As most readers know, employers are permitted to use consumer reports when screening employment applicants and when evaluating employees for promotion, reassignment, or retention purposes—as long as they comply with the Fair Credit Reporting Act (FCRA). FCRA (Public Law No. 91-508) Sections 604, 606, and 615 which spell out their responsibilities and the methods for using consumer reports for employment purposes.

The FCRA, which became law in 1970, was intended to ensure that the information supplied by consumer reporting agencies (then called credit reporting agencies or sometimes, bureaus) was accurate and consumers were afforded recourse when they thought it was not. Amendments to the FCRA—which became effective September 30, 1997—significantly changed the relationship between the user (the employer) and the consumer reporting agency (CRA). It also clarified a number of ambiguities contained in the statute while increasing the legal obligations of users who procured consumer reports. The FCRA was again significantly amended in 2003. That revision, commonly called the FACT Act, clarified additional ambiguities and lessened some of the burdens placed on users in prior amendments. The following revisits some of the more substantial aspects of the FCRA and sheds light on some of the obligations of both users and CRAs.If your company gets background information on prospective employees, it’s likely you’re covered by the Fair Credit Reporting Act. Before you get a background screening report, the law requires that you make certain disclosures and get a prospective employee’s authorization. Is it time for a FCRA compliance check?

Background screening reports are categorized as “consumer reports” under the FCRA when they serve as a factor in determining a person’s eligibility for employment, housing, credit, insurance, or other purposes and they include information “bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.”

Clearly, before you request a consumer report regarding a prospective employee, disclose to the applicant that you intend to obtain a report and get their written authorization allowing you to do so.

If the resultant consumer report reveals something that may cause the user to decide not to hire the applicant, the user must notify the individual of the results of the report and provide a copy of the report to that individual. Next, the employer must give the applicant sufficient time to review the report so they can challenge any elements that they claim are inaccurate or incorrect.

If the organization ultimately decides not to hire someone based in whole or in part on the contents of the report, it must provide a notice to that person that states they weren’t hired in part because of something revealed in the report.

Organizations often ask how to make the required initial disclosure before it obtains the background report and get the prospective employee’s authorization. It’s easier than most might imagine. Under the FCRA, the employer must provide the prospective employee with a clear and conspicuous written disclosure that it plans to obtain a consumer report about them and must obtain written permission to compile the report. It is permissible to put the required disclosure and request for authorization in one document. However, be sure to use clear wording that the prospective employee will understand.

Here are few tips:

  • Don’t include language that claims to release the organization from liability for conducting, obtaining, or using the report.
  • Delete any wording that purports to require the applicant to acknowledge that hiring decisions are based on legitimate non-discriminatory reasons.
  • Get rid of overly broad authorizations that permit the release of information that the FCRA doesn’t allow – for example, bankruptcies.
  • Don’t include anything else that makes it harder for the applicant to understand the main purpose of the document, and
  • Eliminate any additional waivers, authorizations, or disclosures that might be better suited to include in a separate document.

Complying with the FCRA’s disclosure requirements is easy. It can be accomplished in a few sentences. Just include a simple, easy-to-understand notification that indicates that the organization intends to obtain a consumer report. The simpler and clearer the better, and remember, it’s the law.


There can be no argument, our employees are our most valuable asset.  They can make us, as easily as they can break us.  However, many employers don’t take the time or expend the necessary resources to seek out, and hire the best people possible. The result is often disappointment and frustration, and sometimes even litigation. Although there are no guarantees, there is a great deal employers can do to attract, hire and retain quality employees.  Here are my Ten Best Hiring Tips for 2016:

1.       Recruit constantly, not just when a position needs to be filled.  Recruiting is a continuous and never ending process. It is not something an organization only does when it needs to hire. Maintain a revolving inventory of qualified candidates so that when positions become available, interviewing and screening can begin immediately.

2.       Don’t use generic store bought employment applications. They look unprofessional, and frequently don’t meet current legal standards.  Instead, create a customized application. Be sure to provide plenty of space for applicants to explain their leaving prior employers. Allowing enough for a one-word explanation will likely yield only one word. But, before going to press, have it reviewed by an attorney to ensure it complies with applicable federal and state law.

3.       In addition to requiring completed applications be signed, get a signed release of liability from each applicant.  In addition to the notifications and authorizations required by the Fair and Accurate Credit Transactions Act of 2004, the release should be fashioned as to protect the prospective employer from any invasion of privacy claim that might arise during the pre-employment screening process.  The release should authorize, without liability; the examination and use of public records, communications with former employers, and reference checking.

4.       Interview thoroughly and consistently.  Use only trained interviewers, and ensure that they know what can, and cannot be asked.  Develop an interviewing process whereby every applicant is properly interviewed and his or her skills are examined and job suitability can be determined.  Allow the applicant to thoroughly explain; strengths and weaknesses, how long he or she thinks it will take to become a contributor, and any gaps in employment.  Retain all notes as part of the applicant’s permanent file.

5.       Request as many references as possible, and check them thoroughly.  Ask the applicant to provide the work, and home telephone number of every reference provided.  Additionally, ask for the names and telephone numbers of former peers, and subordinates. Contact each one of them and ask for help to determine if the applicant is suited for the position for which they’ve applied.  Be direct, but be respectful, and take notes.

6.       Insist the applicant provide relevant documents, such as recent performance reviews, check stubs, military discharge records (DD 214), copies of transcripts and degrees, and professional licenses if applicable.  Applicants should unhesitantly produce such documents—smart applicants anticipate this increasingly common request.

7.       Conduct a thorough and complete background investigation.  In most states, an applicant’s driving history and criminal history (if any) are public records and available to perspective employers. A string of traffic violations or even misdemeanor offenses should be taken seriously. A history of bankruptcies, tax liens and unfavorable judgments can also be red flags.  Check federal and local laws before making any inquiries, and be sure to comply with the Fair Credit Reporting Act and its amendments.

8.       Drug test all applicants.  According to recent studies, one third of the population has used an illegal drug at least once, and 11.6 million are still regular users. Substance abusers are less productive, have more accidents and miss more work than non-substance abusers.  Budget permitting, consider psychological testing as well.  Tests that have been scientifically validated will help match applicants’ skills with job requirements, and screen out those unlikely to meet performance standards.

9.       Team consult with staff members and collectively identify the best candidates.  Establish a standardized rating system and rate qualified applicants based on skills, work experience, past performance and the information provided by references. Re-interview the best candidates before making a final decision.  Put your offer in writing and have it acknowledged by the final candidate by signing it.  Maintain good will with those not selected, with a timely thank-you letter.

10.    Sell the organization, not the job.  It is common for business owners, recruiters and even, experienced human resource professionals to over sell a position.  The practice often leaves the new employee disillusioned, frustrated, and angry.  Instead, sell the organization and all that it offers.  Valuable benefits often not mentioned include; technical training, personal and/or professional recognition, and professional networking opportunities.


It is a sad fact, each year, businesses lose over $40 billion dollars to employee theft and dishonesty.  While this staggering figure continues to rise annually, employers of all sizes can do more to reduce their individual losses.  But, the best investment against employee crime is to make careful, well informed hiring decisions.