FTC Established on this Day in 1914

On September 26, 1914 the Federal Trade Commission (FTC) was established. Many small business owners do not believe that laws overseen by the FTC can affect them; but they need to think again. The FTC enforces the Fair Credit Reporting Act (FCRA); which businesses need to comply with when using consumer reports (background checks) in order to fill a position or promote an employee.

In complying with the FCRA, there are certain steps that an employer must take before they can obtain a consumer report, and after they make an adverse action based on the report. Here are just a few of the many guidelines, as noted on business.ftc.gov (there are additional state laws):

  • Before getting a consumer report you must:
    • Tell the applicant or employee that you might use information in their consumer report for decisions related to their employment. This notice must be in writing and in a stand-alone format. The notice cannot be in an employment application. You can include some minor additional information in the notice, like a brief description of the nature of consumer reports, but only if it does not confuse or detract from the notice.
    • Get written permission from the applicant or employee. This can be part of the document you use to notify the person that you will get a consumer report. If you want the authorization to allow you to get consumer reports throughout the person’s employment, make sure you say so clearly and conspicuously.
    • Certify compliance to the company from which you are getting the applicant or employee’s information. You must certify that you: ◦notified the applicant or employee and got their permission to get a consumer report;
      • complied with all of the FCRA requirements; and
      • will not discriminate against the applicant or employee or otherwise misuse the information, as provided by any applicable federal or state equal opportunity laws or regulations. 
  • Before you reject a job application, reassign or terminate an employee, deny a promotion, or take any other adverse employment action based on information in a consumer report, you must give the applicant or employee:
    • a notice that includes a copy of the consumer report you relied on to make your decision; and
    • a copy of A Summary of Your Rights Under the Fair Credit Reporting Act, which the company that gave you the report should have given to you.
  • If you take an adverse action based on information in a consumer report, you must give the applicant or employee a notice of that fact – orally, in writing, or electronically.An adverse action notice tells people about their rights to see information being reported about them and to correct inaccurate information. The notice must include:
    • the name, address, and phone number of the consumer reporting company that supplied the report;
    • a statement that the company that supplied the report did not make the decision to take the unfavorable action and can’t give specific reasons for it; and
    • a notice of the person’s right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get an additional free report from the company if the person asks for it within 60 days.

Please note that employers who use “investigative reports” – reports based on personal interviews concerning a person’s character, general reputation, personal characteristics, and lifestyle – have additional obligations under the FCRA.

HR Strategies is pleased to be able to aid our clients in the many state and federal regulations that pertain to employment and human resources.  Call us today so that we can help keep you compliant! 770-339-0000.

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About HR Strategies

HR Strategies is a private human resource management firm created to enable small business owners to focus on their core competencies, rather than the tedium of running payroll, providing employee benefits, or the many other facets of human resource administration. We allow business owners to concentrate on their passion, without being distracted by countless human resource responsibilities.

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