Conducting Legal Background Checks on Contractors

It is standard operating procedure for many, if not most, employers to check the criminal backgrounds of their new direct-hires. But as contractors increasingly are filling vital roles in organizations that require them to have access to sensitive information, it is important that their criminal backgrounds also be checked . . . and that the proper procedure is followed when those checks are conducted.

When an employer uses an outside vendor to conduct background checks, the information provided comes from consumer reports, so the employer must comply with the Fair Credit Reporting Act (FCRA) that was created to protect the privacy and accuracy of information found in consumer reports. If you are a recruiter who places contractors and runs your own back-office, you are responsible for following the FCRA procedure when conducting background checks. If you outsource the back-office responsibilities, it is important that you make sure that the back-office is 1.) Conducting background checks; and 2.) Complying with the following FCRA procedure.

Written Notice and Authorization
Before running a background check on a contractor, the candidate’s authorization must be obtained in writing and they must receive a notification stating that a consumer report will be used. This notice and authorization can be electronic.

Taking Adverse Action
If the background check reveals information that disqualifies the candidate for the contract position, there are two steps that must be taken:

Step 1: The contract candidate must be sent a “pre-adverse action disclosure” before the official decision to withdraw the contract offer is made. This includes a summary of their rights under the FCRA and a copy of the consumer report. This gives the candidate a chance to make any corrections to the information if it is wrong.

Step 2: If the candidate does not take steps to correct inaccurate information after a period of time (usually five to seven days), the contract offer can officially be withdrawn. The candidate must be provided with an “adverse action notice,” which can be oral, written, or electronic. The notice needs to include the name and contact information of the vendor that provided the report, a statement that the reporting agency did not make the decision for adverse action, and a notice of the individual’s right to dispute the information in the credit report. The reporting agency that provided the check can assist with this process.

For more details, the Federal Trade Commission has a good article on its website called Using Consumer Reports: What Employers Need To Know.

This article is for informational purposes only and should not be construed as legal advice.

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