Pre-employment background screenings have been used for decades to help prospective employers and others obtain information that can help them make more informed hiring decisions. However, the rules surrounding these types of background screenings can — and do — change periodically.
Employers, employment agencies and others who conduct background checks need to be aware of several notable changes to employment law in 2021.
Here are three of the new background check laws and updates that could impact your company:
1. Fair Chance Laws
More states have enacted “ban the box” laws, prohibiting employers from discriminating against prospective employees based on their criminal records. In fact, 36 states and at least 150 cities and counties now have legislation restricting what employers can and cannot ask about or do regarding a candidate’s criminal history. There are certain exceptions, of course, when the criminal history could be relevant to the job opening.
In addition, the Fair Chance Law takes effect in December 2021. This is a federal extension of the state-specific “ban the box” laws, prohibiting federal contractors from asking about a candidate’s criminal record verbally or in writing, unless a limited exception applies.
2. Credit History Bans
Employers have long been required to comply with the Fair Credit Reporting Act (FCRA), which stipulates the rules employers must follow when using credit reports as part of the employment screening process. The U.S. House of Representatives passed a bill in 2020 that would have further restricted the use of credit history in employment background checks. While the bill was not passed by the Senate or signed into law, it is possible that a different version of the law will be reintroduced to Congress for consideration.
In addition, at least 10 states have enacted laws that prohibit the use of pre-employment credit checks or place additional restrictions on employers that want to use credit as a screening tool. Other states are considering adopting such measures in 2021 in recognition of the challenges and largely unavoidable credit issues many prospective employees are facing in light of the COVID-19 pandemic.
3. Bans on Salary History Inquiries
Knowing how much a prospective employee made in previous roles can help employers focus on candidates who they believe have salary expectations in line with the pay grade for the open position. However, a growing number of states and municipalities now prohibit making employment decisions based on a candidate’s previous salary history. New Jersey, New York, Colorado and Maryland joined 24 other states in 2020 in enacting salary history bans.
Some states’ and municipalities’ laws provide an exemption for employers when a candidate voluntarily discloses salary history information, while others do not. That said, it is critical to understand jurisdictional rules before proceeding.
Ensure Your Company’s Background Check Practices Comply With All Applicable Rules
The above list of updated reference check laws is not comprehensive. There may be other legislative or regulatory changes impacting your state or industry. Seek guidance as needed to help ensure your pre-employment and other screenings comply with all applicable rules.