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background check

An employer’s background check of a job candidate (or current employee) can range from contacting the candidate’s previous employers and listed references to a more thorough check of the candidate’s work history, compensation history, criminal records, court records, credit history, driving records (motor vehicle reports or MVRs), vehicle registration, bankruptcy filings, sex offender information, property ownership, E-Verify, Form I-9, military records, medical records, drug test results, Office of Inspector General (OIG) background checks, social media, and more.

When an employer uses a third-party service to conduct a background check on a job applicant or current employee the federal law known as the Fair Credit Reporting Act (FCRA) applies and determines how the employer must obtain and handle the information. The FCRA is located in the U.S. Code at 15 U.S.C. §§ 1681-1681x and governs how employers, lenders, and other persons or entities obtain and handle consumer reports, including background checks for employment purposes.

An FCRA investigative consumer report is any written, oral, electronic, or other communication of information by a consumer reporting agency that relates to a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living. The FCRA does not apply when an employer does its own investigation of a job applicant or employee and does not get an investigative consumer report from another company.

The Federal Trade Commission (FTC) requires an employer that wants to get an FCRA investigative consumer report on a job applicant or on a current employee to:

• Tell the applicant or employee the employer might use information in their investigative consumer report for decisions related to their employment. This notice must be in writing and in a stand-alone format. The notice cannot be in an employment application. The employer can include some minor additional information in the notice, like a brief description of the nature of investigative consumer reports, but only if it does not confuse or detract from the notice.

• Get written permission from the applicant or employee. This can be part of the document the employer uses to notify the applicant or employee that the employer will get an investigative consumer report. If an employer wants the authorization to allow the employer to get investigative consumer reports throughout the person's employment, the employer should be sure to say so clearly and conspicuously in the written document.

• Certify compliance to the third-party service provider from which the employer is getting the applicant’s or employee's FCRA investigative consumer report. The employer must certify that the employer:

o notified the applicant or employee and got their permission to get an investigative consumer report;

o complied with all of the FCRA requirements; and

o will not discriminate against the applicant or employee or otherwise misuse the information, as provided by any applicable federal or state equal opportunity laws or regulations.

Before an employer rejects a job application, reassigns or terminates an employee, denies a promotion, or takes any other adverse employment action based on information in an investigative consumer report, the employer must give the applicant or employee:

• an oral, written, or electronic notice that includes a copy of the consumer report the employer relied on to make the decision; and

• a copy of the document titled A Summary of Your Rights Under the Fair Credit Reporting Act, which should be provided by the company that secured the applicant’s or employee’s investigative consumer report for the employer.

Such an adverse action notice tells job applicants and employees about their rights to see information being reported about them and to correct inaccurate information. The notice must include:

• the name, address, and phone number of the consumer reporting company that supplied the investigative consumer report;

• a statement that the company that supplied the report did not make the decision to take the unfavorable action and can't give specific reasons for it; and

• a notice of the person's right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get an additional free report from the company if the person asks for it within 60 days.

Under the FCRA an employer that hires a third party to conduct an investigation into alleged employee misconduct—such as embezzlement, theft, sexual or other harassment, workplace violence, or noncompliance with laws, rules, regulations, or employer policies) is not required to disclose the investigation to the employee or get the employee’s permission prior to the investigation—but such an employer is required to provide the employee with a summary of the nature and substance of the investigation. The employer is not required to identify the sources of the information obtained in the investigation.

If the employer gives the job applicant or employee the notice and a copy of the investigative consumer report in advance of any employment-related decision, the job applicant or employee will have the opportunity to review the report and tell the employer if any part of it is incorrect.

In Texas, as in all states, the Fair Credit Reporting Act (FCRA) governs the use of background checks by employers when they use third-party services to conduct these checks on job candidates or current employees. The FCRA requires employers to provide written notice to the individual that a background check may be used for employment decisions and to obtain written permission from the individual. Employers must also certify compliance with the FCRA to the third-party service provider. If an employer takes adverse action based on the background check, such as denying employment or promotion, they must provide the individual with a notice that includes a copy of the consumer report and a summary of their rights under the FCRA. This notice must also include the contact information of the reporting agency and a statement that the agency did not make the adverse decision. Employers are not required to disclose third-party investigations into employee misconduct unless they take adverse action, in which case they must provide a summary of the investigation to the employee. Texas employers must also comply with any applicable state laws regarding background checks and employment decisions.


Texas Statutes & Rules

Texas Business and Commerce Code, Section 20.05 - Disclosure to Consumer
This statute is relevant as it outlines the requirements for disclosure to consumers by credit reporting agencies, which can include job candidates in the context of employment background checks.

Under this section, a consumer reporting agency is required to disclose to the consumer, upon request, all information in the consumer's file at the time of the request. The agency must also disclose the sources of the information and, in the case of a credit report, any recipients of a consumer report on the consumer which it has furnished for employment purposes within the two-year period preceding the request. This ensures transparency and allows individuals to be aware of the information that may be used by employers in making employment decisions.

Texas Business and Commerce Code, Section 20.06 - Charges for Certain Disclosures
This statute is relevant as it addresses the fees that can be charged for the disclosure of information from a consumer's file, which is pertinent when individuals request information that may be used in employment background checks.

This section stipulates that a consumer reporting agency may not charge a fee to a consumer for providing the consumer with a copy of the consumer's file if the consumer has been notified of an adverse action or has received a notice of a denial of employment within the past 60 days. This provision is designed to ensure that consumers have the ability to access the information used in making decisions that affect their employment without being deterred by cost.

Texas Business and Commerce Code, Section 20.07 - Conditions for Furnishing Reports for Employment Purposes
This statute is relevant as it sets forth the conditions under which consumer reporting agencies may furnish reports for employment purposes, which is a common practice during background checks.

According to this section, a consumer reporting agency may furnish a consumer report for employment purposes only if the agency has received a written authorization from the consumer. The agency must also provide a disclosure to the consumer that informs them of their right to request additional disclosures and a written summary of their rights. This ensures that consumers are aware of and consent to the use of their personal information for employment-related background checks.

Texas Business and Commerce Code, Section 20.08 - Requirements on Users of Consumer Reports
This statute is relevant as it outlines the responsibilities of users of consumer reports, such as employers, when they take adverse action against a consumer based on information in a consumer report.

This section requires that before taking any adverse action based in whole or in part on a consumer report, the user must provide the consumer with a copy of the report and a written description of the consumer's rights under this chapter. The user must also provide the consumer with the name, address, and telephone number of the consumer reporting agency that furnished the report. This ensures that consumers have the opportunity to review and potentially dispute the information before adverse action is taken.

Texas Business and Commerce Code, Section 20.09 - Duties of Users Regarding Address Discrepancies
This statute is relevant as it addresses the duties of users of consumer reports when they receive a notice of an address discrepancy, which can occur during employment background checks.

Under this section, users of consumer reports are required to develop and implement reasonable policies and procedures to enable the user to form a reasonable belief that the consumer report relates to the consumer about whom the user has requested the report when the user receives a notice of address discrepancy. This is to prevent identity theft and ensure the accuracy of the information used in employment decisions.

Federal Statutes & Rules

Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681-1681x
The FCRA is the primary federal law that regulates employer use of background checks conducted by third-party agencies.

The Fair Credit Reporting Act (FCRA) is a federal law that promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies. It is designed to protect consumers from the willful and/or negligent inclusion of inaccurate information in their credit reports and to regulate the collection, dissemination, and use of consumer information, including consumer credit information. Under the FCRA, when employers use third-party agencies to conduct background checks (referred to as 'consumer reports' or 'investigative consumer reports'), they must adhere to several requirements: - Provide a clear and conspicuous written disclosure to the individual before the report is obtained, explaining that a consumer report may be obtained for employment purposes. - Obtain the individual's written authorization before obtaining the report. - Certify to the consumer reporting agency that the employer has followed the required steps, will use the information in the report lawfully, and will not discriminate against the individual. - Provide the individual with a pre-adverse action disclosure that includes a copy of the consumer report and a copy of 'A Summary of Your Rights Under the Fair Credit Reporting Act' before taking any adverse action based on the report. - After taking an adverse action, provide the individual with an adverse action notice that includes the contact information of the consumer reporting agency, a statement that the agency did not make the decision to take the adverse action and cannot provide specific reasons for it, and a notice of the individual's right to dispute the accuracy or completeness of any information provided by the agency. The FCRA also stipulates that employers conducting investigations of suspected misconduct by an employee or for compliance purposes are not required to disclose the investigation or obtain the employee's permission. However, they must provide a summary of the nature and substance of the communication after the investigation if the information may be used for adverse employment actions.