Whether you are applying for a new position or are under review as an existing employee, you may wonder about how your credit history or background check may impact your employment. Under the Fair Credit Reporting Act (FCRA), employers must follow a very specific protocol to ensure compliance and to protect your rights as a part of the job application background check process. In short, employers or potential employers cannot check your credit without your permission, and you must be notified if any adverse action (refusal to hire, failure to promote, or termination) arises from any background check.

Employers will often assert that a credit or background check is a necessary part of applicant screening. Despite any given number of justifications for these background checks, some employer actions give rise to discriminatory hiring practices and may violate state and federal laws.

Job Application Background Check Laws

In Minnesota, new “ban the box” laws require employers to wait until later in the hiring process—at the interview stage or after the company makes a conditional job offer—before asking an applicant about her or his criminal record or conducting a job application background check. While the practice of conducting credit history checks is not per se discriminatory, some employers could access certain information such as marital status, age, disability or other factors that could give rise to illegal hiring practices. In Minnesota, employers must justify credit inquiries as related to an essential job function.

Adverse Employment Decisions and Your Rights

Employers who pursue a credit history or background check must be in compliance with the Fair Credit Reporting Act (FCRA), a federal law enforced by the Federal Trade Commission (FTC) that gives litigants the right to bring claims against unlawfully acting employers, credit reporting agencies, and creditors. To be in compliance with the FCRA, employers must take the following action:

1.     You must be notified in writing that an employer intends to submit your information to a Credit Reporting Agency (CRA). Employers must also be clear that the report will be used as a basis for making employment decisions.

2.     You must provide authorization with the express acknowledgement that the report may be used for the basis of employment decisions. If an employer intends to extend this permission through the duration of employment, you must also be given advanced notification and provide written consent.

3.     Employers must provide you with a copy of the credit report and any other background report that may be used in making an employment decision, including criminal background checks, civil judgments and information on public record.

4.     If an employer intends to make a hiring decision that will adversely impact your employment (refusal to hire, promote, or retain), you must be notified in advance and given the opportunity to dispute any information in the report. The employer must provide you with the name, address, and phone number of the agency that provided the information.

5.     You must be provided with “A Summary of Your Rights under the Fair Credit Reporting Act” and given clear notice of intent to take adverse action, also known as the “Pre-Adverse Action” or “Preliminary Adverse Action.”

6.     An employer must wait at least 5 business days for you to challenge information in the report. Any disputes should be reinvestigated by employer and credit reporting agency. CRAs must correct or delete inaccurate, incomplete, or unverifiable information and provide an updated report to employee.

7.     If an employer decides to continue with the adverse action, you must also be provided with a final notice, known as the “Final Adverse Action.”

Employment decisions are not always made apparent to the applicant; however, employers must be in compliance with state or federal law. If you suspect that you were wrongfully denied employment or illegally discharged because of a job application background check, we can help protect your rights.You may be entitled to compensation, including actual damages for the violation, punitive damages, and additional financial losses related to the adverse action. For more information about the Fair Credit Reporting Act and your rights, please contact our experienced employment lawyers at Wanta Thome PLC by calling 612-252-3570.