Vermont Archives

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.

Vermont is the latest state to restrict credit reports in employment decisions

Effective July 1, 2012, Vermont will be the eighth state to regulate the use of credit-related information for employment purposes. Although similar in many ways to laws already enacted in California, Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington, Vermont’s requirements under Act No. 154 exceed those of other state laws as they prohibit even exempt employers from using an applicant or employee’s credit history as the “sole factor” in employment decisions. Additionally, Vermont exempt employers who take adverse action based in part on a credit history must return the report to the individual or destroy it altogether. Neither the Fair Credit Reporting Act (FCRA) nor any of the other similar state laws imposes such a requirement.

Generally, the Act prohibits employers from inquiring into an applicant’s or employee’s credit report or credit history, and further bans employers from discriminating against or making employment decisions (e.g. hire, fire, alter the compensation or any other term or employment condition) based on a credit report or credit history. Notably, credit history in this context includes credit information obtained from any third party that reflects or pertains to an applicant’s or employee’s “borrowing or repaying behavior, financial condition or ability to meet financial obligations,” even if that information is not contained in a “credit report.”

The trend in restricting credit report use for employment purposes will continue as several other states and the federal government are considering comparable legislation. Soon to follow most likely will be New Jersey. In May 31, 2012, the Senate approved S455 that would prohibit employers from seeking credit checks on employees or applicants under most circumstances. A parallel bill (A2840) was introduced by the Assembly on May 11, 2012, and a similar bill (A704) in December 2011.