As labor attorneys in South Carolina, we advise employers regarding employee background checks. It has become commonplace for employers to require prospective employees to submit to various forms of background checks prior to making an offer of employment or as a condition of continued employment. While it is not illegal for an employer to collect details on the work, education, employment, criminal, or financial history of prospective or current employees, employers must be sure to comply with federal laws that protect people from discrimination and with the Fair Credit Reporting Act (FRCA). In this article, we explain what an employer needs to know about employee background checks.

Before Requesting a Background Check

Equal Application – Before an employer conducts a background check on a prospective or current employee, the employer should have policies in place to ensure the background checks apply to all similarly situated individuals in a nondiscriminatory manner. Asking people of only a certain race, age, religion, etc. about their criminal record or financial history could be evidence of discriminatory hiring practices.

Medical History – Since 2009, workers’ genetic information has been protected under the Genetic Information Nondiscrimination Act (GINA). GINA protects information related to a worker’s genetic tests and any manifestation of a disease or disorder in the worker or the worker’s family members (family medical history). While few employers need (or would even think of asking for) genetic information of prospective employees, many employers still make unlawful inquiries into an applicant’s medical history, which may violate the Americans with Disabilities Act (ADA). According to the EEOC, an employer should not ask any medical questions before making a conditional job offer. Medical questions also should not be asked of current employees unless there is evidence the employee is unable to do the job or may pose a safety risk because of a medical condition. In general, pre-hire background checks should be designed not to include medical information unless the information is required by federal law or regulations for the position.

Notice Requirements – The FCRA requires an employer to take certain precautions before compiling background information on employees or prospective employees. The applicant/employee must be told that the employer may use the information for decisions regarding the person’s employment. This notice generally must be in writing and not contained within other documents (for example, it cannot be included on the employment application) – it must be a stand-alone notice.

In addition, if the report will be an investigative consumer report (instead of just pulling credit or criminal background information from reporting sources), the notice should make clear that an investigative consumer report may include information on the applicant’s/employee’s character, general reputation, personal characteristics, and mode of living. An “investigative consumer report” is a report usually based on personal interviews conducted by other employees regarding the applicant’s personal character, reputation, lifestyle, and characteristics. The additional notice required for this type of report must be given no later than three days after the date on which the report was first requested, and it must include a statement informing the applicant of the right to request additional disclosures. Employees or applicants must be informed of their right to obtain a description of the nature and scope of an investigative consumer report if one is compiled.

Employers must obtain the applicant’s or employee’s written permission to conduct a background check. Employers must also certify to the company conducting the background check that the employer 1) received the applicant’s permission for the check; 2) has complied and will comply with FCRA requirements; and 3) will not misuse the information gathered nor discriminate unlawfully against the applicant. Note that searches by employers in SC of publicly accessible government data on criminal backgrounds that do not involve a third-party to do the search are not subject to the FCRA. However, such searches and use of the data obtained are still subject to anti-discrimination laws.

How to Use the Information Collected in a Background Check

Equal Application – None of the information gathered in a background check can be used to discriminate against an applicant or employee. An employer must:

  • Apply the same standards to similarly situated applicants/employees regardless of race, sex, color, religion, national origin, disability, genetic information, or age.
  • Employ policies and procedures to avoid basing employment decisions on background check results that may be more common among a certain class of people (race, national origin, color, sex, disability, age, or religion) and that do not bear on the job for which they are being considered, or that a current employee holds. For example, employers should avoid disqualifying applicants with a certain background check result if the disqualification significantly disadvantages people of a specific race with no relationship to the job. Employers also should avoid making employment decisions based on arrest records, which may also disparately impact racial minorities.
  • Employ policies and procedures that examine whether a reasonable accommodation may be required because the results of a background check are due to the applicant’s or employee’s disability.

Prior to Taking Action – Once an employer collects background information about an applicant or employee, the employer must not take adverse action against the person without complying with additional requirements set forth by the FCRA. Adverse action could be choosing not to hire the applicant, reassigning an employee, or terminating an employee. The FCRA’s additional requirements include:

  • Giving the applicant or employee notice before taking adverse action. The notice must include a copy of the consumer report the employer relied on to make the decision and a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act.”
  • Notifying the employee or applicant 1) that s/he was rejected because of the information in the report; 2) the name, address, and phone number of the company that sold the report and the numerical credit score used in taking the adverse action and information about credit scores in general; 3) that the company selling the report did not make the hiring or firing decision and cannot give specific reasons for it, and 4) that the applicant or employee has a right to dispute the accuracy or completeness of the report and can get an additional free report from the reporting company within 60 days. This notice can be given orally, in writing or electronically.


What to Do with Background Information Once an Employer Collects It

When an employer collects sensitive personal information about its applicants or employees, it must retain and dispose of that information securely. The EEOC requires that all personnel or employment records (including application forms, regardless of whether the applicant was hired) must be kept for one year after the record was made or personnel action was taken, whichever is later. However, the Department of Labor requires records to be kept for two years where an employer is a federal contractor that has at least 150 employees and a government contract of at least $150,000.

The Federal Trade Commission also has guidelines on the retention and destruction of records. Background checks may be disposed of after the prescribed EEOC waiting periods mentioned above. However, the checks or reports must be disposed of securely. This can include burning, pulverizing, or shredding so that the reports cannot be reconstructed.

Polish Your Procedures

Conducting background checks of any type of employee or applicant can open a company to potential liability for its employment decisions. Bring your background check policies and procedures to an experienced employment lawyer at Gignilliat, Savitz & Bettis, LLP for a thorough review and advice on best practices to comply with all state and federal regulations.