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Pulling Credit For Prospective Employees Legally


There are a lot of reasons why you may want to check the credit of a prospective employee, before hiring him or her. Whatever your reason, you should be aware that the Fair Credit Reporting Act (FCRA) has very strict restrictions on when credit can be pulled, how, and the procedures surrounding background or credit checks.

Failure to follow these procedures could result in your business getting in serious trouble.

Where Can’t an Employer Pull Credit?

Remember that if you pull credit, you are also subject to individual state laws, should you have offices or branches in those states. Right now, Colorado, California, Connecticut, Delaware,  Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington, forbid pulling credit for the purposes of employment completely.

Requirements to Pull Credit

The first requirement is that you must get consent from the employee, before you pull his or her credit. This disclosure and consent must be done in a separate document—it cannot be included, for example, as part of an application or other document. The disclosure should have an area where the potential employee signs, acknowledging and agreeing that you will be pulling his or her credit.

If a prospective employee refuses to sign or agree to have his or her credit pulled, you are legally allowed to refuse to hire him or her on that basis (other than in the states listed above).

As long as there is written consent, there is no time limit on how long the consent is good. Technically, someone could consent today and you could pull their credit 5 years later. However, you would need additional consent, for each separate time you pull an employee’s credit.

You must also, in writing, advise the prospective employee that you may opt not to hire him or her, if the credit check reveals something that you do not like.

Adverse Decisions Based on Credit

Lastly, if in fact you opt not to hire the employee because of something on the credit check, you must advise the employee in writing of your decision. You will need to provide to the prospective employee a copy of the credit report or check that you reviewed, as well as a legal notice from the Federal Trade Commission that summarizes people’s rights under the FCRA.

Assuming you follow these requirements and other requirements set forth in the FCRA and state laws, you are legally protected from any liability for the pulling of the credit or from any decision not to hire the employee.

However, as a practical matter, remember that many credit reports have inaccurate or outdated information. That means that if you have an otherwise very qualified candidate, you may want to consider how much weight you put into what appears in a credit report. You do not, however, have to conduct any kind of investigation into whether anything on a credit report is, in fact, accurate or not.

Call the West Palm Beach business litigation lawyers at Pike & Lustig to help you run your business safely and avoid unnecessary legal problems.

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