ESR Newsletter and Legal Update

This newsletter is sent to clients of Employment Screening Resources (ESR) as well as employers, Human Resources and Security professionals, and law firms who have requested information on pre-employment screening, safe hiring, the FCRA and legal compliance. Please note that ESR’s statements about any legal matters are not given or intended as legal advice but only general industry information. For specific legal advice, employers should contact their attorney. If this was sent in error, you can be removed from this mailing by simply using the “remove” feature at the end of the newsletter and you will not receive any future newsletters.

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September 2007 Vol. 7, No. 9

Employment Screening Resources (ESR) Newsletter and Legal Update

1. Urban Myths Continued – Credit Scores are Utilized for Employment

2. Adverse Action Letters: A Critical Step for Employers

3. In the News: Background Checks of Volunteers

4. ESR Announcements and Seminars

1. Urban Myths Continued – Credit Scores are Utilized for Employment

Last issue, ESR addressed the Urban Myth that licensed professions, such as doctors, lawyers, CPA’s or teachers do not need a background check because some governmental agency is in charge of overseeing them.

In this issue, we explore another urban myth that just will not die—that credit scores are used for employment purposes.

An Urban Myth can be described this way; “legends are a kind of folklore consisting of stories often thought to be factual by those circulating them. Urban legends are sometimes repeated in news stories.”

On September 13, 2007, VISA USA issued a press release with the headline: “Americans Unaware That Employers Can Legally Refuse to Hire Job Applicants With Low Credit Scores.” The story said that, “the vast majority of Americans do not know that a bad credit score is more than just a barrier to getting a loan — it may also keep you from getting the job you want.”

The problem with the story? It is just not factual. The plain fact is that employment credit reports simply do not contain a credit score, since there is no validity in studies that suggest a credit score bears a relationship to employment. It is, of course, fair to say that employers can access an employment credit report which can contain elements of a credit history, so that meeting obligations may be helpful for employment. But to say the credit score is used or provided is factually incorrect.

Unfortunately, the story was then repeated as though accurate in another Bay Area newspaper. The problem with such inaccurate information of course is that it can only cause consumers to suffer unnecessary worry and anxiety. In addition to any other worries, consumers with low credit scores may now think they must worry about employment as well.

Fortunately there was one reporter who saw through the Urban Myth and exposed it for what it was. Columnist Brian O’Connor of the Detroit News set the record straight that employers do not get credit scores and that the credit scores are meant for credit risk and not employment. His advice: “So any job-hunters out there can stop worrying about whether last month’s late utility bill will keep you out of work.”

The bottom-line: VISA USA does a commendable job in bringing financial education to consumers, but even they fell for this urban myth. It demonstrates once again that background checks and hiring are complicated subjects that are heavily regulated and present a number of potential traps for the unwary.

2. Adverse Action Letters: A Critical Step for Employers

Employers that obtain background reports must be very careful to understand and follow the adverse action rules as required by the federal Fair Credit Reporting Act (FCRA). Where an employer receives a Consumer Report, and intends not to hire the applicant based upon the report in any way, the applicant has certain rights. Before taking the adverse action, the employer must provide the applicant a copy of the report and a summary of their rights prepared by the Federal Trade Commission.

The purpose is to give an applicant the opportunity to see the report that contains the information that is being used against them. If the report is inaccurate or incomplete, the applicant then has the opportunity to contact the Consumer Reporting Agency to dispute or explain what is in the report. Otherwise, applicants may be denied employment without ever knowing they were the victims of inaccurate or incomplete data.

As a practical matter, by the time an applicant is the subject of a Consumer Report, an employer has spent time, money and effort in recruiting, and hiring. Therefore, it is in the employer’s best interest to give an applicant an opportunity to explain any adverse information before denying a job offer. If there was an error in the public records, giving the applicant the opportunity to explain or correct it could be to the employer’s advantage.

Even if there are other reasons for not hiring an applicant, in addition to matters contained in a consumer report, the adverse action notification procedures still apply. If the intended decision was based in whole or part on the Consumer Report, the applicant has a right to receive the report. In fact, these rights apply even if the information in the consumer report used against an applicant is not even negative on its face. For example, an applicant may have a perfect payment record on his or her credit report, but an employer may be concerned that the debt level is too high compared to the salary. The applicant still is entitled to a notice of pre-adverse action, because it is possible that the credit report is wrong regarding the applicant’s outstanding debts. In a situation where the employer would have made an adverse decision anyway, regardless of the background report, following the adverse action procedures is still the best practice for legal protection.

The question that arises is how long an employer must wait before denying employment based upon information contained in a Consumer Report. The Fair Credit Reporting Act is silent on this point. However, many legal authorities advise that an employer should wait a reasonable period of time before making the final decision. This period should be the time that would be needed for an applicant to meaningfully review the report and make known to the employer or the Consumer Reporting Agency any inaccurate or incomplete information in the Consumer Report. This does not mean that an employer is required to hold the job open for a long period of time. After the first notice is given, and the applicant has had an appropriate opportunity to respond, an employer may either wait until there has been a re-investigation, or fill the position with another applicant. Most employers find as a practical matter that this provision of law does NOT impose any hardship or burden upon an employer. Even though in rare situations an employer may have questions on how to proceed, the clear advantages of a pre-employment screening program far outweigh any complications that can theoretically arise from compliance.

If, after sending out the pre-adverse action notice, the employer intends to make the decision final, the employer must take one more step. The employer must send the applicant a Notice of Adverse Action informing the job applicant that the employer has made a final decision, along with another copy of the FTC form “Summary of Your Rights under the Fair Credit Reporting Act.” There is certain mandatory information that the second letter must contain.

For a more in-depth discussion and sample of pre-adverse and post-adverse letters, as well as additional information about the FCRA, see. “The FCRA in Four Easy Steps for Employers,” at or contact Jared Callahan at 415-898-0044 or by e-mail at

3. In the News: Background Checks of Volunteers

According to a recent article in the Los Angeles Times on September 16, 2007, background checks have become so pervasive in the work world that you might as well count on undergoing one if you’re a candidate for a big job. However, the article pointed out that now volunteer organizations are also requiring checks. See:,1,2119079.story?coll=la-headlines-business

The article quoted ESR President Lester Rosen in parts:

“We first started hearing from volunteer organizations in about 2000,” said Rosen, who was founding director of the National Assn. of Professional Background Screeners. “There had been a shift in the national consciousness.”

The shift, he said, was largely caused by the ever-increasing awareness of sex abuse scandals in the Catholic Church as well as secular organizations.

A scandal could crush an organization by bringing gifts and grants to a near halt. And a group could be subject to big lawsuits if found lax in regard to its volunteers.

Still, organizations that relied on volunteers at first resisted background checks.

“There was a lot of push-back,” Rosen said. “Volunteers were wonderful people. They were coming forward to do good work. It was almost not polite to ask them questions that might seem intrusive.”

“The attitude toward background checks for volunteers has changed, Rosen said. They have become accepted, in large degree, as a necessary evil.

“It used to look like it was a ‘1984’ kind of thing,” he said. “But if it’s presented as part of contributing to the greater good, it becomes part of the volunteer experience.”

Certain states have legislation permitting organizations to take advantage of state fingerprinting or criminal record programs. On October 9, 1998, President Clinton signed the Volunteers for Children Act into law – Public Law 105-251 – amending the Nat’l Child Protection Act of 1993. Organizations and businesses dealing with children, elderly, or the disabled may now use national fingerprint-based criminal history checks to screen out volunteers and employees with relevant criminal records.

The Wisconsin Attorney General’s Office has produced an excellent brochure describing not only their state program, but also the Federal Act and how to obtain FBI background checks; see the online version at

The same office also provides a website listing state sites where volunteer organizations can obtain fingerprint information. see

One question that arises is whether a screening on a volunteer needs to be conducted under the Fair Credit Reporting Act (FCRA), since the volunteer is not paid. The best practice is to still operate under the FCRA, even for volunteers. There is no requirement under the FCRA that a person is only employed if they are paid in monetary form. The Federal Trade Commission (FTC), the federal agency with responsibility to enforce the FCRA, takes the position that the FCRA is given broad interpretation to protect consumer’s rights.

Conclusion: an organization should not assume the FCRA does not apply just because a person is a volunteer.

4. ESR Announcements and Seminars

ESR Announces New printing of the Safe Hiring Manual!

Employment Screening Resources (ESR), announces the release in September, 2007 of an updated and revised fourth printing of “The Safe Hiring Manual -The Complete Guide to Keeping Criminals, Terrorists and Imposters Out Of Your Workplace,” by Lester S. Rosen.

“The Safe Hiring Manual” is the first comprehensive book on how to conduct background checks and how to exercise due diligence throughout the hiring process. The revised release examines developing issues in background checking, such as the use of the Internet and social networking sites to screen candidates, screening employees post-hire and the dangers of utilizing home-based operators or foreign data centers for background screening. The book also updates users on new laws and recent developments in the use of credit reports.

Published by Facts on Demand Press, “The Safe Hiring Manual” is written for employers, human resource departments, security professionals, staffing vendors, background firms, private investigators, and labor lawyers. The 512-page book significantly increases an employer’s chance of avoiding the financial and legal nightmares of even one bad hiring decision.

“This book is intended as the first comprehensive guide to background checks and safe hiring for employers,” explains author Rosen. “The book provides a number of practical, cost-free ‘how-to’ steps that employers can take immediately to avoid hiring criminals with unsuitable records and imposters. It is also intended as a detailed reference book on background checks and best practices.”

The Safe Hiring Manual covers:

  • Effective use of applications, interviews and past employer checks as key hiring tools.
  • Verifying educational degrees and credentials, and how to legally obtain and use criminal records.
  • Compliance with legal mandates including the Federal Fair Credit Reporting Act (FCRA), EEOC issues, Patriot Act, Privacy laws, Sarbanes-Oxley, state law compliance, negligent hiring and other legal issues.
  • In-depth pre-employment background screening and investigative techniques.
  • Critical information on how to identify terrorists and perform international background checks.
  • How to audit the effectiveness of your current hiring program, how to select a pre-employment screening firm and how the background screening industry works.

The book also serves as the text for the only professional development course available on background checks, the 30 hour “Safe Hiring Certification Course,” available at:


ESR is pleased to announce new services that are available to US employers:

  1. Form I-9 Compliance ESR is qualified to act as an employer’s Designated Agent to perform the verification of employment eligibility checks to determine that individual’s employment eligibility through databases administered by the Department of Homeland Security and Social Security Administration. See:
  2. In-depth searches and litigation support ESR has introduced a new service, an “IntegrityCheck,” for businesses that need in-depth research on partners, key executives, prospective members of a Board of Directors, and other highly sensitive positions, It is also ideal for law firms for litigation preparation. See:
  3. Vendor Checks ESR has introduced a new program to allow businesses to check their vendors. Businesses who would never allow an employee on onsite without due diligence, cannot ensure that the same due diligence is applied to vendors, independent contracts or temporary employees.

ESR will be participating in the following seminars across the United States.

ESR 2007 Schedule

October 17/18, 2007 Long Beach, CA “Negligent Hiring Mock Trial: HR in Court.” and “Caution–Using Google, MySpace or Facebook for Hiring.” 50th Annual PIHRA Conference

November 9/10, 2007 Baltimore, MD “Negligent Hiring Mock Trial– College and University HR in the Hot Seat.” National HR Conference for College and University Professional Association for Human Resources (CUPA-HR)

November 12, 2007 Tampa, FL “The Pre-employed Screening Industry–The Good, the Bad and the Ugly.” Keynote address at the Annual Pre-Employment Screeners Conference sponsored by the Background Investigator (Intended for background firms and record retrievers)

November 13, 2007 Orlando, FL Background Checks and Recruiting Practices and Legal Compliance Kennedy Information’s Recruiting 2007 Conference and Expo

November 16, 2007 Contra Costa, CA Extreme Caution Advised: Advising Employers on Compliance with Federal and State Laws Regulating Pre-employment Screening and Background Checks Contra Costa Bar Association MCLE Seminar (intended for attorneys)

December 6-7, 2007 Bangalore, India “Background Screening for US Firms with Operations in India and the Pacific Rim.” Keynote Address at the International Pre-employment Screening Conference, The Taj West End Hotel

Contact ESR for further details.

Employment Screening Resources (ESR) Rated Top Background Screening Firm in First Independent Industry Study. See the Press Release

Please feel free to contact Jared Callahan at ESR at 415-898-0044 or if you have any questions or comments about the matters in this newsletter. Please note that ESR’s statements about any legal matters are not given or intended as legal advice.

Employment Screening Resources (ESR)

7110 Redwood Blvd., Suite C

Novato, CA 94945


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