By Eric H. Rumbaugh, Jason Kunschke and Matthew Kurlinski
If a staffing firm obtains a background check on an employee or prospective employee, can that firm share the background check with its clients? The short answer is yes, within certain parameters.
To understand the caveats involved, you have to have some basic understanding of the public policy in this area.
The federal Fair Credit Reporting Act (FCRA) is the primary law governing how businesses obtain and use background check information (referred to as a “consumer report” or “investigative consumer report”). (While there are also several state laws restricting the use of similar background check information, this article discusses only the FCRA.) The FCRA places restrictions on when and how businesses can obtain and use consumer reports from third-party suppliers that contain information on employees and prospective employees.
Under the FCRA, almost all background checks employers obtain from third parties are considered consumer reports, whether they contain credit information or not. Even court and employment reference checks are generally covered under the FCRA.
The FCRA sets up cumbersome procedures for obtaining and using such reports, and businesses need to know what those procedures are. While the general FCRA rules apply to contingent and traditional workers, this article focuses on the rules specifi c to contingent workers.
First, an employer must provide proper notice of the intent to obtain a consumer report and gain the subject’s authorization. The notice must be separate from the employment application. It must also be simple and straightforward. The authorization may be included on the same document as the notice, and should specifically state that the signer has authorized that a consumer report be obtained. The most common mistake employers make is including the notice of intent on a larger form containing other information. In most cases, this will invalidate the form.
In addition to complying with the notification and authorization requirements, staffing firms must comply with the following in order to lawfully share consumer report results with clients.
The relevant authority for the ability to pass on the report is Section 603 of the FCRA. Consumer reports may only be used for permissible purposes, and are not generally disclosable to a third party. However, the section excludes such a communication from being considered a consumer report under the following conditions: The communication is 1. made to a prospective employer for the purpose of procuring an employee or finding the consumer a job; 2. is made by a person who regularly performs such procurement; 3. is only used in procuring an employee or finding the consumer a job; and 4. The consumer consents in writing to such a communication, before the collection of information is made.
In most cases, staffing firms meet these requirements and can pass the reports along to their clients in a way that other businesses cannot. But they must be sure to follow the rules for the exception, especially the requirement of notice and consent.
In addition, the staffing firm may not make any inquiry of the consumer that would violate any applicable federal or state equal employment opportunity law or regulation. The firm must also notify the consumer that they may request a copy of their report, and must provide in writing the nature and substance of all information in the consumer’s file within five business days of receiving such a request.
In short, assuming compliance with these requirements, the contingent labor supplier may in most cases pass the consumer report on to prospective employers.
Eric H. Rumbaugh is a partner and Jason Kunschke and Matthew Kurlinski are associates with the law firm Michael Best & Friedrich LLC (www.michaelbest.com). They represent employers in labor, employment and benefits law matters.