FCRA

Your Next Hire Is Online. Here’s How to Screen Them Legally.

Social media screening is legal, but only if done right. Here are the essentials.

Federal nondiscrimination laws still apply.
Anything that reveals protected characteristics (race, religion, disability, age, pregnancy, etc.) cannot influence a hiring decision.

Using a third‑party screener? That triggers the FCRA.
Employers must provide a standalone disclosure, get written authorization, and follow pre‑adverse and adverse‑action steps. Accuracy rules also apply and the CFPB is enforcing them more aggressively.

28 states restrict employer access to personal social media.
Most ban requesting login credentials, requiring applicants to log in on the spot and demanding they add HR as a “friend.” In some states, even asking for a username may create risk.  

Public vs. private content matters.
Employers may review public posts but accessing private content without permission can violate the federal Stored Communications Act.

NLRA protections apply online.
Employees’ posts about wages or working conditions may be protected concerted activity. Don’t treat them as negative findings.

California adds extra compliance layers.
ICRAA and CCRAA impose stricter disclosures when using third‑party screeners.

Best Practices

Use a consistent, documented process focused ONLY on job‑related behaviors (e.g., threats, fraud, harassment). Keep decision makers away from protected information. Never request access credentials. Stick to public content. And follow the FCRA if a third-party is involved.

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

February 5th, 2026|Categories: Compliance Corner, Employment Decisions|Tags: , , , |

Bankruptcy Records: Credit Reports Erase Them But Employment Background Checks Find Them

Many people assume that once a bankruptcy drops off their credit report, it disappears everywhere.

Not true. And this difference matters, especially for employers and job seekers.

Credit Reports Follow Standard FCRA Time Limits

Under the Fair Credit Reporting Act (FCRA), national consumer reporting agencies (TransUnion, Experian, Equifax) must remove bankruptcies after specific time periods:

  • Chapter 7: reportable for up to 10 years
  • Chapter 13: typically removed after 7 years, sometimes sooner
    Once these limits are reached, credit bureaus delete the record entirely, meaning they cannot provide it for any purpose, including employment screening.

Employment Background Checks Work Differently

Employment screening companies are also consumer reporting agencies under the FCRA, but they don’t rely solely on credit bureaus. They frequently pull records directly from the courthouse, which may contain older bankruptcy filings long after the credit bureaus deleted them.

Under the FCRA’s $75,000 salary exception, employment background check companies may report adverse information with no time limit. So if a bankruptcy exists in public court records, it may still appear on an employment background check even though it no longer appears on a credit report.

State Reporting Laws Add Another Layer

Several states have their own rules on how long bankruptcy records may be reported in employment background checks–specifically California, Colorado, Kansas, Maryland, Massachusetts, Montana, New Hampshire, New Mexico, New York, Texas, and Washington. California, for example, prohibits reporting a bankruptcy that is more than 10 years old measured from the date of the relief order, unless a narrow exception applies.

Bottom Line

A bankruptcy “dropping off” your credit report does not guarantee it disappears from employment background checks. Different rules, different timelines.

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

January 29th, 2026|Categories: Compliance Corner, Employment Decisions|Tags: , , , , , , , , , , , , |

Can Employers Charge Job Applicants for Their Background Check?

When candidates apply for a job, they expect a thorough screening process: interviews, reference checks, and often a formal background check. But can an employer require a job applicant to pay for their own background check?

The answer is more nuanced than a simple yes or no. It depends on state law, federal wage-and-hour rules, and how the background check is conducted.

Federal Law: No Direct Prohibition, but Important Limits

At the federal level, there is no law that explicitly prohibits an employer from requiring applicants to pay for a background check. The Fair Credit Reporting Act (FCRA) regulates how background checks must be conducted but it does not regulate who must pay for the screening.

However, the federal Fair Labor Standards Act (FLSA) does impose limitations once a person becomes an employee. Employers cannot deduct background check costs if doing so would reduce the individual’s pay below the minimum wage for that workweek. While this usually applies to employees, not applicants, it still influences how some states treat pre‑employment expenses.

State Laws: The Deciding Factor

State legislation determines whether an employer can charge job seekers for the cost of a background check. And many states say no. These include: California, Louisiana, Minnesota and Vermont.

In states without specific prohibitions, employers may legally require applicants to pay for background checks as long as the practice does not violate any other wage, consumer protection, or hiring transparency rules.

Should Employers Charge Applicants?

Even in states where charging applicants is legal, many employers avoid it for several reasons:

  • Competitive Disadvantage

Requiring applicants to pay, especially lower‑wage candidates, may shrink an employer’s talent pool.

  • Perception and Candidate Experience

Applicants may view the request as unfair or predatory, damaging employer reputation.

  • Administrative Burden

Collecting fees, issuing reimbursements, and maintaining compliance increases operational complexity.

 

  • Equity Concerns

Cost‑shifting disproportionately impacts economically vulnerable job seekers.

For these reasons, most employers see background check costs as part of doing business.

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

January 15th, 2026|Categories: Compliance Corner, Employment Decisions|Tags: , , , , , , |

The FCRA Big Three Lawsuit Triggers

Hiring the right talent is critical but one overlooked detail in your background screening process can cost your company millions. Employers often assume background checks are routine, yet the legal landscape tells a different story. The majority of lawsuits tied to employment screening aren’t about discrimination or bad hires—they’re about technical compliance mistakes under the Fair Credit Reporting Act (FCRA). These errors are easy to make and expensive to fix.

Research shows that approximately 73% of FCRA-related lawsuits against employers stem from these three common mistakes:

  • Non-compliant disclosure forms
  • Missing or delayed pre-adverse action notices
  • Inadequate authorization forms

The consequences can be significant: statutory damages of $100–$1,000 per violation, plus attorney fees, with settlements often reaching mid-six to seven figures.

Emerging Risk: Disparate Impact Discrimination

Background check policies and particularly those applying strict pass/fail criteria based on criminal history can unintentionally violate Title VII if they disproportionately impact protected groups. The EEOC has successfully challenged such blanket policies in litigation.

EEOC guidance emphasizes individualized assessments, considering:

  • The nature of the offense
  • Time elapsed since the offense
  • Relevance to the job

Relying on generalized exclusions without job-specific review creates legal risk. Additionally, many state and local laws impose specific requirements for individualized assessments.

Best Practices to Reduce Lawsuit Risk

To minimize exposure from background screening:

  • Use standalone, plain-language disclosure forms before any check.
  • Obtain written authorization in a separate form, not embedded in applications.
  • Follow the adverse action protocol: provide a pre-adverse notice with a copy of the report and summary of rights, and wait at least five business days before issuing the final notice.
  • Allow candidates to dispute findings.
  • Implement individualized assessments, especially for criminal record policies.
  • Regularly audit processes and train HR staff on evolving regulations.

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

December 23rd, 2025|Categories: Compliance Corner, Employment Decisions|Tags: , , |

The Illusion of Instant Criminal Checks: Why a True National Criminal Database Still Doesn’t Exist

If you’ve ever been pitched a “national criminal database,” you’ve probably imagined a single, authoritative system that instantly returns every criminal record across the United States. That database doesn’t exist for non‑law‑enforcement users and relying on anything marketed that way can lead to missed records, inaccurate matches, and regulatory headaches.

What actually exists at the national level?

The FBI operates several national systems—NCIC, III, NGI, N‑DEx, and NICS—to support criminal justice operations. These are law‑enforcement systems, with access tightly constrained by federal law and regulation (including 28 C.F.R. § 20.33). Employers generally cannot query NCIC/III directly unless a statute authorizes fingerprint‑based checks for specific roles (e.g., child care, elder care, or other regulated positions) and the check is routed through the state repository per the Compact Council rules.

Even within law enforcement, these systems are indexes and exchanges that depend on state and local repositories to submit arrests and dispositions; coverage and timeliness vary. The DOJ/BJS surveys and FBI guidance repeatedly emphasize gaps and the critical need to report final court dispositions to keep records accurate.

So what are “national criminal databases” sold by private vendors?

Commercial “national” or multi‑jurisdictional files aggregate data from many sources (state repositories where available, departments of corrections, sex offender registries, selected county uploads, watchlists, etc.). They can be useful as a pointer or discovery tool, but they are not comprehensive and often not current enough to stand alone. Coverage varies by jurisdiction and update cadence; name‑match noise creates false positives/negatives, especially with common names.

Industry resources and compliance guidance are consistent on this point: use multi‑jurisdictional databases to broaden the net, then verify at the originating court or repository before reporting or taking action.

Why “database‑only” screening creates risk

  1. Incomplete coverage: Not all courts or states report; updates lag. Recent charges or local misdemeanors may be absent.
  2. Identity ambiguity: Limited identifiers can mis‑match results; aliases and data entry errors compound the problem.
  3. Stale or missing dispositions: Arrests without case outcomes mislead; expungements or dismissals may remain in bulk feeds.
  4. Fair Credit Reporting Act (FCRA) compliance exposure: The FCRA requires “reasonable procedures to assure maximum possible accuracy” and complete, up‑to‑date public record reporting. Database “hits” must be confirmed at the source, and consumers must be notified appropriately when adverse public records are reported for employment decisions.

Regulators have sharpened expectations. In 2024, the Consumer Financial Protection Bureau (CFPB) reiterated that consumer reporting agencies (CRAs) must prevent reporting of duplicate or expunged/sealed items and include disposition information where available. CRAs also must disclose the source(s), both original and any intermediaries, when consumers request their files.

Why this still matters

Despite modernization, data gaps persist—especially in disposition reporting and identity matching. The newest BJS/SEARCH survey shows continued dependence on state repositories and varying automation/completeness across states, reinforcing why source verification and robust procedures remain critical.

Meanwhile, regulators (CFPB/FTC) are raising the bar on “maximum possible accuracy.” Organizations that rely on “instant database” products without verification risk adverse action mistakes, consumer disputes, and enforcement exposure.

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

December 12th, 2025|Categories: Compliance Corner, Employment Decisions|Tags: , , |

Independent Contractors, Misclassification, and the FCRA: Lessons from Joel Galarza’s Eleventh Circuit Case

The Eleventh Circuit’s recent decision in Galarza v. One Call Claims, LLC sent ripples through compliance and risk management circles. At its core, the case addressed whether three insurance adjusters labeled as independent contractors were actually employees under the Fair Labor Standards Act (FLSA). The court applied the economic realities test and concluded that a jury could reasonably find these workers were employees, reversing the district court’s summary judgment in favor of the companies. Five of six factors favored employee status, including:

  • Control over work: The companies dictated schedules, monitored performance, and approved overtime.
  • Economic dependence: Adjusters worked exclusively for the companies for nearly two years.
  • Integral role: Their work was central to the companies’ operations.
  • Permanency: Long-term, exclusive engagements suggested employment rather than independent contracting.

Why This Matters for Employment Background Screening

While the Galarza case was decided under the FLSA, it raises a critical question for compliance professionals: Should independent contractors be treated as employees for purposes of the Fair Credit Reporting Act (FCRA)?

Under the FCRA, requirements such as stand-alone disclosures, written authorization, and pre-adverse action notices apply when a consumer report is obtained for “employment purposes.” The statute defines this as evaluating a consumer for employment, promotion, reassignment, or retention as an employee. Although Federal Trade Commission (FTC) staff reports have suggested that the FCRA’s “employment purpose” provision may extend to certain independent contractors, courts have generally taken a narrower view. For example, in Smith v. Mutual of Omaha (S.D. Iowa), the court held that background screening for contractor roles did not trigger the FCRA’s employment-related protections.

However, the Galarza decision underscores a practical risk: labels don’t control legal outcomes. If a contractor is later deemed an employee under an “economic realities” or similar test, a company could face exposure—not just under wage laws, but potentially under FCRA if the screening process didn’t meet employment-purpose requirements.

Compliance Takeaways

  1. Don’t Rely on Labels Alone
    Contracts calling someone an “independent contractor” won’t shield you if the working relationship looks like employment. Courts focus on substance over form.
  2. Assess Classification Before Screening
    If the role involves long-term, exclusive work under significant control, treat the individual as an employee for FCRA compliance. This means providing proper disclosures, obtaining written consent, and following adverse action procedures.
  3. Update Policies and Vendor Agreements
    Ensure your background screening policies clearly address contractor roles and include contingency plans if classification changes.
  4. Monitor Legal Trends
    The Eleventh Circuit’s ruling aligns with broader enforcement trends emphasizing misclassification risks. Expect more scrutiny in wage-and-hour and consumer reporting contexts.

Bottom Line

The Galarza case is a wake-up call: misclassification isn’t just a wage-and-hour issue—it’s a compliance risk that touches background screening and FCRA obligations. When in doubt, err on the side of treating high-control, long-term contractors as employees for screening purposes. It’s a small step that can prevent big liability

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

November 11th, 2025|Categories: Compliance Corner, Employment Decisions|Tags: , , |

A Unified Credit Reporting System: CFPB Clarifies Federal Preemption Under the FCRA

On October 28, 2025, in a significant move toward regulatory clarity, the Consumer Financial Protection Bureau (CFPB) issued a new interpretive rule reaffirming the broad preemptive scope of the Fair Credit Reporting Act (FCRA) over state laws. This rule replaces the narrower interpretation issued in July 2022, which the CFPB formally withdrew in May 2025.

Why This Matters

The FCRA, enacted in 1970 and amended multiple times since, governs the creation and use of consumer reports. It has always included a preemption clause, but the scope of that clause has evolved. In 1996, Congress expanded FCRA’s preemption to cover specific subject matters, aiming to prevent a fragmented regulatory landscape. This expansion was made permanent in 2003 to support a unified national credit reporting system.

The CFPB’s latest interpretive rule confirms that the FCRA broadly preempts state laws that touch on the subject matter regulated by the federal statute. This clarification is intended to promote consistency across the credit reporting industry and ensure that consumers and businesses operate under a single, coherent set of standards.

The Shift from 2022

The 2022 interpretive rule argued for a narrow reading of FCRA’s preemption clause, suggesting that states could regulate areas like medical debt, rental information, and arrest records unless those regulations directly conflicted with specific FCRA provisions. The CFPB now asserts that this interpretation was flawed, both legally and practically.

According to the Bureau, the language of the FCRA—particularly section 1681t(b)(1)—uses broad terms like “no requirement or prohibition” and “with respect to any subject matter regulated under,” which indicate Congress’s intent to occupy the field of consumer reporting. The phrase “relating to” further expands the scope, encompassing any state law connected to the topics covered by the FCRA.

Legal and Legislative Support

The CFPB’s position is supported by legislative history and judicial precedent. Congress explicitly aimed to create national standards to avoid a “patchwork system of conflicting regulations.” Courts have consistently interpreted the FCRA’s preemption clause broadly, finding that state laws addressing the same subject matter as federal provisions are preempted even if they don’t mirror the exact language of the FCRA.

Implications on Compliance

While the CFPB’s interpretive rule provides helpful guidance, it is important to note that interpretive rules are not binding on any court. Courts may choose not to adopt the CFPB’s interpretation, and legal challenges could arise depending on jurisdiction and context.

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

October 31st, 2025|Categories: Compliance Corner, Employment Decisions|Tags: , , |

California Consumer Privacy Act (CCPA) and Employment Background Screening

Key Points:

  1. Limited Applicability Due to AB 25

Initially, the CCPA broadly defined “consumer” to include job applicants and employees. However, Assembly Bill 25 (AB 25) amended the CCPA to temporarily exclude personal information collected from job applicants, employees, and independent contractors from most CCPA provisions.

This exclusion was in effect until January 1, 2023, after which some CCPA rights were extended to employees and job applicants. As of now, employers must comply with the following CCPA provisions when using background screening services:

  • Notice at collection–employers must inform applicants about:
  • What personal data is being collected (e.g., criminal history, credit data, identifiers)
  • The purpose of data collection (e.g., hiring decisions)
  • Data security obligations:
    Employers must implement reasonable security measures to protect personal data. If a breach occurs due to negligence, affected individuals may sue for statutory damages.
  1. Overlap with Other Laws

Employers in California must also comply with:

  • Fair Credit Reporting Act (FCRA)
  • Investigative Consumer Reporting Agencies Act (ICRAA)
  • Consumer Credit Reporting Agencies Act (CCRAA)

These laws govern how background checks are conducted, what disclosures are required, and how adverse actions must be handled.

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

October 27th, 2025|Categories: Compliance Corner, Employment Decisions|Tags: , , , |

Takeaways for Employers from the Grijalva v. ADP Screening Decision

The Ninth Circuit’s August 2025 ruling in Grijalva v. ADP Screening clarified how exclusions from federally funded healthcare programs and similar long-term listings, such as sex offender registries, can be reported under the Fair Credit Reporting Act (FCRA).

Key Implications for Employers:

  • Ongoing exclusions are reportable. Even if the exclusion began over seven years ago, it’s considered a current status and can appear in a background report.
  • The reason for the exclusion may not be reportable. If the underlying cause (e.g., an administrative action) occurred more than seven years ago and isn’t a criminal conviction, Consumer Reporting Agencies (CRAs) generally cannot report it unless the candidate is expected to earn $75,000 or more annually.
  • Employers can ask candidates directly. If you need context behind an exclusion or listing, you’re free to ask the candidate. CRAs may be restricted from providing that information due to FCRA limitations.
  • Convictions are treated differently. Criminal convictions are reportable regardless of age under the FCRA, but several states impose their own time-based restrictions.

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

October 24th, 2025|Categories: Compliance Corner, Employment Decisions|Tags: , , |

Pitfalls of Delegating the Employment Adverse Action Process to Consumer Reporting Agencies

In the complex landscape of employment background screening, compliance with the Fair Credit Reporting Act (FCRA) and state-specific laws is critical. One area that demands particular attention is the adverse action process, that is, the legal steps an employer must follow when deciding not to hire a candidate based on information in a background report. While some employers may be tempted to outsource this process to their consumer reporting agency (CRA), doing so can expose them to legal and regulatory risks.

The Employer’s Legal Responsibility Under the FCRA

The FCRA requires employers to follow a two-step process before taking adverse action:

  1. Pre-Adverse Action Notice: Along with this notice, the employer must provide the candidate with a copy of their consumer report and a summary of rights under the FCRA.
  2. Adverse Action Notice: After a reasonable waiting period–typically at least five business days, per Federal Trade Commission (FTC) guidance–the employer may send a final notice if they decide not to hire the candidate.

This process allows candidates to dispute inaccurate or incomplete information before a final decision is made.

Timing Matters: The Risk of Premature Decisions

The timing between the pre-adverse and adverse action notices is not explicitly defined in the FCRA, but courts and regulators have consistently held that five business days is the minimum acceptable waiting period. If a CRA sends both notices too close together or simultaneously, it undermines the candidate’s right to dispute the report and may be seen as a violation of the FCRA.

Who Is Making the Hiring Decision?

The most critical issue arises when a CRA appears to be making the hiring decision rather than the employer. If a CRA sends adverse action notices without the employer’s review or discretion, it could be construed that the CRA is deciding the candidate’s eligibility for employment. This is problematic because:

  • Only the employer can assess job-relatedness and business necessity.
  • CRAs are not equipped to perform individualized assessments, which are required under many state and local laws.

Fifteen states (California, Colorado, Connecticut, Hawaii, Illinois. Maine, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, Oregon, Rhode Island, Vermont and Washington) have “Ban-the-Box” laws, several of which require employers to conduct individualized assessments before taking adverse action based on criminal history. Additionally, cities and counties like Los Angeles, New York City, and San Francisco have their own ordinances that include more stringent requirements for these assessments. These assessments typically involve evaluating the nature and gravity of the offense, its relevance to the job, and the time that has passed, and must be documented and provided to the applicant. They cannot be delegated to a CRA.   

Legal Precedent: When a CRA Crosses the Line

While there is limited case law directly holding that a CRA made the decision instead of the employer, courts have scrutinized situations where employers failed to retain control over the adverse action process. In Goode v. LexisNexis Risk & Information Analytics Group, Inc., the court emphasized that employers must make the final employment decision and cannot rely solely on automated decision tools provided by CRAs.

Additionally, in Henderson v. CoreLogic, the court found that the CRA’s automated scoring system used to filter candidates could be interpreted as making employment decisions, raising serious FCRA compliance concerns.

These cases underscore the importance of employer discretion and the legal risks of outsourcing the hiring decision.

Conclusion

Delegating the adverse action process to a CRA may seem efficient, but it can lead to serious compliance failures. Employers must remain actively involved in evaluating background check results, conducting individualized assessments, and making final hiring decisions. The stakes are too high to outsource this critical function.

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

October 23rd, 2025|Categories: Compliance Corner, Employment Decisions|Tags: , |
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