When employers are hiring a new employee, it is common for them to conduct background checks on applicants prior to making an offer or entering into an employment agreement. Yet it is essential for employers to understand what it means to be in compliance with federal and state laws concerning background checks, from gathering information related to a job applicant’s credit history to information concerning a job applicant’s criminal convictions.
Federal Laws Pertaining to Background Checks
If you want to run a background check on a potential employee during the hiring process, you must do so in compliance with federal law. A fact sheet from the U.S. Equal Employment Opportunity Commission (EEOC) makes clear that federal law requires employers to do all of the following when it comes to background checks to avoid allegations of discrimination:
- Treat everyone equally, running background checks on all applicants as opposed to only running background checks of applicants on the basis of age, sex, race, religion, national origin, disability, or genetic information;
- Most employers should not attempt to obtain a job applicant’s genetic information, and if it is necessary, do not use it to make a hiring decision; and
- Do not ask questions about a job applicant’s medical condition.
Federal law, through the U.S. Federal Trade Commission (FTC) and under the Fair Credit Reporting Act (FCRA), also requires employers to do the following when utilizing third parties to conduct background checks in the hiring process:
- Inform the job applicant that you may use the information contained in a background report in making an employment decision, and that notice must be in writing (independent of the job application);
- Obtain the applicant’s written permission to conduct a background check;
- Offer the applicant an opportunity to review and correct information contained in the report prior to taking any adverse action; and
- Inform the company conducting the background check that you have the applicant’s permission, that you have complied with the FCRA, and that you will not discriminate against the applicant.
Under the FCRA, employers are only permitted to conduct background checks on job applicants when the information will help to determine whether the applicant is appropriate for the position.
Texas Laws and Applicant Background Checks
In addition to the requirements listed above, employers should also know the following about Texas law. Employers can obtain credit reports for applicants, but employers cannot use information dating back more than seven years. However, Texas law has an exception: If the applicant is seeking a job with a salary of $75,000 or more, then the employer can look back farther than seven years.
Recordkeeping and Disposal Requirements for Employers
Federal law requires employers to retain certain recordings pertaining to employment, including job applications, for a specific period of time. Even if a job applicant was not hired for the position, the EEOC requires employers to keep any related employment records—including application forms and agreements to background checks. Employers must preserve those records for the later of the two dates — either one year after the date that the records were made or one year after a personnel action was taken. For employers that are federal contractors and have 150 or more employees and a government contract of $150,000 or more, the records must be preserved for two years.
After employers are no longer required to keep records, employers usually want to dispose of those records. The FTC has specific requirements for disposal. In short, employers must securely dispose of any records, including materials related to background checks. The FTC allows employers to do this in a variety of ways, including “burning, pulverizing, or shredding paper documents and disposing of electronic information so that it cannot be read or reconstructed.”
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