New FTC Guidance for Background Screening Disclosure Forms

Posted Friday, May 26th, 2017 by Debbie Lamb, Sterling Talent Solutions

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We have to fill out forms all the time from applying for a passport to filling out all of the required forms when buying a car; the paperwork seems never ending. Each industry will have its own regulations and rules and required forms to fill out. The background screening industry is no different. Background screening is a highly regulated industry. Job candidates are protected by various local, state and federal laws. Background screening reports are regulated under the Fair Credit Reporting Act (FCRA).

FTC Background Screening Disclosure Forms Guidance

The Federal Trade Commission (FTC) periodically makes updates to their regulations that will affect the background screening industry. In April 2017, the FTC released a nonbinding guidance about the types of disclosure forms used by background screening companies.

The FTC defines a background screening report as a consumer report when “they serve as a factor in determining a person’s eligibility for employment, credit, insurance, housing or other purposes and include information bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living.”

FCRA Requirements for Hiring Based on Background Screening Reports

If a company uses background reports to make hiring decisions, the FCRA has three required steps that must be followed:

  1. A company must disclose to a candidate that they will be running a background check, and they must receive a written authorization to do so.
  2. If the background screening report reveals something that may cause a company to deny employment, the company must notify the candidate of the results of the report and provide them with a copy of the report. Sufficient time must be given for the candidate to review the report so they can dispute information in their report.
  3. If the candidate was denied employment in whole or in part on the contents of a background screening report, a company must provide notice to that person that states that they were denied employment due at least in part to the result of the background screening report.

Use a Simple Disclosure Form

The FTC recommends using a simple disclosure form instead of one with “complicated legal jargon or adding extra acknowledgments or waivers.” Examples of items that should NOT be included on the disclosure form are:

  • Language that claims to release a company from liability for conducting, obtaining or using the background screening report.
  • A certification from the prospective employee that all information in his or her job application is accurate.
  • Wording that requires a prospective employee to acknowledge that a company’s hiring decisions are based on legitimate non-discriminatory reasons.
  • Removes overly broad authorizations that permit the release of information that the FCRA doesn’t allow to be included in a background screening report.

The extra items included on a disclosure form make it harder for the prospective employee to understand the main purpose of the document, but it could also violate the FCRA. If extra waivers, authorizations or disclosures are needed to be read and signed by a candidate, they should be completely separate from the FCRA disclosure and authorization form. The FTC recommends having a “simple easy-to-understand notification that your company will obtain a background screening report, perhaps with a simple explanation of what information will be included in the report.”

Commitment to Compliance

Companies must take action to comply with the local, state and federal regulations by talking to legal counsel and having a third party employment screening company that is current on the updated guidelines. Sterling Talent Solutions provides sample disclosure and authorization forms. However, we recommend the forms are reviewed by legal counsel before being used. Sterling strives to keep its clients up to date on laws pertaining to background screening via this blog and quarterly FCRA Compliance Update webinars. You can listen to our Q1 OnDemand webinar any time and sign up for our next compliance update webinar on June 21st.

* PLEASE NOTE: Documents/presentations should NOT be construed as legal advice, guidance or counsel. Employers should consult their own attorney about their compliance responsibilities under the FCRA and applicable state and municipal law. Sterling Talent Solutions expressly disclaims any warranties or responsibility for damages associated with or arising out of this document/presentation or other information provided.

This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.