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FCRA and EEOC Compliance and Background Checks: 3 Tips for Your Small Business

by Ali Gordon


Even with all the economic upheaval of the past year, entrepreneurship in America is growing rapidly. This is especially true among young people whose savvy understanding of technology has empowered them to create businesses in entirely new ways. 

In fact, entrepreneurs registered 4 million new businesses last year despite the obstacles. New business founders and hiring teams face many exciting, challenging phases of the learning curve, including questions about hiring, background checks, and legal compliance. Here are three tips to stay on track.

Tip #1: Correctly Document Your Background Check Process

All throughout the hiring process, employers need to document their decisions. Best practices suggest a robust hiring and background check policy to protect the company and empower teams to make smarter decisions. 

However, even if a company does not yet have a holistic hiring policy in place, they must use a credit reporting agency and qualified background check company throughout the pre-screening process. New business must carefully follow all other FCRA guidelines.

If you partner with eKnowID, we take care of all of these steps for you at no extra cost! 

These guidelines require that employers file all the right documentation throughout the pre-employment screening process, including:

  • Background Check Disclosure and Consent Forms

These documents will be sent to prospective candidates separately from other paperwork to inform candidates about the intent to run a background check. The consent form must also be signed to grant the company permission to run the check. Language on these two forms must meet legal requirements and stand alone. Candidates have the right to refuse background checks. 

  • Adverse Action Notice Forms

These forms let candidates know that their background check results have been flagged, and the employer may reject the candidate on this basis. If they failed the check, candidates have the right to dispute background screening results after receiving this notice. 

  • Second Adverse Action Notice Forms

Even after disputing any information that turned up in a background check, candidates may still receive these forms as documentation that the small business intends to move in a different direction. Different hiring discrimination laws govern decisions to turn down candidates, and businesses need to understand local, state, and federal employment laws to ensure they do not violate fair hiring regulations when they turn down a candidate because of background check results

Tip #2: Ensure Inclusive Practices from the Beginning 

Often the hiring and background check process can be used as a way to screen out prospects who raise red flags, are unqualified, or may make a workplace and customers unsafe. But this is not the only approach to pre-screening. Companies can use the background check and hiring process to understand candidates more holistically, which will make for better hiring decisions and workplaces. Equally important, companies can use the process of creating inclusive hiring practices to set the foundation for environments that practice overall workplace equity. This protects companies from committing EEOC violations.

In some cases, this means setting anti-discriminatory policies around second chance hiring. In other contexts, it means considering ways discriminatory practices may show up early on in a company at their hiring phase. The EEOC offers small businesses an anti-discrimination fact sheet, but companies can take it a step further by ensuring inclusive practices from the very beginning. 

For example, intentional and accidental discrimination are both problematic. A prospect with visual disabilities, for instance, may find it challenging to access or sign digital forms, and a company may accidentally discriminate against people with this kind of disability by unintentionally barring a prospect from being able to apply. A company that thinks about inclusivity around disabilities in the hiring phases is more likely to think about this in the rest of workplace culture. Job descriptions and requirements can demonstrate this too. For instance, unreasonable education requirements may box out candidates who face class-based discrimination, but companies that think about inclusivity even at the early stages of writing job descriptions will be more likely to avoid discriminatory pay practices later on. 

There are all kinds of ways companies can practice anti-discrimination in the hiring process, and this kind of thinking can set them up to offer reasonable, inclusive accommodations all throughout their workplace culture whether for parents, religious employees, teammates with chronic illnesses, etc. Thinking this way early on will help protect the company from accidental or intentional discrimination, and it will offer employees a healthy, mutually beneficial environment. This must start at the earliest stages of hiring. 

Tip #3: Know Which Questions to Ask, and Which to Avoid

Employers can remain compliant with both the FCRA and EEOC mandates by being clear about the kinds of questions they can--and cannot--ask throughout the pre-screening process. Alternatively, even if certain questions can be asked, they may need to be asked equally across all applicants in order to remain compliant. Small businesses should consider this part of their process carefully. 

For example, if a company only asks some candidates for consent to background checks, but does not run checks on all of them -- this can be a violation of fair hiring rules. This is especially true if the background check is then used to bar employment. If a business wants to check one applicant, they need to run background checks on them all, and they must run the right type of background check for each role. 

Companies should be careful to avoid questions around medical and genetic information, in most cases. Information about religion, race, sexual orientation, and other protected identities should not be used to discriminate for a role in which an individual is otherwise qualified. This means companies need to make sure their pre-hiring process does not use answers or information in ways that discriminate, even by accident because of implicit biases. The best practice is to evaluate candidates only on qualifications for the role and to apply all questions and pre-screening processes evenly.

It’s an exciting time for new, growing businesses and startups, and they can focus on building the right team the right way by understanding EEOC and FCRA compliance. The background check and pre-screening processes are only the first parts of adherence to legal mandates and building a healthy, inclusive work culture. If done well from the beginning, companies will find their efforts ripple across the rest of the team and into their long term success. 

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