Some states have their own rules about what you can and can’t do with criminal background checks, and it’s important that you know whether any special rules apply to you. For example, in California, employers are subject to certain disclosure requirements that, under federal law, only apply to third-party professional background check companies.

At the federal level, there are two agencies and laws you need to pay attention to: the Equal Employment Opportunity Commission (EEOC) and the Federal Trade Commission. The EEOC enforces the Civil Rights Act of 1964, and responds to allegations of any discriminatory practices in background checks. The Federal Trade Commission enforces a law (described below) which, in spite of its name, deals with more than credit.

Disclosure Requirements

The requirements of the Fair Credit Reporting Act (FCRA) are relatively straightforward. The focus is on what you must disclose to people whose backgrounds you are investigating, and whom you are planning not to hire (or, in the case of current employees, terminate) based on information that you received from a background check company.

As noted, some states like California broaden the scope of the requirement to include background checks that you perform, without using an outside background search vendor.

Under FCRA, before you take an adverse action based on the results of a background check you generally must give the job seeker or employee a notice and a copy of that report. You also must give the person a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act.” The goal is to provide an opportunity for the individual to look for any inaccurate information in the report.

Assuming you still plan to proceed with the adverse action, you need to inform the individual of your decision, stating that it was based on information in the report. You must also provide contact information for the background check company, and inform the applicant that:

• The company that created the report didn’t make the hiring decision, and can’t give specific reasons for it, and

• He or she has a right to dispute the accuracy or completeness of the report, and to get an additional free report from the reporting company within 60 days.

Uniform Standards

Things get a little murkier with the EEOC’s nondiscrimination standards. The Commission outlines its requirements in a general summary:

You must apply the same standards to everyone. The EEOC applies tests for discrimination based on categories, such as race, national origin, color, sex, religion, disability, genetic information (including family medical history), or age.

You must take special care with certain groups. Specifically, when basing employment decisions on “background problems that may be more common among people of a certain race, color, national origin, sex, or religion.”

The EEOC adds: “Employers should not use a policy or practice that excludes people with certain criminal records if the policy or practice significantly disadvantages individuals of a particular race, national origin, or another protected characteristic, and does not accurately predict who will be a responsible, reliable, or safe employee.” What does that mean? Here’s a hypothetical example that might help.

Let’s say that individuals age 40 and up (a protected group) have a much greater tendency to shoplift than younger people. If your policy eliminates applicants who have been convicted of shoplifting, it stands to reason that this may eliminate a higher percentage of those at least 40 years old, having what the EEOC calls a “disparate impact” on a protected group. Continuing with that example, there’s an exception if having a shoplifter on staff could damage your business financially or operationally.

More about “Disparate Impact”

The EEOC is on the lookout for companies that use criminal background checks that affect people with disabilities. Again, little clarity is provided, not even an example of what kind of criminal behavior might be linked to a disability.

Still, the EEOC says employers “should be prepared to make exceptions for problems revealed during a background check that were caused by a disability.” As is generally the case, if hiring a person with a troubled legal history (even when it relates to a disability), would cause a significant financial or operational difficulty to your business, you may be off the hook.

In 2012 the EEOC updated the “enforcement guidance” that its investigators use. That detailed document is available to the public (http://www.eeoc.gov/laws/guidance/arrest_conviction.cfm) and could be useful if you find yourself unsure about whether a criminal background check policy would have a disparate impact on a protected group, or whether your policy is justified by business necessity, as the law permits.

When trying to determine if a criminal background check policy violates the Civil Rights Act, EEOC examiners are instructed to look into:

• The offenses, for example, all felonies and drug offenses;

• Whether convictions, arrests, charges or other criminal activity were reported;

• How far back in time the reports reached (that is, how many years have passed); and

• The job for which the screening was conducted.

Too Important to Leave to Chance

Even if you digest the entire EEOC technical guidance, it may be a good idea to consult with an employment law attorney. Criminal background checks are valuable tools, but it’s critical to ensure that your policy satisfies the requirements of federal, state and possibly local laws.