by Kelly E. Riddle, Kelmar Global
Is there a difference between a pre-employment background check and an investigative background check? While the short answer is a significant “yes,” it’s important for private investigators to understand the distinctions because failing to do so can put you in line for a lawsuit.
Pre-Employment
The most significant difference to keep in mind is pre-employment background checks are highly regulated, with their parameters falling under many governmental agencies and laws. Particularly germane is the federal Fair Credit Reporting Act (FCRA), enacted in 1970.
Don’t let the name fool you. While the FCRA was designed to regulate the use of consumer credit reports, it has direct oversight over pre-employment background checks. Subsequent amendments that went into effect on Sept. 30, 1997, ensure (1) that individuals are aware that consumer reports may be used for employment purposes and agree to such use, and (2) that individuals are notified promptly if information in a consumer report may result in a negative employment decision.
Critically, the employer must have written authorization to conduct a pre-employment background check, and the candidate must be given notice if there is any “adverse information” found during the research. The FCRA requires that the candidate be given a copy of the report and ensures they have the right to contest the findings and ask for a reinvestigation.
Private investigators conducting pre-employment background checks are considered a “consumer reporting agency,” and the subsequent reports they produce are considered “consumer reports” under the FCRA when they serve as a factor in determining a person’s eligibility for employment, credit, insurance, housing or other purposes.
You should also be aware that the FCRA limits the length of time in which offenses can be reported. Typically, you can only report convictions going back seven years, and the consumer reporting agency (private investigator) has a duty to report accurate information. If the record is incomplete by failing to provide the final disposition or similar information, every effort must be made to obtain and include this material.
Additionally, the investigator must confirm the information pertains to the candidate in question by matching personal identifiers. It’s important to note that some jurisdictions, such as California, have recently passed legislation to remove dates of birth from criminal records. This obviously poses a problem for investigators in their efforts to meet the requirement confirming information is related to a specific job candidate.
The FCRA also requires that investigators provide clients with official documentation about their responsibilities under the statute (“Notice to Users of Consumer Reports”) as well as a summary of consumer rights under the act (“A Summary of Your Rights Under the Fair Credit Reporting Act”).
Further, while the FCRA is a federal regulation, many states have additional regulated pre-employment restrictions and requirements. For example, as of last July 1, California Senate Bill 731 allowed most old convictions for nonviolent or non-sex-related offenses in criminal records to be permanently sealed. This applies to previous convictions for those who completed their sentences and did not return to the criminal justice system.
In addition to the FCRA, a federal “ban the box” policy was passed by Congress under the National Defense Authorization Act (NDAA) in December 2019. As part of the NDAA, the government enacted the Fair Chance to Compete for Jobs Act (also known as the Fair Chance Act), which prohibits federal agencies and contractors from requesting criminal background information from job applicants prior to extending an offer, though there are a few exceptions.
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Investigative
In contrast, investigative background reports are what most private investigators prepare on a regular basis in relation to individuals who may be involved in a lawsuit or similar situation. Unless you are obtaining a credit report, which requires the person’s written authorization, there are no laws restricting a private investigator from preparing a common investigative report.
Investigations of insurance claims, nonemployment backgrounds and litigation support (to name a few) are not covered by the FCRA. This is because of the following distinctions:
• These types of investigations are not for a “permissible purpose.”
• The investigative report is not a consumer report.
• The investigator is not acting as a consumer reporting agency.
Database Restrictions
You should also be aware that most of the databases private investigators rely on prohibit using their information for pre-employment background checks. Language from one example reads:
This is NOT a CONSUMER REPORT and does not constitute a “consumer report” under the Fair Credit Reporting Act (“FCRA”). This report may not be used to determine the eligibility for credit, insurance, employment or any other purpose regulated under the FCRA. This system may be used only in accordance with your Subscriber Agreement, the Gramm-Leach-Bliley Act (“GLBA”), the Driver’s Privacy Protection Act (“DPPA”) and all other applicable laws. User agrees to having knowledge of all applicable laws pertaining to the usage of data. User accepts all responsibility civilly and criminally for any use of this system. Violations of these restrictions or misuse of this system will cause your access to be terminated and will cause an immediate investigation.
Part of the reason these databases are restricted from being used for pre-employment background checks is because the information they contain is comprehensive and can include lawsuits, liens, judgments, bankruptcy information and similar records that are prohibited from being provided or considered in a pre-employment search.
Since you can’t use common database sources, the obvious question is how to obtain usable information. Fortunately, there are industry suppliers, including TazWorks, MeridianLink and others, that provide databases (or websites) that can be custom-branded to your agency. These companies typically have all the necessary computer connections to online county, state and federal records. Without some type of system such as these, producing a pre-employment background check can be a very tedious process, and the final product you provide will most likely be incomplete.
Additional Thoughts
Offering pre-employment background checks can be a very competitive market. The typical charge for a standard pre-employment check ranges from $10 to $75. This usually includes criminal history, a sex offender search and a check of the terrorist watch list. Additional pricing can be added if a client also wants someone’s driving history, credit history, education and/or work verification and similar information.
Based on the fee structure, the only way to really generate income from this type of service is through a volume of requests. One strategy is to take a “boutique” approach through which you may be able to generate a more diverse clientele.
Private investigators who conduct pre-employment background checks should also make sure that their insurance policy covers these types of services. There are law firms dedicated to bringing lawsuits against those that violate the FCRA.
As you can see, there are clear distinctions between pre-employment background checks and investigative background searches. Investigators absolutely need to be aware of these differences prior to offering and engaging in these services.
About the Author
Kelly E. Riddle is the President of Kelmar Global and the PI Institute of Education, training more than 7,500 PI’s since 1989. With more than 41 years of investigative experience and author of 16 published books, he is one of only 50 PIs who’s a Texas Certified Investigator. He has been the guest speaker at more than 650 events and has been on national TV, radio and newspapers. Riddle is also the founder and President of the Council of Association Leaders, Association of Christian Investigators, and a graduate of University of North Alabama where he earned a Bachelor of Science degree in Criminal Justice.
We’re always listening. Send your story submission/idea to the Editor: kendra@orep.org.
Kelly is an excellent seasoned professional with decades of knowledge and experience. I truly appreciate this article as it was a concern recently for one of my customers who I had to convince “we have oversight and laws to abide by.” Thanks Kelly!