The Red Flags Rule specifies that your Red Flags Program must be updated in response to changes in risk of identity theft, or in response to an actual occurrence of identity theft.  Employee turnover in the retail automobile industry is very high, and partly because of that, many dealers have experienced identity theft that was committed or facilitated by an employee.  (We’ve blogged about both high turnover and employee fraud previously).

A reasonable response to that risk might be to conduct background checks on potential employees.  But be careful.  From the FTC:

Two companies that fired workers and rejected job applicants based on background checks without informing them of their rights under the Fair Credit Reporting Act (FCRA) have agreed to settle Federal Trade Commission charges that they violated federal law. The settlements require the defendants to pay $77,000 in civil penalties…

According to the FTC’s two complaints, both defendants contracted with a CRA to conduct background checks including criminal record reviews for employees and job applicants, and made hiring and firing decisions based on those background checks. The companies allegedly failed to provide the employees and applicants with pre-adverse action notices and adverse action notices as required by the FCRA.

If you are considering doing background checks on your employees or applicants, be sure to check out the FTC’s guide, “Using Consumer Reports: What Employers Need to Know”.