What Is ‘Compliance’ and Is It Really That Big of a Deal?

Mary Poquette

From a practical perspective, compliance simply means following the legal and regulatory rules that apply in a certain environment. And as all human resources professionals know, the HR environment is rife with legal and regulatory requirements in the form of FLMA, HIPAA, ADA, Title VII, OSHA, FLSA, and many others. If your organization conducts background screening for employment, you also need to know FCRA – the U.S. Federal Fair Credit Reporting Act. Although not the only law and regulation governing background screening, it is the most impactful.

The Federal FCRA governs the procurement, preparation and use of background reports for employment purposes when those reports are prepared by a third party. The Federal FCRA sets forth specific legal obligations for preparers and users of background reports. Importantly, it also provides legal protection for consumers who are the subject of background reports. Those protections include three critically important employer obligations: disclosure, authorization and adverse action. These are worthy of special note not only because they are key consumer protections, but also because they often form the basis of litigation against employers for alleged non-compliance.

Disclosure simply refers to informing the candidate he or she may be the subject of a background report and authorization means obtaining the consumer’s consent for the background check. Both disclosure and authorization must occur before the background check is requested from the screening provider. Adverse action refers to a potentially unfavorable employment decision, such as not hiring, when based in whole or part on information in the background report. In that situation, the consumer must be informed of the potential for adverse action, receive a copy of the background report, a summary of rights document, and have the opportunity to dispute and correct information in the background report before an employment decision is made.

Although the Federal FCRA is the “big elephant” in the room of background screening governance, it is not the only law and regulation with which employers and screening providers must comply. Other laws impacting background screening include: State FCRA, ban the box/fair chance hiring, credit limitations, criminal history limitations, compensation inquiry limitations, security and more. International and country specific privacy, security and data transfer law also apply.

Is Compliance Really That Big of a Deal?

In a word, yes. First, recruiting compliance is a big deal because the sheer amount of law, regulation and guidance impacting background screening for employment is so very big – literally – with dozens of laws and regulations coming into play.

Second, non-compliance can be very expensive for an employer in terms of hard and soft dollars. Employer settlements for alleged non-compliance, particularly with the Federal FCRA, are typically measured in millions of dollars. Soft dollar costs come in the form of potential negative impact on company brand and value, client acquisition and retention, and focus on core business objectives.

How Can Employment Screening Companies Ensure Compliance?

For background screening companies, managing and complying with this increasingly complex maze of law and regulation requires:

  • Subject matter expertise to ensure ongoing compliance throughout the organization
  • Development and implementation of new processes to accommodate changing laws
  • To the extent possible, technology to support and enforce compliance
  • Continuing education programs for internal staff
  • Ongoing monitoring of internal processes, technology and staff to ensure continued compliance
  • Robust client education programs to help clients understand their compliance obligations and strategies to meet those obligations

Employers make a wise business decision when they choose to conduct background screening for employment purposes. Background screening, however, is not their core business or typically a core competency. Therefore, employers need a screening partner who can assist in developing and maintaining a screening program based on compliance and best practices, while keeping focus on the fundamental objective of background screening – helping to identify the best candidate for the job.

This information is provided for general educational purposes only and does not constitute legal advice, express or implied. Consultation with qualified legal counsel is recommended.

Learn more about background check best practices

Mary Poquette is the Owner and Principal Consultant of Poquette Screening Solutions, LLC and a 20-year veteran of the background screening industry.


Previous Article
Seven Habits of Highly Effective Candidate Experiences
Seven Habits of Highly Effective Candidate Experiences

Time and again, research has shown that providing a good candidate experience is essential to today’s busin...

Next Article
Four Challenges Talent Acquisition Leaders Must Address Now
Four Challenges Talent Acquisition Leaders Must Address Now

The movie Nine to Five may be a timeless American treasure, but as a concept, working ‘nine to five’ is – f...

Get inside the minds of 2,800 job seekers and what they want

Download Now