Question:

A friend of mine told me that he just had to go through a background check for his job. He’s not even a new employee, his employer just decided to start doing background checks on everyone. Is this legal? Can my employer do the same thing to me?

Answer:

Yes, employers in California can conduct credit and background checks on existing employees if the information is going to be used for “employment purposes” such as evaluating an employee for purposes of promotion, reassignment, or retention.  There are two broad categories of background checks in California—one is called an “employment credit report,” and one is referred to as an “investigative consumer report.” In addition, there are several notice requirements that an employer must satisfy when it uses an outside agency to perform one of these types of inquiries.

An “employment credit report” is defined as any communication of information by a consumer credit reporting agency relating to an individual’s credit worthiness, credit standing, or credit capacity.   In order to use information from a credit report for employment-related purposes, an employer must do all of the following:

  1. Provide the employee with a clear, written disclosure before the credit report is obtained.
  2. Get the employee’s written authorization to obtain the consumer credit report.
  3. Send a certification to the credit-reporting agency stating that the employer has made the disclosure, obtained written authorization, and will not use the information in violation of any federal or state law or regulation.  This certification must also state that if the employer takes an adverse action based on the credit report, it will provide the employee with a copy of the report and a summary of the Fair Credit Reporting Act Rights (FCRA).
  4. Before taking adverse action based on the credit report, the employer must provide the employee with a copy of the credit report and a summary of his/her rights under the FCRA, and advise the employee of the name, address and telephone number of the agency that furnished the report.
  5. If an employer takes adverse action based on the credit report, it must advise the employee that the decision was based in whole or in part on the information in the credit report.  In addition, it must provide a summary of the employee’s rights under the FCRA.

As mentioned above, a background check in California is referred to as an “investigative consumer report.” This type of report compiles information on the subject’s reputation, personal characteristics, and mode of living.   If your employer wishes to conduct a background check on you, it must do the following three things:

1. Intend to use the report for a permissible employment purpose.

2. Provide a disclosure before the report is obtained, which states the following:

  • That an investigative consumer report may be obtained by the employer;
  • That the report is being obtained for a permissible employment purpose;
  • That the report may include information on the employee’s character, general reputation, personal characteristics, and mode of living;
  • The name, address, and telephone number of the investigative consumer reporting agency who will conduct the investigation; and
  • The nature and scope of the investigation requested, including a summary of the employee’s right to view the file maintained by the investigative consumer reporting agency.

3. Obtain the employee’s written authorization to procure the report.

If your employer intends to take adverse action against you based on information obtained in an investigative consumer report, two forms (the Pre-Adverse Action Disclosure, and Summary of Your Rights Under the Fair Credit Reporting Act) must be provided to you.  If adverse action is actually taken based in whole or in part on an investigative consumer report, you are also entitled to receive an Adverse Action Notice.

You should note that these requirements do not apply if an employer suspects an employee of wrongdoing or misconduct. In such an instance, the employer is permitted to conduct the background check without following the notice requirements set forth above.

As an existing employee, your employer can therefore obtain credit or background checks on you for legitimate employment purposes if it first gets your consent, and if it complies with the requirements described above.
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