Employers looking to use a third party to conduct pre-employment background checks must be careful to comply with the federal Fair Credit Reporting Act, which establishes guidelines for obtaining consumer reports, investigative consumer reports and traditional credit reports for employment purposes.


According to Robert Dubault of Michigan-based law firm Warner Norcross & Judd, consumer reports include motor vehicle records, educational and employment histories, criminal history and licenses. Interviewing people acquainted with the applicant - as in checking references - is considered to be obtaining an investigative consumer report.

Employers who conduct background checks via third-party vendors are obligated by the FCRA to provide advanced written notice to the applicant, obtain the individual's authorization before collecting the information, provide pre-adverse action notices to the applicant before taking any action and certify to the vendor that FCRA guidelines have been followed.

Failing to comply with these regulations can result in enforcement action by the Federal Trade Commission, legal action by the state attorney general or a private lawsuit filed by the applicant.

Last month, freight services and distribution solutions provider Vitran Express agreed to pay $2.6 million to settle a class action suit filed against it on behalf of more than 1,500 applicants, alleging that it secretly obtained criminal background checks that did not comply with FCRA standards.