July 22, 2021

Conducting Compliant Background Checks

Many employers find it worthwhile to check the references, job history, personal character, criminal conviction history or credit history of an individual prior to making the decision to hire or promote.

This can be done through an in-house investigation using public records or by an outside third-party consumer reporting agency (CRA). Initiating background checks and calling an applicant’s referencesare typical screening methods. However, if not performed in accordance with state and federal lawsthey can expose an employer to legal and financial risk.

The term ‘consumer report’ is broad and includes all types of consumer reporting such as information about an individual’s credit, character, personal attributes, lifestyle, and reputation. Criminal and DMV records are also considered to be consumer reports. And although these types of reports are typically written, information transmitted orally can also be considered a consumer report. Consumer reports are used by employers for purposes of employment, promotion, reassignment, or retention.

State laws differ when it comes to limiting an employer’s inquiry into an applicant or employee’s credit history. This article discusses best practices under Arizona’s Consumer Reporting and Fair Credit Reporting statutes as well as federal Fair Credit Reporting Act (FCRA). These laws govern the employer’s ability to obtain consumer information through in-house investigations and its use of information obtained through third-party consumer reporting agencies (CRA).

If an employer uses a CRA to conduct a background check that includes job, personal or credit history, it must follow both state and federal rules concerning notice, disclosure, and consent requirements. In Arizona that includes:

  • Providing a clear and conspicuous written disclosure (in a separate, standalone document) to the applicant or employee that includes:
    • The purpose of the investigation
    • Identifying of the consumer reporting agency conducting the investigation or providing
    • the report; and
    • Statement that defines the nature and scope of the report
  • Providing the applicant or employee with a summary of rights under federal and state law
  • Obtaining written authorization from the applicant or employee prior to procuring the report[i] 
  • Providing a copy of the report to the applicant or employee upon request[ii] 
  • Certify to the CRA all required disclosures have been made (e.g., that the employer will comply with procedures by which an applicant or employee can obtain or be provided with a copy of the report; and that the employer will not use the report in violation of any applicable federal or state law or regulation)

Check in with us next week for additional best practices and tips on conducting background checks in Arizona.

Find these tips and best practices useful? Check out Western Growers newly updated Personnel Procedures Manual (PPM) The PPM is an information-packed employer tool that provides helpful guidance for employers navigating the employer/employee relationship from pre-employment to termination. Click the PPM link in the body of the newsletter for more information.

[i] Employers should be aware that the practice of obtaining authorization through the use of an “I agree” checkbox contained within an online job application may be challenged in court.

[ii] If credit information is obtained, the employer must request that the CRA send a copy of the report to the applicant or employee at the same time it is sent to the employer.