Background Check Laws: Your Rights as a Job Seeker

If you’re like most people, you know what it’s like to spend weeks (or months) sifting through online job postings looking for the perfect job opportunity. As such, you understand that most employers today require applicants to consent to a background check as part of the hiring process.

You have legal rights regarding these background checks. Many companies rely on AI firms to generate applicant risk scores for job applicants. These scores, along with the data AI algorithms collect, can make or break whether a hiring manager invites a candidate to interview with their company.

The good news is that federal and state laws protect your privacy and give you rights to access, review, and dispute background check information. Unfortunately, it isn’t practicable to challenge every AI-generated applicant score. Finding a new job is hard enough without worrying about how technology will affect your career opportunities.

This article will explain your rights regarding background reports during your job search. It also discusses the laws and agencies that protect you, such as the Fair Credit Reporting Act (FCRA) and the Consumer Financial Protection Bureau (CFPB).

The Fair Credit Reporting Act (FCRA): Your Primary Protection

In general, there’s nothing wrong with potential employers conducting background checks. Issues can arise when agencies report inaccurate or unfair information about a job seeker. For purposes of employment screens and background checks, job applicants qualify as consumers. This means that the Fair Credit Reporting Act (FCRA) applies to agencies that release information about prospective employees.

According to the FCRA, consumers have the right to dispute inaccurate or unfair information on background reports. Furthermore, the law requires that agencies notify consumers when information they report has an adverse impact on the consumers. Given the impact that negative reporting can have on job seekers, it’s worth discussing the FCRA‘s protections a bit further.

What Does the FCRA Cover?

The FCRA offers extensive protections. It covers how agencies collect personal information about consumers, how long they keep it, and how they share it with other entities, including potential employers.

The FCRA covers unfair marks on a credit report and offers protections for employment as well. These can include:

• Consumer reports used for employment purposes
• Credit reports
• Criminal background checks
• Personal data (address, social security number, employer, etc.)

This information could affect whether a company hires a potential employee. For example, if Company X receives an application from someone and decides to interview them for the job, it may run a background check in preparation for the interview. When the company receives the applicant’s credit report and other background information, it may discover that the applicant filed for bankruptcy the previous year. Since the job involves handling money and dealing with sensitive financial information, the company decides to cancel the interview and move on to another candidate.

Under applicable law, the agency that provided the report to Company X is required to notify the applicant that Company X chose not to hire them based on information it received from the agency. However, this rarely happens, if ever.

Who Qualifies as a “Consumer Reporting Agency“?

If you look at a credit report, you’ll see that it includes a bevy of personal information about a consumer. Not only does it list the status of the person’s credit accounts, but it also includes other critical information. Some of the information on a credit report or background check includes:

• Personal contact information (phone number, address, etc.)
• Credit accounts and current status
• Employer
• Liens and judgments
• Bankruptcies
• Inquiries

A prospective employer can use this information when deciding whether to hire someone. As such, agencies that report this information should be held accountable for reporting inaccurate and unfair information.

What qualifies as a “consumer reporting agency (CRA)?” Per the FCRA, any entity that meets the following criteria constitutes a CRA:

• An entity that collects fees or operates cooperatively
• An entity that reasonably expects that the information it reports will be used for any of the following purposes:
  • Housing
  • Employment
  • Healthcare
  • Credit decisions
  • Insurance
  • Any other similar eligibility decisions
• An entity that regularly evaluates or assembles consumer information

Traditionally, only a handful of agencies provided credit reports. For example, when an employer or other entity wished to review a consumer’s report, they would reach out to Experian, Equifax, or TransUnion. The number of reporting agencies has increased, but so has the reliance on algorithms to determine the reported information.

Your Rights Under the FCRA

If you’re concerned about agencies reporting inaccurate, unfair, or inflammatory information about you, take the time to understand your rights under the FCRA. There are certain duties that reporting agencies and employers must meet regarding background checks. Some of the protections and duties of the FCRA include:

• Notice and consent: Employers must get your written permission before requesting a background check
• Pre-adverse action notice: If an employer plans to deny you a job based on the report, they must give you a copy of the report and a summary of your rights
• Adverse action notice: If a potential employer rejects you based on the report, you must receive formal notification
• Dispute rights: You can challenge inaccurate or incomplete information
• Free copy: You’re entitled to a free copy of any report that led to adverse action

If you aren’t sure how to go about taking advantage of your FCRA protections, contact a local employment attorney. They have experience reading these reports and dealing with the reporting agencies.

The FCRA and Employer Obligations

When you apply for a job, the last thing you worry about is whether your prospective employer will do a deep dive on your background. After all, most people know that employers must receive permission from a candidate before they run any criminal history reports, credit reports, or other inquiries.

The good news is that federal law also requires employers to follow other guidelines, such as:

• They must use osuch as Indeed andto reduceattended an Ivy League school, it can use an algorithm to do sooyers must follow specific procedures before taking adverse action

If a company decides not to hire you based on information it receives from an outside reporting agency and did not follow these rules, you may have a legal claim. The best way to know for sure is to talk to an employment lawyer. They can review whatever information you provided and speak to the company about why they denied you the job.

AI Background Checks and Algorithmic Scoring

The days of human resource managers reviewing every application they receive in response to a job posting are gone. Not only are companies trying to cut costs, but they are also relying almost exclusively on online job boards and websites like Indeed or LinkedIn to find new employees.

With this reliance on online recruiting, employers are taking advantage of any tool they can find that will decrease costs, improve results, and identify the best possible job candidates. One of these tools is Artificial Intelligence (AI).

AI allows employers to use algorithms to identify the most promising job applicants. Employers can apply these algorithms to the data AI collects regarding job seekers. For example, if a company only wants to review the resumes of people who went to an Ivy League school, they can use an algorithm to do that. Unfortunately, AI and algorithmic scoring have made it very difficult for strong candidates to bypass the “bots” and rise to the top of a hiring manager’s pile.

What Are AI Dossiers?

AI dossiers are a new, technology-based way of streamlining the background check process. Employers rely on these tools to analyze large amounts of data and identify red flags among job applicants.

AI dossiers use algorithms to score applicants based on a host of information, including:

• Social media activity
• Web browsing history
• Online behavior patterns
• Public data aggregation

Once the algorithms do their work, they provide employers with “risk scores.” These scores allow employers to weed out job applicants whom they find undesirable or high-risk. They can then run another AI dossier to further weed out the remaining candidates, whittling the pool down to the most highly attractive job seekers.

2024-2025 CFPB Guidance (Circular 2024-06)

Until recently, employers had no restrictions on the indiscriminate use of AI and AI dossiers to identify the best job applicants. Potential employees often had no idea that companies were using AI in the hiring process, and had no control over what information the company captured.

Despite being weakened considerably by the second Trump administration, the Consumer Financial Protection Bureau (CFPB) now classifies algorithmic scores and social media dossiers as “Consumer Reports.” This means they fall under FCRA protections, and the agencies providing the information or algorithmic scores must comply with applicable laws.

Some examples of the type of scoring employers use to screen job applicants include:

• LinkedIn activity scores
• Social media sentiment analysis
• “Employability” scores based on a candidate’s online presence

Any entity that provides the data employers use to create these scores must comply with the rules and requirements of the FCRA and other consumer reporting laws and regulations.

Your Rights Regarding AI-Generated Reports

As a job seeker and consumer, you have certain rights regarding the AI reports that employers rely on so heavily during the hiring process. These include:

• Right to access: You can request to see the algorithmic data a company uses to score you
• Right to know: If an AI company gave your employer a “risk score,” you have the same rights as you would have with a credit report
• Dispute rights: You can challenge the accuracy of AI-generated assessments
• Transparency: Employers must disclose if they use algorithmic scoring in hiring decisions

If you believe an employer or reporting agency has violated any of these rights, contact a local employment attorney. They can help determine if you have a valid legal claim and, if so, assist you in pursuing a claim against the reporting agency or hiring company.

What Information Can Employers Access?

The idea of a faceless, nameless agency collecting private and public records about a person can be frightening, but there are restrictions on the types of data employers may collect and use when making hiring decisions. Let’s examine some of them.

Restricted Information (Off-Limits or Limited Use)

There are certain types of information that even employers cannot use in hiring decisions. Consider consulting with an employment attorney if you believe an employer solicited any restricted information. Some of the restricted information includes, but is not limited to:

• Criminal records (varies by state; see Ban the Box law by stateemployers can access other types of data )
• Bankruptcy information (FCRA prohibits use in most cases)
• Medical records (ADA protections)
• Military records (Privacy Act of 1974)
• Workers’ compensation history
• Genetic information (GINA protections)

There are instances in which employers can access some of this information, but the access is limited, and employees have the right to know when this occurs.

Information Employers Can Typically Access (With Consent)

While the above information is restricted, there are other types of data that employers can access either freely or with the prospective employee’s consent. This information can be useful in determining whether a candidate is a good fit for a company, but it doesn’t mean they can collect and use this data indiscriminately.

Some of the data that employers have access to includes:

• Credit reports (with state law variations)
• Driving records
• Education verification
• Employment history
• Professional licenses
• Court records (with limitations)
• Drug test results

In most cases, an employer will request the applicant’s consent to run these background reports as part of the job application. Other times, they wait until the applicant has completed the interview process and then ask them to consent to these background checks.

State-Specific Protections

In addition to the federal laws, such as the FCRA, there are state-level restrictions employers must follow. These vary by state. For example, states such as California and Connecticut prohibit employers from running pre-employment credit checks. New York also has specific laws prohibiting these types of background checks.

Credit checks can be used as a job requirement in limited circumstances, including:

• Jobs involving financial responsibility
• Positions where security clearance is required
• Employees who will have access to sensitive information

An employer that denies you a position based on your credit must notify you. This is the case in all instances where a credit report results in pre-adverse actions, such as denial of an interview.

If you learn that a company has denied you employment based on something that came up on your credit background check and didn’t notify you, you may want to call an attorney. It may be difficult to prove that this is the reason the company decided not to hire you and what specific damages you suffered as a result of their actions.

There are other protections available to job applicants during the hiring and recruitment process. Let’s look at some of them.

Criminal History Information

It’s common for a prospective employer to ask whether a job applicant has a criminal record. As enticing as this information may be, there are limitations to what information a company can access and use during the hiring process.

Some of the relevant laws and regulations on the use of criminal history information include:

• Ban the Box laws: These laws prohibit employers from including a checkbox asking whether an applicant has a criminal record, including misdemeanors and felonies. Under these state laws, employers can no longer ask this question on an initial job application. This allows those with a criminal record to have a fair chance at job opportunities.
• Restrictions on how far back employers can look: According to the federal government, there is no limit to how far back employers can go in their employment background checks. However, some states have laws that limit the look-back period. The Equal Employment Opportunity Commission (EEOC) recommends that employers narrowly tailor any background checks they do, including those for criminal history. The EEOC urges employers to consider the following when analyzing an applicant’s criminal history:
  • How long ago the misdemeanor/felony occurred
  • The type of criminal offense
  • The relevance of the offense to the specific job duties
• Certificate of rehabilitation programs: Some state courts will issue these certificates to offenders who meet certain eligibility standards. These certificates help mitigate or remove the consequences of a criminal conviction.
• Expunged records: For the most part, employers cannot access expunged criminal records. However, they are accessible to some federal employers. If it is a matter of national security, these records may be visible to federal recruiters.

Certain jobs may have exceptions for some companies.

Social Media and Online Activity

For years, career counselors have warned job applicants about posting negative content on their social media accounts. Employers can use AI to analyze a job seeker’s online posts. If they see anything inflammatory, they may move on to another candidate.

While employers can view your social media content, that doesn’t mean they have access to your social media accounts, passwords, and other sensitive information. There are state laws restricting employers’ access to this information.

If you’re convinced that a prospective employer used this information in their hiring decisions, you can meet with an experienced employment attorney. Once a hiring manager sees this information, there’s little you can do to erase its impact.

What To Do If Your Rights Are Violated

If a consumer reporting agency violates your rights, you may be entitled to damages under the FCRA. It depends on the nature of the violation and whether you suffered actual damages. It’s a good idea to consult an employment attorney before proceeding with legal action.

Some of the more common FCRA violations include:

• Reporting inaccurate or incomplete information
• Reporting outdated adverse records
• Not providing the consumer with a copy of their report
• Failure to notify consumers of an adverse impact
• Not investigating a consumer dispute
• Providing consumer data for an impermissible purpose

If you’re confident that any of these violations occurred, take the following steps.

Review the Report

You’ll need to review the actual consumer report that is the subject of the violation. An attorney will want a copy to review if you decide to pursue legal action.

To get one, do the following:

• Request a copy of any background check report
• Check for errors or outdated information
• Verify the source of algorithmic scores

If you don’t see any mistakes, you might not have a valid claim.

File a Dispute

If there is an issue with the actual report, file a dispute with the appropriate entity. This will depend on the nature of the violations:

• The consumer reporting agency
• The company that generated algorithmic scores
• The company that relied on the information in its hiring process

Make sure you abide by the dispute procedure and meet all necessary timelines. Otherwise, the reporting agency will not treat your dispute seriously or resolve the issue.

Document Everything

It’s critical to have the necessary documentation to support your claim. Keep a complete record throughout your job search.

Your attorney will need the following information when evaluating the legitimacy of your claim:

• Copies of all correspondence
• Dates of job application, background check authorization, and any adverse action
• Evidence of online activity if AI scoring is involved

The more you can provide, the better an understanding of your claim they’ll have.

Understand Remedies

You are only entitled to certain remedies under the law. Even for an egregious violation, there are limits to what you can demand from the responsible party.

The types of remedies available vary depending on the type of claim that you file. For example, the FCRA allows you to demand the following types of damage after a violation:

• Lost wages and related expenses
• Emotional distress
• Damage to reputation

As far as the types and amounts of damages you can demand in an FCRA claim, they are as follows:

• Negligent violations: Actual damages plus reasonable attorney fees/costs
• Intentional violations: Actual damages, punitive damages, statutory damages, emotional distress

Under the FCRA, violators face fines of $100 to $1,000 per violation. If they engage in multiple violations, they will have to pay significant fines.

In addition to the federal damages available, you may also be entitled to damages under state law. A skilled employment lawyer can review your claim and let you know what to expect in the way of compensation.

Practical Tips for Job Seekers

If you’re searching for a new job, there are some important things to keep in mind. Employers have access to vast amounts of data and can use algorithms to sort it and identify the best job candidates.

Here are some helpful tips for when you’re job hunting:

Before the Background Check

• Review your own credit report annually
• Google yourself and review your digital footprint
• Consider privacy settings on social media
• Be aware of what’s publicly accessible online

During the Application Process

• Read authorization forms carefully
• Ask what type of background check will be conducted
• Ask if algorithmic scoring or AI assessment tools will be used
• Keep copies of everything you sign

If You Receive Adverse Action

• Exercise your right to review the report
• File disputes promptly (typically 30 days)
• Request information about algorithmic scoring methods
• Consider legal consultation

State laws change frequently due to new legislation, higher court rulings, and other means. While FindLaw strives to provide the most current information, consult a local employment attorneyscreenings can provide an employer with valuable information when making a hiring decision or extending a  to confirm your state laws.

Get a Legal Case Review

Background checks and background screenings can provide an employer with valuable information when making a hiring decision or job offer. Still, employers aren’t permitted to violate your consumer rights. If you feel that your rights have been violated by a prospective employer or third party, contact a local employment law attorney for legal advice. Given the damage negative reporting can have on job seekers, it’s worth discussing the FCRA’s protections in a bit more detail