Yes, there are limits on what employers and prospective employers can do with background and credit checks on employees and prospective employees or job applicants. This post will first address the use of background checks and then address specific limits on the use of credit checks by employer in Nevada.

Whenever and employer chooses to conduct a background check of an employee, which includes credit, criminal records, or past employment, using a third-party company or service, the background check must comply with The Fair Credit Reporting Act of 1970 (FCRA). Like all Federal laws, the FCRA is applicable to Nevada employers and employees.

What is the FCRA?

Congress passed the FCRA in 1970 with the intent of ensuring background checks and other reports were accurate, fair and protected consumer’s personal information. The FCRA regulates the collection and use of this information.

For employment purposes, the FCRA protects employees and prospective employees in the way employers are permitted to conduct background checks and what employers can do with the information once they obtain it.

Can an Employer Require me to Submit to a Background Check?

An employer can require an employee or job applicant to submit to a background check before employing them or before allowing them to continue employment if they are already employed. However, the employer must first provide notice of its intent to perform a background check in writing and obtain the employee or applicant’s written consent to performing the background check. The employer must tell the employee or applicant how they intend to use the information once it is obtained.

Under the FCRA, an employee can certainly refuse to submit to a background check for either new employment or continued employment, but the employer can choose not to hire that person and a current employer can terminate the employee. They can do this with no repercussions. In other words, if an employee wants to be employed by an employer that requires background checks, they must submit to the background check or risk being unemployed.

What Happens Once an Employer has Obtained the Background Check?

An employer is required to give a copy of any report they obtain to the employee or applicant. The employee or applicant is permitted to dispute any inaccuracies in their report. If an employer decides they will not hire a prospective employee because of information contained within the report or will terminate a current employee because information contained within the report, the employer must give a pre-adverse action disclosure.

The pre-adverse action disclosure must include a copy of the report and a copy of the employee or applicant’s rights under the FCRA. The employer must also provide notice that they will not hire the applicant or will terminate the employee. The notice must inform the employee of the name and address of the Consumer Reporting Agency providing the report and information on the employee’s rights to dispute the report.

What if an Employer Doesn’t Follow the FCRA Rules?

The penalties for an employer’s non-compliance with the FCRA can be great. Under the FCRA, both job applicants and employees have the personal right to sue employers and potential employers when they do not comply with the law. The penalties available for an employer or potential employer’s willful failure to comply can be: (a) the actual damages of the applicant or employee caused by the employer or potential employer’s non-compliance or (b) damages of not less than $100 and not more than $1,000 per individual violation by the employer or potential employer.

In addition to the damages in (a) or (b) above, the job applicant or employee is also entitled to an award of their reasonable attorney’s fees and costs. If an employer or potential employer’s non-compliance is egregious or shocks the conscience, a court may award punitive damages. But, this is very unlikely and a rarity.

Nevada has Specific Protections Against the Use of Credit Checks by Employers.

In 2013, the Nevada Legislature passed a bill to limit employer’s use of credit checks. Under that law, Nevada employers are not permitted to:

• Request or require an employee or job applicant to submit to a consumer credit report or provide other personal credit information as a condition of employment or continued employment;
• Ask or inquire into an applicant or employee’s credit history;
• Use an employee’s or job applicant’s consumer credit report or other credit information;
• Take any adverse job action (fire, not hire, not promote, demote, etc.) against a job applicant or employee based on their personal credit report or other credit information;
• Take adverse job action against a job applicant or employee because they refuse to provide their credit report or other credit information; or
• Retaliate in any way against an employee or job applicant that complains about the employer or potential employer’s violation of Nevada law concerning the use of credit reports.

This law applies to all Nevada employers regardless of their size. This is different from many employment laws that require employers to have at least 15 employees before a law will apply to them (e.g employment discrimination laws). There are several exceptions to this general statutory ban on the use of credit reports and personal credit information.

Some of the exceptions to this ban on the use of credit reports or personal credit information are:

• If an employer is required by state or federal law to use an applicant or employee’s credit history for employment purposes.
• If an employee or applicant’s personal credit report of information is reasonably related to the job.

This last exception can mean several different things. A few examples (this is not an exhaustive list) include:

• The employee is responsible for the handling of money or other employer assets or the assets of others in the care of the employer;
• The employee will personally be employed as a law enforcement officer for any state or local law enforcement agency;
• The employee will have access to the personal financial information of others in the course of their employment;
• The employee will be employed by a bank or credit union; or
• The employee will be employed by a licensed Nevada gaming establishment.

For more information on these Nevada specific protections and exceptions, you can look at NRS 613.520 through NRS 613.600.

What if an Employer or Potential Employer Violates this Nevada law?

Any employer in violation of NRS 613.520 to 613.600, is liable to the employee or job applicant personally affected by the violation. The employee harmed can obtain any legal or equitable relief appropriate under the circumstances. This is a very broad remedy for an employee or job applicant. The statute specifically states the remedies include “employment of a prospective employee, reinstatement or promotion of an employee and the payment of lost wages and benefits.”

The statute further specifically provides an employee can bring a lawsuit on behalf of herself or in a class action on behalf of herself and others similarly situated. Any lawsuit must be filed within 3 years of the employer’s violation of the law. An employee or class of employees may recover their attorney’s fees and costs of suit but this is in the court’s discretion.

In Nevada, employers are permitted to use background checks and in some cases credit checks. But, employers must follow the rules for the use of each. If an employer fails to follow the Fair Credit Reporting Act rules or misuses credit reports or consumer credit information under Nevada law, the employer can be liable to the employee or applicant. The remedies to the employee depend upon the law violated and the harm caused to the employee.

Disclaimer

This post is not legal advice. It merely provides information. The only way to properly determine whether an employee or applicant has a claim is to consult with a licensed attorney. This post is not intended to and does not create an attorney-client relationship between the author and any reader of the post.