What Do Employers Need to Know about Conducting Background Checks?

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Background checks have become an essential part of the hiring process. And it makes sense that employers want as much information as possible about the candidates they are considering, since hiring is one of the costliest expenditures for a business.

The Federal Fair Credit Reporting Act (FCRA) governs the collecting and reporting of confidential information and imposes numerous obligations upon employers. A recent law also places additional duties upon Illinois businesses.

The Federal Fair Credit Reporting Act

Failure to adhere to the various requirements of the FCRA can lead to costly litigation for employers. In fact, class action lawsuits are quite common for FCRA violations. As a result, many employers outsource candidate background checks to ensure they are meeting the FCRA’s requirements.

Even if your business uses a third-party company for background checks, your duties under the act are not complete. Below are the key requirements that employers must follow under the FCRA.

  1. Obtain informed consent from an employee to conduct the background check.

Employers must provide all candidates with written disclosure of their intent to conduct a background check. This disclosure document must be presented on its own, and not mixed in with an orientation packet or other onboarding paperwork.

Further, before proceeding with the background check, employers must obtain signed consent from the job candidate, which acknowledges that the check will happen and provides consent for the check to occur.

Employers must also inform candidates of their rights under the FCRA by providing a copy of the FCRA Summary of Rights document.

  1. Provide employees with the right to review their background check information and correct any inaccuracies.

Before making the final hiring decision, employers must inform candidates of their rights under the FCRA and offer them an opportunity to correct errors on their reports.

Employers should be aware that federal and state laws prohibit employers from excluding individuals based on past arrests. Further, federal and state laws prohibit excluding individuals with a criminal record, so long as state or federal regulations do not forbid hiring a person with criminal records from holding the job or situations in which the conviction is not relevant to the job.

Many states, including Illinois, also follow “Ban the Box” regulations, which restrict employers from asking about criminal records until after determining that a candidate is qualified for the job.

  1. Notify employees if a decision was made not to hire them based on the results of a background check.

If an employer finds unsatisfactory information in a background check which results in a decision against hiring, retaining, or promoting an individual, the employer must provide the individual with written notice, or a Pre-Adverse Action Notification. Employers must provide the contact information for the agency or company that provided the unsatisfactory information.

  1. Allow employees the opportunity to appeal those decisions.

Employees should be afforded an opportunity to refute or explain the unsatisfactory information. When the employer still decides not to hire the candidate, a Final Adverse Action Notice must be sent to the candidate.

New Illinois Obligations

On March 23, 2021, Governor J.B. Pritzker signed a new law which amends the Illinois Human Rights Act and places additional restrictions and obligations on employers’ use of background checks in Illinois.

Prior to the new law, Illinois employers were only restricted from making employment decisions based on arrests. Now, employers are restricted from making employment decisions based on an arrest record or conviction record. A conviction record is defined broadly to include felonies, misdemeanors, placed on probation, fined, and more. More details are provided on the Illinois Human Rights Commission website.

There are two exceptions which allow employers to base employment decisions on conviction records: (1) there must be a substantial relationship between a criminal offense and the employment sought or held, or (2) the granting or continuation of the employment must involve an unreasonable risk to property or to the safety or welfare of specific individuals or the general public. In determining if a “substantial relationship” exists, employers will need to determine whether there is an opportunity for the same or similar offense to occur in the position.

Employers must also take into consideration the following mitigating factors:

  • The length of time since the conviction.
  • The number of convictions that appear on the conviction record.
  • The nature and severity of the conviction and its relationship to the safety and security of others.
  • The facts or circumstances surrounding the conviction.
  • The age of the individual at the time of the conviction.
  • Evidence of rehabilitation efforts.

When an employer determines that an individual is disqualified from employment, the employer must provide a notice to the employee or applicant, which will include a copy of the conviction report and an explanation of the individual’s rights. Individuals then have the right to respond to challenge the accuracy of the conviction record. Thereafter, if the employer proceeds with its decision, the employer must send a second notice to the individual which contains the following:

  1. Notice of the disqualifying conviction(s) and the employer’s reasoning for the disqualification.
  2. Any existing procedure the employer has for the individual to challenge the decision or request reconsideration.
  3. The right to file a charge with the Illinois Department of Human Rights.

Improper background checks are the subject of much litigation. Whenever employers start conducting background checks—of potential hires or of current workers—they should consult counsel to ensure they comply with the FCRA, as well as any applicable state laws related to background checks.