FCRA—What It Is And What It Does
Before we talk about the differences, it’s important to note the unified front that has been taken on a federal level to protect employees and future job candidates. The Fair Credit Reporting Act (FCRA) was established in 1970 to protect the privacy of consumer information. Among many things, the FCRA regulates employer background checks on employees in terms of what information employers can ask for, receive, and use in the hiring and employment processes.
Specifically, the act requires employers to inform job applicants if they will be conducting a background check on them and to get authorized consent from the applicant if a third- party company will be conducting the background check. If the employer then decides not to hire the candidate based on the results of the background check report, they must give the applicant a pre-adverse action disclosure which includes a copy of the report and of the applicants’ rights. The employer also has to give the applicant notice that they will not hire them and must disclose the third-party reporting agency they used so applicants can dispute the report if they choose.
While the FCRA applies to all fifty states, each state has the right to add their own employment laws on in addition to the FCRA, thus job candidates in some states may have more rights than candidates in other states.
Sunshine, beaches, celebrities—what could be better about the state of California? How about the legal reforms they have undertaken the past few years to increase protection of job applicants. California was one of the first states that passed a law prohibiting employers from screening job candidates’ criminal history. Named the California Fair Chance Act, the law came on the heels of active lobbyists from the Ban the Box movement which strives to create equality for all, specifically ex-convicts, in the workplace.
According to the 2018 state law, employers can not conduct due diligence on candidates before hiring but can look into their criminal past once they have made a job offer. However, a background check conducted on the candidate can only report criminal information that resulted in a conviction. Arrests, indictments, misdemeanor complaints, and convictions of crimes older than seven years cannot be reported. In addition, any full pardon that has been granted or any arrest that did not lead to a conviction cannot be reported.
California wants to make sure that employers know the state government isn’t messing around with these newly enacted laws. Employers can be entitled to damages or fined $10,000 per background check violation. In some cases, courts can award punitive damages as well, which can be up to ten times the amount of statutory damages awarded.
Like California, many cities across New York hopped on the Ban the Box bandwagon pretty early on in the campaign. But prohibiting employers from screening applicants’ criminal backgrounds was not the only thing on New York’s state of mind. The state has tried to increase the protection of job applicants across its cities in many different ways. For example, effective from October 2017, employers are no longer permitted to conduct due diligence on candidates’ salary history during the hiring process. The goal of the law is to prevent employers from relying on a candidates’ previous salary to determine whether to offer them a job and what their potential compensation would be. This allows employers and employees to negotiate a salary contract based on the employee’s position, job requirements, and any other relevant factors.
Unlike many other states, New York has also enacted laws to protect applicants based on genetic grounds. Under Article 15 Section 296 of the New York Human Rights Laws, employers are prohibited from requesting or requiring a genetic test as a condition for employment. According to subsection 19, “it shall be an unlawful discriminatory practice of any employer… to directly or indirectly solicit, require, or administer a genetic test to a person, or solicit or require information from which a predisposing genetic characteristic can be inferred as a condition of employment…” Employers are also forbidden from buying or acquiring genetic test results from third-party entities. Evidently, New York has taken drastic measures to ensure the protection of job applicants on the most microcosmic level possible.
Not only has the state of New York taken extra precautions to protect an individual candidate, but it has also laid out the law (no pun intended) in terms of damages that employers have to pay if they violate these requirements. For example, New York City’s Fair Chance Act, which was created to protect job applicants, outlines the repercussions businesses would have to face if they violated its terms. The damages include up to $3,500 for initial violations, $10,000 for repeat violations, and up to $250,000 for willful or malicious employer actions.
Although one of the biggest states in the U.S., Texas may not be seen as the biggest state in terms of job applicant protection. Unlike many cities across California and New York, Texas has, for the most part, not adopted Ban the Box policies, as employers may conduct due diligence on applicants’ criminal backgrounds. Furthermore, businesses that provide in-house services and residential deliveries are even required to look into applicants’ criminal history by state law. However, criminal history is only considered for the past seven years so applicants are limitedly protected from criminal offenses that took place in their distant past.
Despite what may seem like nominal job applicant protection in Texas, the state has progressively been moving towards more candidate-centric practices. For example, under the Texas Commission on Human Rights Act, employers are prohibited from discriminating against job applicants by limiting, segregating, or classifying them based on their protected status, a status given to nationals of select countries. Failure to comply with the Act can cost up to $50,000 for employers with under 100 employees and up to $300,000 for employers with over 500 employees.
The Implication Of It All
So each state has different hiring policies and laws. So what? The implication of this phenomenon goes way beyond the complexities of cross state hiring practices. One obvious example of how this affects sectors beyond employment is the due diligence and background check industries. Companies that span across multiple states have to comply not only with the FCRA, which is convoluted in and of itself, but also with individual state laws which seem to be implemented and enforced through injudicious silos. Add to that the fact that most background checks are conducted manually and you have yourself a very complicated, if not impossible, method of conducting compliant, timely due diligence reports.
One company that has seamlessly avoided the intricacies of the state-by-state hiring policies is Intelligo. This high-tech company leverages artificial intelligence and machine learning to streamline the background check process. Intelligo puts both the candidate and the employer first by offering enhanced transparency for each step of the background check process. Candidates are invited to grant consent in their Intelligo portal, which automatically complies with the state in which the employer is hiring in.The report itself is based on both structured and unstructured data from thousands of sources and analyzes the results to extract meaningful information that offers a comprehensive overview of employment candidates. Furthermore, Intelligo’s Clarity platform conducts due diligence that automatically and effortlessly ensures that each background check has adhered to U.S. regulatory compliance both on a federal and state level.
Intelligo was founded based on the principles of trust, and their services deliver just that. The company ensures their clients can have utmost reliance that their background checks are conducted according to the highest legal standards, and that the reports are turning over every stone to display accurate insights. Combining their artificial intelligence system with human intellect, Intelligo ensures that no due diligence report is too compounded to manage. While the phrase ‘the devil is in the details’ could not be more true when it comes to U.S. hiring policies, companies like Intelligo are providing priceless value by ensuring that the devil has no place in employers’ lives.