There are many professional service companies that will do background checks on potential employees. The cost of these services varies from $20 for a simple on-line check to $50,000 for investigate checks with written reports and analyses. These companies check sources such as motor vehicle records, credit records, criminal convictions, drunk driving convictions, civil litigation records and other public databases.

The Fair Credit Reporting Act of 1970 and the Consumer Credit Reporting Reform Act of 1996 (collectively “FCRA”) govern the use of consumer credit reports by employers. Under FCRA, a tech company employer may obtain a consumer credit report for employment purposes only if it:

  • gives the potential employee a clear and conspicuous written disclosure (in a document consisting solely of the disclosure) notifying the potential employee that a consumer credit report may be obtained; and
  • the tech company obtains authorization in writing from the potential employee.

If a tech company denies employment based in whole or in part on consumer credit report, it must provide the potential employee:

  • written notice of the decision and a statement that the decision was based in whole or in part on the credit report;
  • a copy of the credit report;
  • description of the potential employee’s rights under FRCA; and
  • contact information for the consumer credit reporting agency that prepared the report.