Check, Please:
Investigating Potential Employees
By Ray J. Michalowski, Esq.
Employing brokers occasionally call the PAR Legal Hotline with questions about how to do background checks on prospective employees, including contract sales staff.
A typical response to that question is, “what exactly do you mean by a background check?”
In short, the type of information being sought determines which laws apply and how the background information can be obtained and used.
If the employing broker wants a moderate-to-large amount of information on an applicant, including a credit report and criminal record check, for example, the information will likely be obtained from a third-party vendor or “Consumer Reporting Agency” (CRA). CRAs gather the requested information and produce a Consumer Report. As defined by the Fair Credit Reporting Act (FCRA), the CRA Report contains information about a person’s credit, character, general reputation and lifestyle.
The use of Consumer Reports in all employment situations is strictly controlled by the FCRA and requires, at a minimum:
1. Notice and Authorization: The prospective employer must give written notice, including a summary of certain FCRA rights, to the applicant stating that an employment-related Consumer Report will be obtained. The employer must acquire the applicant’s express written authorization to do so.
2. Pre-Adverse Action Disclosure: Before taking an adverse employment action (i.e., failure to hire or promote, or terminating employment) based on Consumer Report information, the applicant must be given a “pre-adverse action disclosure” that includes a copy of the Consumer Report and a summary of FCRA rights as prescribed by the Federal Trade Commission.
3. Adverse Action Notice: After taking an adverse employment action based on a Consumer Report, the employer must supply the applicant with an “adverse action notice.” This notice must include information about the CRA that prepared the report; a statement that the CRA did not make the adverse employment decision and cannot give specific reasons for it; and a notice that the applicant has the right to dispute the accuracy or completeness of the information furnished by the CRA.
While this process seems complicated, the CRA should provide the employing broker with the required notices and authorizations and instructions on how to use them. Note that even an accidental failure to comply with FCRA requirements can result in civil liability up to $1,000 per occurrence and possible punitive damages.
An employing broker interested in obtaining a simple criminal history report can make an online request to the PA State Police. This request, when made by the employer, is not covered by the FCRA. Under the PA Crimes Code, however, the use of criminal record history information for employment purposes, no matter how it is obtained, is limited to consideration of felony or misdemeanor convictions, not arrests, and only to the extent to which the convictions relate to the applicant’s suitability for the particular employment position. The employer must also notify the applicant in writing when a decision not to hire is made, in whole or in part, based on criminal record history information.
Mr. Michalowski is an attorney with Caldwell & Kearns and serves as associate general counsel to PAR. A substantial portion of his practice is dedicated to providing licensure compliance services to real estate licensees and representing and defending real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. He routinely counsels employers on employee relations issues and is also one of the voices of the PAR Legal Hotline.