Credit and Criminal Background Checks under the FCRA
The Fair Credit Reporting Act (FCRA) limits an employer’s ability to obtain background checks and credit reports on job applicants and employees. If you have been subjected to a credit or criminal background check as part of an employment application process and/or denied employment as a result of credit or criminal background check, your rights may have been violated.
The Fair Credit Reporting Act (FCRA) imposes two general limitations on employers:
- Before an employer may conduct a background check, the employer must obtain a proper release or authorization from the applicant or employee. No background check can be performed without the authorization. In addition, the authorization form must be in a stand-alone document. That means the authorization form must be separate from the job application and may not also contain an “employment agreement” or ask employees to release any claims or waive any rights. The law is very specific about the form of the authorization that is required, and many employers do not obtain proper authorization;
- Before an Employer may take an “adverse action” against an applicant or employee as a result of a credit or criminal background check, such as not hiring the applicant or firing the employee, the employer must provide the job applicant or employee with a copy of the background check or credit report. The purpose of this section of the FCRA is to allow the applicant or employee to challenge any errors in the report.
The Fair Credit Reporting Act (FCRA) provides employees money damages for a violation. If the employer willfully violates the FCRA, the employer is liable for actual damages, punitive damages, and statutory penalties of up to $1,000 per violation.
Frequently Asked Questions about the Fair Credit Reporting Act (FCRA)
If I file a lawsuit under the Fair Credit Reporting Act, what damages can I recover?
- Actual damages. Actual damages include lost employment opportunities because of incorrect information contained and included in your credit report. It is possible that wrong information on your credit report can cause you to suffer the loss of employment, increased insurance premiums or the loss of insurance coverage, attorneys’ fees, and the expense of having to correct incorrect negative credit information.
- Emotional distress damages. These damages include the kind of injuries recoverable in a personal injury case, such as lost sleep, digestive problems, ulcers, loss of appetite; depression, anxiety, nightmares, insomnia, emotional paralysis, inability to think or function at work, headaches, shortness of breath, anxiety, nervousness, fear and worry, irritability, hysteria; embarrassment, humiliation, indignation, and pain and suffering.
- Statutory damages of $1,000 if we can prove that the furnisher of the information or the credit reporting agency willfully violated the FCRA.
- Punitive Damages. Juries can return large damages for punitive damages if they feel that your rights have been trampled upon by the creditor/furnisher or the credit reporting agency.
What Questions Can My Potential Employer or Employer Ask About My Background?
An employer may ask you a variety of different questions about your background, including during the hiring process. So long as it done legally, and with certain limitations, an employer may ask you about your employment history, your education, your criminal record, your financial history, your medical history, or your use of online social media.
It’s legal for an employer to ask questions about your background or to require a background check — with certain exceptions, as explained above. An employer is not permitted to ask you for your medical information until it offers you a job, and an employer is not allowed to ask for your genetic information, including your family medical history, except in limited circumstances.
When an employer asks about your background, it must treat you the same as anyone else, regardless of your race, national origin, color, sex, religion, disability, genetic information (including family medical history), or age if you’re 40 or older. An employer isn’t allowed to ask for extra background information because you are, say, of a certain race or ethnicity.
What if my potential employer or employer finds something negative in my background check?
Set forth below is a description of your rights, depending on what type of negative information is obtained from the background check:
Criminal History or Other Public Records
If you don’t get hired or promoted because of information in your criminal history or other public records, the employer must tell you orally, in writing, or electronically:
- the name, address, and phone number of the company that supplied the criminal history or public records report;
- that the company that provided the information didn’t make the decision to take the adverse action and can’t give you specific reasons for it; and
- that you have the right to dispute the accuracy and completeness of any information in the report, and to an additional free report from the company that supplied it, if you ask for it within 60 days of the employer’s decision not to hire or retain you.
The company that provided the employer with negative information from a criminal history or other public records has certain obligations: it has to tell you that it provided the information and it has to take certain steps to make sure the information is accurate.
Some employers might say not to apply if you have a criminal record. That could be discrimination.
Credit Report/Financial Information
If an employer decides not to hire, keep, or promote you based on financial information in a background report, it must tell you — orally, in writing, or electronically. Specifically, the employer must:
- give you the name, address, and phone number of the company that supplied the credit report or background information;
- give you a statement that the company that supplied the information didn’t make the decision to take the adverse action and can’t give you any specific reasons for it; and
- give you a notice of your right to dispute the accuracy or completeness of any information in your report and to get an additional free report from the company that supplied the credit or other background information if you ask for it within 60 days.
Race, National Origin, Color, Sex, Religion, Disability, Genetic Information, Age
It is against the law when an employer has different background requirements depending on your race, national origin, color, sex, religion, disability, genetic information (including family medical history), or age, if you’re 40 or older. It’s also illegal for an employer to reject applicants of one ethnicity with criminal records for a job, but not to reject other applicants with the same criminal records.
Even if the employer treats you the same as everyone else, using background information still can be illegal discrimination. For example, employers shouldn’t use a policy or practice that excludes people with certain criminal records if it significantly disadvantages individuals of a particular race, national origin, or another protected characteristic, and doesn’t accurately predict who will be a responsible, reliable, or safe employee. In legal terms, the policy or practice has a “disparate impact” and is not “job-related and consistent with business necessity.”