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California Employers Fear New Background Check Law

California’s newly enacted Investigative Consumer Reporting Agencies Act (ICRAA) requires the results of any background check be furnished to the investigated person, including applicants for employment. Any collected data regarding reputation, personal characteristics or mode of living must be reported within one week or at the interview, whichever is sooner. The California legislature aimed to prevent small data errors from causing substantial damage such as identity theft. For example, attribution of erroneous poor credit history might improperly prevent a person from getting a loan, but IRCAA’s furnished report would allow the subject of the background check to clarify the error.

Much to the surprise of many California employers, IRCAA’s language is drafted broadly enough to encompass employment background checks. Enacted under many employers’ radar, ICRAA’s impact on the modern California workforce is already apparent. Its requirements are much greater than the federal Fair Credit Reporting Act (FCRA), which merely sets reporting agency standards and establishes consumer information rights. FCRA imposes no duty on employers to release a report to the subject. IRCAA’s requirements translate into a sizeable expense because employers must document all the information they gather and report. Companies have already begun to keep background check logs to ensure compliance in the most cost-effective fashion.

In the wake of September 11th, background checks will become an increasingly important tool in hiring a qualified and secure workforce. While the U.S. as a whole has been strengthening security requirements, California’s new law demands the grounds for security precautions be well-documented and disclosed. While IRCAA has placed a new burden on employers to continue this precautionary hiring practice, it is uncertain whether other states will follow California’s novel approach.

Should you have any questions about this article, please call or e-mail Brody and Associates, LLC. We can be reached at (203) 965-0560 or info@brodyandassociates.com.