Many Fortune 500 companies across the country are finding themselves susceptible to lawsuits due to their failure obtain adequate authorization from job applicants prior to conducting a background check.

Employers, like Whole Foods and Dollar General, have been successfully sued for failing to adhere to the Fair Credit Reporting Act (FCRA), which was enacted in 1970 to protect the privacy of individuals’ personal information, as credit reporting agencies began distributing credit reports for credit card companies, banks, and employers.

What does the FCRA have to do with job applicants and employers getting sued?

Well, the FCRA requires that employers give notice and ask for permission in a manner that is clear and evident before performing a background check involving a person’s credit report. Therefore, notice cannot be hidden within a large paragraph and instead must stand out on its own.

Additionally, an employer must notify candidates if they plan not to not hire them because of the results of a background check before actually doing so. That courtesy allows applicants to fix any errors in their consumer report before their candidacy is eliminated.

Before obtaining a consumer report on an applicant or employee, you must:

Notify the person in a separate, written disclosure that you may seek a credit report for employment purposes.
Obtain the person’s permission in writing before ordering the report.
Provide a summary of FCRA rights.

If you decide to fire or not to hire someone based on employment background check results—even if it is only one of several reasons—you must:

Before taking action, give the person a “pre-adverse action disclosure” that includes a copy of the credit report and a copy of a document titled “A Summary of Your Rights Under the Fair Credit Reporting Act.” The CRA that provides the report gives you this summary. It’s also available online at www.ftc.gov/os/statutes/2summary.htm.
After taking action, you must give the person notice—orally, in writing or electronically—that you did so. Include the name, address and phone number of the CRA that supplied the report, a statement that the CRA did not make the decision to take the adverse action and a notice of the applicant’s right to dispute the information’s accuracy. The person has the right to an additional free consumer report from the agency upon request within 60 days.

These tips are to assist in your business's lawfulness and fair better than the corporations that are supposed to set the standard.