Background Checks: Top 6 Ways to Reduce Risk with Your Disclosure and Authorization Process

By Dr. Alan Lasky, Universal Background Screening

I read an article the other day from a self-proclaimed expert in the background screening industry who reported incorrect information to the public about the disclosure and authorization process, which has been at the forefront in the media, and the cause of a significant amount of class action litigation over the past few years. The incorrect process of obtaining a candidateโ€™s disclosure and authorization before ordering a background check can lead to class action litigation worth millions of dollars, as well as negative publicity for your organization.

Below, I have listed the most important processes for obtaining a legally-Background Check Compliancecompliant disclosure and authorization form when conducting a background check on any of your candidates. By considering these six best practices, you can help to reduce your risk of future litigation:

1. Always provide the candidate a state- and federal-compliant written disclosure and authorization form, and get the candidateโ€™s signature on the form before conducting a background check

A candidate always has to provide consent for a background check to be conducted prior to a consumer reporting agency processing any of their information. Consent occurs when the candidate signs the authorization form and recognizes they are allowing your organization to obtain a background check on them for employment or โ€œpermissibleโ€ purposes.

Organizations such as Dollar General and Publix Supermarkets have settled lawsuits costing them millions of dollars either for failing to provide a disclosure form or providing an out-of-date one.

The disclosure and authorization form must include specific language to comply with state and federal regulations. Although your background screening firm should not provide you legal advice, your background screening company should provide you with sample language that you can review with your own legal counsel.

2. Make sure to provide the disclosure and authorization form as a separate document to the candidate

To protect the applicant, the federal government wants to ensure that your candidates are not confused about what forms they sign to authorize a background check.

The disclosure and authorization forms are required to be free-standing documents and not merged/bled into your application or other applicant-specific documents (i.e., โ€œsolelyโ€ a disclosure and authorization form). The separation from other documents helps your candidates understand what they are reading and that their signed authorization gives you the right to conduct a background check on them. Michaelโ€™s Stores, Wells Fargo, and Sears and many other organizations were hit with class action litigation for not following this easy procedure.

3. Do not provide any waiver of liability in your disclosure and authorization form

Each organization is responsible for their actions in hiring a candidate and it is illegal for any company to remove its legal liability or obligation. That is, you cannot place any waiver or indemnification of your companyโ€™s responsibility in the language of the disclosure and authorization form to try to protect your organization.

Make sure your disclosure and authorization forms do not have any waiver or indemnification language because it is your responsibility to follow proper background screening procedures. Speak with your screening firm about any sample forms they can provide to you. But be careful–we have seen incorrect sample forms provided by background screening firms to their clients, which could lead to litigation against your company since your organizationโ€™s name is on the form and you are actively providing it to your candidates.

4. Donโ€™t add any extraneous information on the disclosure and authorization form

There are very specific state and federal requirements as to the language of the disclosure and authorization form (see Section 606 of the Fair Credit Reporting Act).

Similar to using a separate form so that the candidate does not become confused about what they are signing, the government also does not want any โ€œextraneousโ€ or additional, non-required language in the form because it may confuse the candidate. For this reason, it is important that you do not add questions or statements, and keep the text โ€œpureโ€ by including only the required language. There have been recent cases where companies have added language and have paid out millions of dollars in class action settlements because the form they used did not follow government requirements.

5. Always provide a copy of the document โ€œA Summary of Your Rights Under the Fair Credit Reporting Actโ€

Under federal law, you must not only provide a disclosure form and obtain the candidateโ€™s written authorization, but you must also provide the consumer a copy of their rights. This document, which is available from the Consumer Financial Protection Bureau (CFPB) website or from your background screening firm, does not need to be signed but you must provide it to your candidate when conducting an investigative consumer report (e.g., Employment Verification) or when conducting the Adverse Action process. It is a common best practice to always provide this form and reference the authorization form signed by the candidate, that they have received a copy of this document, so that you have proof that you did provide this document. Several states also require their own documents or disclosures be provided, so be sure to check with your legal counsel about what state laws may be applicable to your organization.

6. Make sure to keep a copy of the disclosure and authorization form

It is always important to keep a copy of the candidateโ€™s signed authorization form in your records. Playing devilโ€™s advocate, if you ever have a disgruntled candidate who states that you were not authorized to conduct a background check, you will have proof of the candidateโ€™s signature on the disclosure and authorization form you have on file. Even if you have it saved electronically, your screening firm should have a date and time stamp process, along with an approved e-sign act signature/authorization, which can be printed and shown at any time.

By following all of these important procedures, your organization can reduce its risk of an improper disclosure and authorization process and increase compliance to protect your firm. Please visit www.universalbackground.com for further information on how to reduce risk and join us for the compliance webinars we conduct for our clients.

Universal Background Screening is a strategic partner of ACA Talent.