Employers that use background screening methods to vet potential employees are likely aware of their obligations when making employment decisions based on a report’s findings. However, recent laws in states and cities across the U.S. are adding to the list of requirements for communicating adverse actions to applicants. As a result, an employer’s current adverse action policies may no longer be compliant with state and local legislation.

A Brief Reminder of FCRA Requirements for Adverse Actions

When taking adverse action against an employee or applicant because of information obtained from a consumer reporting agency, an employer has certain obligations to the affected person. These obligations arise under the Fair Credit Reporting Act (FCRA). Mainly, employers must provide preliminary notice to the person of the fact that information in their report may possibly lead to an adverse action (e.g., not hiring them, etc.). The notice – also known as a preliminary adverse action letter – must include the following information:

• • A copy of the report;
  • Contact information of the reporting agency; and
  • A summary of the person’s rights under the FCRA (e.g., right to dispute inaccurate information and a right to receive an additional copy of the report from the agency)

Note that this is not a one-step process. After you send the preliminary notice and determine that you will take an adverse employment action, you must also notify the applicant or employee:

• • that he or she was rejected because of information in the report;
  • the name, address, and phone number of the company that sold the report;
  • that the company selling the report didn’t make the hiring decision, and can’t give specific reasons for it; and
  • that he or she has a right to dispute the accuracy or completeness of the report, and to get an additional free report from the reporting company within 60 days.

FCRA Compliance Does Not Guarantee Compliance with Local Adverse Action Laws

In addition to the compliance requirements of the FCRA, employers may also need to adhere to new state and local legislation related to adverse actions. In general, this new wave of legislation places additional requirements and limitations on the timing of background checks, criminal record inquiries, and subsequent adverse action. Known as “Fair Chance” or “Ban the Box” laws, the purpose of the increased restrictions is to create a more equal hiring process for candidates with criminal records.

For example, several states and cities prohibit employers from asking an applicant about their criminal history or from performing a background check before making a conditional job offer. Alternatively, some jurisdictions only prohibit questions about prior criminal records on initial application forms (e.g., Vermont’s “Ban the Box” law) or before a first interview (e.g., Philadelphia’s Ordinance).

Some of the other jurisdictions with this type of law include:

• • California
  • Illinois
  • Portland, Oregon
  • San Francisco, California
  • Los Angeles, California
  • New York City
  • Austin, Texas

Depending on the state or city, limitations may also exist on the number of years an employer may look back on a prospective employee’s criminal history. San Francisco’s Fair Chance Ordinance, for example, prohibits employers from considering an employee’s conviction that is more than seven years old. Ultimately, each state may have its own unique variation of rules for background screening and adverse actions. In general, some of the other elements of these rules may include:

• • Employer exceptions based on size (i.e., number of hired employees);
  • Additional notices to applicants who were subject to adverse action (e.g., a notice of state rights or information about the precise convictions that were the basis for adverse action); and
  • Employers may have to perform written reassessments of an applicant after they provide supplemental information about the results of a background check.

Continue to Monitor State and Local Governments for More Updates

Employers should consult with their legal and HR offices for specific guidance on how to comply with applicable rules in their jurisdiction. Furthermore, state and local governments (or their related agencies) may adopt additional regulations that employers should continue to monitor.