Watch Your Step

New rules for using investigative reports to screen employees.

Magazine Contributor

June 1, 1998 2 min read

This story appears in the June 1998 issue of Entrepreneur. Subscribe »

If you rely on consumer credit or other investigative reports when screening prospective employees, you need to know about changes in the Fair Credit Reporting Act (FCRA) that took effect last October. Michael Delaney, vice president of sales for CBT Employment Screening Services in Toledo, Ohio, says the new guidelines for using such reports place a greater administrative responsibility on employers.

Companies must now obtain written authorization from an applicant in the form of a separate disclosure statement before obtaining consumer or investigative reports. While the statement of authorization can be simple and straightforward, Delaney says it must be conspicuous and not embodied in the employment application or any other form. You must also provide applicants with a summary of their rights under the FCRA.

Another key change is that you must notify individuals of your intentions prior to taking any adverse hiring action based in whole or in part on information contained in any consumer or investigative report, as well as provide to the prospective employee a copy of the report on which you're basing your action. Delaney suggests sending a standard letter to all applicants, explaining that hiring decisions may be based on the reports and enclosing copies of the reports you are using.

For more information on your obligations under the FCRA and a copy of the summary of rights you must provide, contact the Federal Trade Commission, 600 Pennsylvania Ave. N.W., Washington, DC 20580, (202) 326-2222, or visit its Web site at http://www.ftc.gov