The federal Fair Credit Reporting Act (FCRA) sets the national standard for employers who want to find out more about an applicant or current employee. Sometimes mistaken for the credit reporting law, the FCRA covers much more than credit reports. It is enforced by the Federal Trade Commission (FTC), www.ftc.gov.

The FCRA covers “consumer reports.” In addition to credit worthiness information, it covers information about a person’s “character, general reputation, personal characteristics, and mode of living.” This is the type of information you as an employer usually want to know before making important decisions about an applicant or employee. Thus, whether a credit check is included or not, an employment background check is a type of “consumer report” that is covered by the FCRA.

The purpose of the FCRA is to assure that reports used to make important decisions such as those related to a person’s employment are accurate. Privacy is also a factor in protecting a consumer’s rights. The law limits who has legitimate access to employment background checks. For the individual who is the subject of a background check as well as the employer, such safeguards are essential. For example, a report that erroneously shows a criminal conviction can wreck a career and at the same time rob a business of a valuable member of the workforce.

Yes. The FCRA makes no distinctions between a small business owner and a large corporation. If the information you seek on an applicant or current employee meets the definition of a consumer report and the information is compiled by a consumer reporting agency, the FCRA applies no matter how many employees you have.

“Background check” is a common term used to describe any one or a combination of reports collected about individuals for employment purposes. The technical term used by the FCRA for a collection of such data is a “consumer report,” defined as “…any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.

Neither the FCRA nor the California ICRAA requires employers to conduct background checks. These laws merely set the standards that apply if and when a background check is conducted. The focus of both the FCRA and the ICRAA is not to help employers dig into an applicant’s past, but rather to assure the information obtained is accurate and up to date. Without these standards, erroneous information may follow an individual for a lifetime.

For certain jobs, specific laws make a background check mandatory rather than discretionary. Often the laws that require a background check are limited to a check of criminal records. Examples of jobs that require a criminal background check are those in the trucking industry and many jobs that involve contact with children, the elderly, and disabled persons. Such industry-specific background checks are beyond the scope of this fact sheet.

Immigration laws also call for employers to verify a person’s eligibility for employment. This requires a form called an Employment Authorization Document (EAD), sometimes referred to as an I-9 check. For more on this process and an employer’s obligations, visit the web site for the Bureau of Citizenship and Immigration Services, formerly the Immigration and Naturalization Service and now a part of the Department of Homeland Security. Go to www.bcis.gov/graphics/

Criminal records held by the court system are public records, and unless some restriction has been imposed by a court, the records are available to anyone. Even so, the FCRA says that records of arrest cannot be included on an employment background check after seven years. The FCRA allows a criminal conviction to be reported indefinitely.

Note: See sections 7 and 10 for more information on the California law. It states records of arrest cannot be reported at all unless a conviction resulted or the matter is pending judgment. California law also has a more restrictive rule about reporting criminal convictions.

A consumer reporting agency that includes public record information that is likely to have an adverse effect on a consumer's ability to obtain employment must either:

The FBI maintains a national data base of criminal records called the National Crime Information Center (NCIC). Employers whose workers are required to have a criminal background check may be able to access this national data base, either directly or through criminal record data bases maintained by the state attorney general.

However, the data base is not available to all employers. Access to the NCIC is typically allowed for employment screening related to jobs that involve work with children, the elderly, or the disabled.

If the job does not require or allow access to the NCIC where criminal information is compiled in one place, any company you hire to screen employees will search as many court systems as you are willing to pay for. Many background check companies (consumer reporting agencies) consult the data bases of information brokers that report on criminal records from multiple jurisdictions. Such third-party companies, if reputable, comply with the FCRA.

If you want to conduct your own investigation rather than hire an outside company, you can request court records from every jurisdiction where the applicant may have lived. In some jurisdictions, court records are available directly from the court’s web site. Access to court records via the Internet varies greatly from jurisdiction to jurisdiction. If not available over the Internet, court files are available at the courthouse. Access may be restricted if a case has been sealed by the court or the record has been expunged.

In recent years, there has been an explosion of Internet data brokers that offer to “find out anything about anybody,” no questions asked. Typically, these services offer public records searches, including criminal records, for most jurisdictions. A word of caution: Many Internet sites advertise low rates for public records searches, but the advertised rates may be deceiving. The more jurisdictions you want to search, the more you are likely to pay.

Public records, other than criminal records, may also be a part of an employment background check. This could include such information as bankruptcy, civil judgments, or tax liens. The FCRA imposes limits on the time such “negative” information can be reported by a consumer reporting agency. But the FCRA time limit does not apply if you visit the courthouse yourself.

When included in a report prepared by a consumer reporting agency, civil judgments and tax liens should not be reported after seven years, and bankruptcy should not be reported after 10 years. When noting a consumer’s bankruptcy, the report should also include the type of bankruptcy filed (the applicable chapter of Title 11 of the bankruptcy code). If the bankruptcy was withdrawn before judgment, that information should also be reported.

Reference checks may be as simple as a brief telephone call to an applicant’s former employer to verify facts such as date of employment, salary, and job title. Reference checks limited to such factual information are generally not considered part of a consumer report — even when the call is made by a third party consumer reporting agency.

However, if the conversation goes beyond a simple check of facts and this information is included in a background check report, this may constitute what the FCRA calls an “investigative consumer report.” It requires additional disclosures to the applicant or employee.

For more on reference checks and when an inquiry becomes an investigative consumer report, see these FTC staff opinion letters:

• Hinkle, www.ftc.gov/os/statutes/fcra/hinkle.htm
• Beaudette, www.ftc.gov/os/statutes/fcra/beaudett.htm

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