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Federal, state and corporate: Are your background checks in compliance?

Compliance–it is one of the top concerns for SMBs this year, but where does the SMB begin? Many aspects of a business are required to meet federal and state standards. The multiple agencies creating compliance requirements, the number of business processes that must be in compliance, and the frequency with which those agencies publish updates is overwhelming. And, the cost of a violation of any compliance standard can be devastating.

We’re here to help. At KRESS, we focus exclusively on pre-employment screening and employee screening. For screening to be in compliance, it must adhere to standards set by federal and state governments, and sometimes large corporations. KRESS is constantly monitoring and updating our policies in order to keep our customers in compliance.

How do we keep track?

Corporate Compliance

If you are the HR leader for your company, and your company works directly for consumers with no partnerships—great! You write the laws for corporate compliance and enforce them as well. However, this is not the case for a large number of contractors and contracting firms. Here in Houston, we work with many contractors that are subject to unique regulations depending on the company they are working with and the job function they perform within that company.

And, those regulations are constantly changing. How can you keep up?

The best bet would be to choose your background screening provider carefully. Ask the following questions:

  1. Are they on the approved vendor list?
  2. Do they understand the requirements of your particular job function?
  3. Will they partner with you to keep you in compliance?

Every company on the approved vendor list can meet the corporate requirements (or else they wouldn’t be on the list), but it’s how they help you meet those requirements that should influence your choice. Due to a growing need for corporate compliance, we’ll be posting industry-specific pages to help you understand the process better over the next few months.

State and Local Compliance

Each state has its own compliance laws when it comes to background screening, and some counties or cities have unique regulations as well. Here in Texas, we are an employer-friendly state, with no regulations on background screening beyond federal. However, Austin and Travis County both have legislated Fair Chance laws for employers, and these affect the employment process. And, it is anticipated that more municipalities will choose this path in the near future.

If you’re outside of Texas, things get more complicated. If you’re interested in just how complex the laws applicable to background checks can get, read about NYC’s Ban the Box laws, which go into effect this fall. Most states fall somewhere between NYC and Texas in terms of their background check legislation.

As an employer, it is imperative that you choose a background screening provider with up-to-date-information on state and local compliance. Corporate compliance is an important first step for many companies, but all companies must align with state and local compliance laws.

Federal Compliance

Finally, there’s federal compliance. This is the most-often publicized type of compliance because it is applicable to every company that operates in the U.S. And, unfortunately, many are getting it wrong and ending up with multi-million dollar lawsuits as a result. In order to maintain federal compliance, you really need to know the FCRA and the EEOC.


The FCRA (Fair Credit Reporting Act), enforced by the Federal Trade Commission, protects individuals’ privacy and rights when they interact with a CRA (credit reporting agency). A CRA is any company that provides consumer information, typically a credit bureau or a background checking firm.

So, what does the FCRA have to say about background checks? They mandate how the agencies (and employers) interact with their applicants or employees. They regulate the following communications:

Corporate America has been under the microscope of the FCRA lately, and in the last two years, everyone from Disney to Dollar General to Whole Foods have found themselves out of compliance and paying exorbitant fines. You’ve got to manage federal compliance perfectly, with every applicant and every screen, to avoid ending up in court.


The EEOC (Equal Employment Opportunity Commission) has much more to do with the kind of information employers can consider in the hiring process, and they have consistently come down on the side of employee rights and privacy in the past two years. The EEOC regulates what information CRAs (consumer reporting agencies) can provide to employers and how employers can use that information.

In the past year, the EEOC has been particularly interested in the following issues:

Corporate America has also suffered numerous lawsuits from the EEOC recently, so many that the Supreme Court came down on the side of the employer, mandating reconciliation before a court case filing.

How do you maintain EEOC compliance? Keep abreast of new changes to the laws and opt in favor of applicant privacy when possible and equitability always.

The Bottom Line

Employment law is constantly changing, and the laws applicable to background checks are no different. Additionally, what works for one company will not work for another, and now, because of the changes in legislation in the past two years, what worked for one position often will not work for another, even if both employees are being hired by the same company.

Unfortunately, a slip up in compliance will cost your company substantially, whether it’s a violation of corporate compliance or federal.

One size fits all background checks, or no background checks at all, is not a sustainable proposition for any company. Choose an employment screening provider who understands compliance and your business to create a screening program that will protect your company, your employees, and your customers.

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