the required disclosure and secured the required authorization, and that it will not use the report in violation of any equal employment opportunity law.
If an employer then wishes to base an adverse employment action even in part upon a consumer report, the employer must, before actually taking the action, provide the individual with a copy of the report, and a description in writing of the individual's rights under the Fair Credit Reporting Act. The credit agency that furnishes the report is required to provide employers with a description of these rights which can be passed on to the individual. The employee's rights include an opportunity to correct inaccurate or erroneous information contained in the credit report by reporting inaccuracies to the credit reporting agency that produced the report. After the employer takes the adverse action, it must give the individual notice-orally, electronically or in writing-that the action has been taken. The adverse action notice must include the name, address and phone number of the credit bureau that supplied the credit report, a statement that the credit bureau did not make and does not know the reasons for the adverse action, and a notice of the individual's right to dispute the accuracy or completeness of any information the bureau furnished and right to an additional free credit report from the bureau upon request within sixty days.
These requirements under the FCRA for using consumer reports in the employment context should be interpreted to apply to simple criminal background checks as well as traditional credit reports. Under the FCRA, a "consumer report" is defined as any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer's eligibility for . . . (B) employment purposes.
15 U.S.C. 1681a(d) (emphasis added). Although the definition does not specifically say that a consumer report includes criminal background information, later sections of the FCRA indicate that such information can be part of a consumer report. For example, the section entitled "Requirements relating to information contained in consumer reports" limits the criminal background information that can be provided by excluding "records of arrest, indictment, or conviction of crime which, from date of disposition, release, or parole, antedate the report by more than seven years." 15 U.S.C. 1681c(a)(5). This limitation suggests that recent arrests and convictions could be contained in a consumer report.
Furthermore, it appears that a report containing only criminal background information would still be a consumer report within the meaning of the FCRA. The definition of "consumer report" does not say that a report must cover a certain number of topics or that there are any subjects that it must cover (such as credit information). It simply states that a consumer report will include "any information . . . bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living." Thus, it appears that a report providing only criminal background information would be as much a consumer report as a report providing only credit worthiness information.
A criminal background check will not be a "consumer report" within the meaning of the FCRA, however, if it is not provided by a consumer reporting agency. A "consumer reporting agency" is any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports.
15 U.S.C. 1681a(e). The inclusiveness of this definition is addressed in the regulations. The Federal Trade Commission regulations specifically comment that "the FCRA unquestionably applies to all consumer reporting agencies, a universe that includes more than credit bureaus (e.g., specialized CRAs that report only on mortgage or tenant applications, or only on consumers' check writing habits)." 16 C.F.R. Part 601. Thus, while this limitation appears to exclude background checks that a company performs by itself without hiring a third party, it may well include even an individual who researches criminal records and provides arrest and conviction information for a fee.
If you obtain criminal background information from an entity or person who could be considered a consumer reporting agency, the safest course of action would be to institute FCRA notice and disclosure protections when criminal background information is obtained for employment purposes and/or used as the basis for an adverse action.
II. A NOTE ON ARREST RECORDS AS PART OF A BACKGROUND CHECK
Particularly with positions that involve extensive or close contact with the public, it may be advisable for the employer to conduct a thorough criminal investigation concerning the applicant. However, several states, including Maryland, Virginia and the District of Columbia, have enacted statutes that prohibit employers from asking applicants and employees whether they have ever been arrested, except in limited circumstances. See Md. Code Ann., Art. 27, &#sect; 740; Va. Code Ann. &#sect; 19.2-392.4; D.C. Code Ann. &#sect; 1-2530. The EEOC also frowns on such inquiries, on the ground that they have a disparate impact against certain minority groups. However, employers can ask about an applicant's criminal convictions. In addition, recent laws applicable to certain regulated industries may require more detailed background checks. See Md. Health Occ. Code &#sect; 19-1901 (health care providers required to perform criminal background checks on licensed nurse applicants).
In some industries, background checks are routine for every potential employee, for other employers, background or credit investigations are only used for certain highly sensitive positions. Whenever an employer seeks background for credit information, she should be aware that the Federal Fair Credit Reporting Act, as well as state laws in several states, imposes obligations upon employers that use "investigative reports" from "consumer reporting agencies" or "investigative agencies". See 15 U.S.C. &#sect; 1681 et seq. The Fair Credit Reporting Act dictates a procedure that an employer must follow in order to obtain a consumer credit report on a prospective or current employee. The FCRA also imposes disclosure requirements on employers who want to use consumer reports as a basis for adverse employment actions.
To obtain a consumer report, an employer must first make a clear, conspicuous, written disclosure, notifying the individual that a consumer report may be obtained for employment purposes. The disclosure must be in a document consisting solely of the disclosure. In addition, the individual must authorize the procurement of the report in writing. The employer may then request a consumer report for employment purposes by certifying to the credit reporting agency that it has made the required disclosure and secured the required authorization, and that it will not use the report in violation of any equal employment opportunity law.
If an employer then wishes to base an adverse employment action even in part upon a consumer report, the employer must, before actually taking the action, provide the individual with a copy of the report, and a description in writing of the individual's rights under the Fair Credit Reporting Act. The credit agency that furnishes the report is required to provide employers with a description of these rights which can be passed on to the individual. The employee's rights include an opportunity to correct inaccurate or erroneous information contained in the credit report by reporting inaccuracies to the credit reporting agency that produced the report. After the employer takes the adverse action, it must give the individual notice-orally, electronically or in writing-that the action has been taken. The adverse action notice must include the name, address and phone number of the credit bureau that supplied the credit report, a statement that the credit bureau did not make and does not know the reasons for the adverse action, and a notice of the individual's right to dispute the accuracy or completeness of any information the bureau furnished and right to an additional free credit report from the bureau upon request within sixty days.
These requirements under the FCRA for using consumer reports in the employment context should be interpreted to apply to simple criminal background checks as well as traditional credit reports. Under the FCRA, a "consumer report" is defined as any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer's eligibility for . . . (B) employment purposes.
15 U.S.C. 1681a(d) (emphasis added). Although the definition does not specifically say that a consumer report includes criminal background information, later sections of the FCRA indicate that such information can be part of a consumer report. For example, the section entitled "Requirements relating to information contained in consumer reports" limits the criminal background information that can be provided by excluding "records of arrest, indictment, or conviction of crime which, from date of disposition, release, or parole, antedate the report by more than seven years." 15 U.S.C. 1681c(a)(5). This limitation suggests that recent arrests and convictions could be contained in a consumer report.
Furthermore, it appears that a report containing only criminal background information would still be a consumer report within the meaning of the FCRA. The definition of "consumer report" does not say that a report must cover a certain number of topics or that there are any subjects that it must cover (such as credit information). It simply states that a consumer report will include "any information . . . bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living." Thus, it appears that a report providing only criminal background information would be as much a consumer report as a report providing only credit worthiness information.
A criminal background check will not be a "consumer report" within the meaning of the FCRA, however, if it is not provided by a consumer reporting agency. A "consumer reporting agency" is any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports.
15 U.S.C. 1681a(e). The inclusiveness of this definition is addressed in the regulations. The Federal Trade Commission regulations specifically comment that "the FCRA unquestionably applies to all consumer reporting agencies, a universe that includes more than credit bureaus (e.g., specialized CRAs that report only on mortgage or tenant applications, or only on consumers' check writing habits)." 16 C.F.R. Part 601. Thus, while this limitation appears to exclude background checks that a company performs by itself without hiring a third party, it may well include even an individual who researches criminal records and provides arrest and conviction information for a fee.
If you obtain criminal background information from an entity or person who could be considered a consumer reporting agency, the safest course of action would be to institute FCRA notice and disclosure protections when criminal background information is obtained for employment purposes and/or used as the basis for an adverse action.
II. A NOTE ON ARREST RECORDS AS PART OF A BACKGROUND CHECK
Particularly with positions that involve extensive or close contact with the public, it may be advisable for the employer to conduct a thorough criminal investigation concerning the applicant. However, several states, including Maryland, Virginia and the District of Columbia, have enacted statutes that prohibit employers from asking applicants and employees whether they have ever been arrested, except in limited circumstances. See Md. Code Ann., Art. 27, &#sect; 740; Va. Code Ann. &#sect; 19.2-392.4; D.C. Code Ann. &#sect; 1-2530. The EEOC also frowns on such inquiries, on the ground that they have a disparate impact against certain minority groups. However, employers can ask about an applicant's criminal convictions. In addition, recent laws applicable to certain regulated industries may require more detailed background checks. See Md. Health Occ. Code &#sect; 19-1901 (health care providers required to perform criminal background checks on licensed nurse applicants).