Last month, we urged employers to conduct background checks before allowing any new hires to begin work. In this issue, we will discuss the legal requirements under the federal Fair Credit Reporting Act (15 USC §§ 1681-1681(u)), the California Consumer Credit Reporting Agencies Act (California Civil Code §§ 1785.1-1785.35), and the California Investigative Consumer Reporting Agencies Act (California Civil Code §§ 1786-1786.56).

These laws apply to any employer who seeks information about an individual’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living from a third-party reporting agency. Examples include criminal background reports, workers’ compensation history and medical reports, motor vehicle reports and driving records, reference checks, verifications of education, license, or past employment experience, credit history reports, general background reports, reference checks, and other types of personal interviews. These laws do not apply to an employer simply contacting an applicant’s previous employers for reference information. However, if an employer conducts its own investigation using public records, it must comply with the provisions of the Investigative Consumer Reporting Agencies Act (ICRAA), which are discussed further below.

Before an employer orders a report, it must notify the applicant of its intention to obtain and use such a report. The notice should: (1) Be in writing as a separate document, rather than as part of the job application; (2) Be clear and conspicuous; (3) State that a consumer credit report may be obtained and used for employment purposes; (4) State the source of the report; and (5) Contain a box that the applicant may check off to receive a copy of the credit report. If an employer seeks information about an applicant’s character, general reputation, personal characteristics, or mode of living, there are additional notice requirements under the Investigative Consumer Reporting Agencies Act. Once notice is given, the employer must obtain the applicant’s written authorization prior to requesting the report. The employer must also certify to the agency from which it requests a report that it is in compliance with applicable laws.

If the applicant requested a copy of the report, the employer must provide a copy to the applicant contemporaneously with its receipt of the report. (Employers may want to contract with the reporting agency to send a copy directly to the applicant within the required time frame.) If the employer performed an in-house public records search, the Investigative Consumer Reporting Agencies Act requires employers to provide copies of the records within seven days. However, if the employer conducts an investigation on suspicion of wrongdoing or misconduct, it may provide a copy to the applicant within a reasonable time, rather than a fixed time period.

If the employer intends to take adverse action based on the consumer report, it must provide the applicant with a copy of the report and a statement of his or her rights before the action is taken. On taking action, the employer must provide: (1) Notice of the adverse action; (2) The name, address, and telephone number of the agency that prepared the report; (3) A statement that the agency did not make the decision to take adverse action and can’t provide any reasons for the action; (4) A statement that the applicant may request a free copy of the report from the agency; and (5) A statement that the applicant may dispute the accuracy or completeness of any information in the report.

ESKRIDGE LAW may be contacted by phone (310/303-3951), by fax (310/303-3952), or by e-mail (geskridge@eskridgelaw.net.) Please visit our website at www.eskridgelaw.net or www.employmentattorneys.net.

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