This is a question that nanny agencies ask me a lot.
[Disclaimer: I’m not a lawyer and Imperative/PFC isn’t a law firm. This is just my practical advice based on 25 years’ experience in the background screening business. If your lawyer disagrees with me, you can always go find another lawyer. 
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]The TL;DR Version 
I don’t know of any federal or state laws prohibiting a nanny agency from sharing background checks with their employer clients.
The absolute safest process would be for the agency to ask the candidate to directly request that Imperative/PFC share a “consumer copy” of the report with the family on the candidate’s behalf.
If the agency wishes to share the report directly with the family (rather than ask the candidate to do so), I recommend that the agency notify the candidate in writing that the report may be shared with families so that the candidate does not feel that the agency was unfair with them. While this isn’t a legal requirement, it ensures transparency. Imperative/PFC can include such a notification in our electronic background check authorization process.
If anything potentially negative is included in report, I recommend that the agency initiate the pre-adverse action process in our system (which will share the report and the summary of consumer rights with the applicant) before sharing it with the family.
This gives the candidate an opportunity to review the information and decide whether they wish to dispute the accuracy of the information with Imperative/PFC. They would also have opportunity to withdraw from consideration rather than sharing any embarrassing information with the family.
If the family decides not to proceed with a candidate based in whole or part on the shared report (or if after receiving the report, they decide not to proceed for any reason), the agency should initiate the adverse action notification process through our system—even if the candidate may be considered by another family.
The Long Version
If an agency wanted to play it really safe, they would simply ask that the candidate directly request that Imperative/PFC share a “consumer copy” of the report with the family on the candidate’s behalf.
This may remove any FCRA pre-adverse or adverse action responsibilities from the agency or the family should the family decide not to proceed with the candidate. [Again, I’m not a lawyer and different lawyers would likely give different advice as to how to proceed.]
Upon approval by our client, Imperative/PFC would happily share a report with a family at the candidate’s request but most other screening companies may not.
In that case, the candidate could request a copy of their own report directly from the screening company and then share it—but then you have the possibility that they might edit it. (Candidates sometimes provide forged or altered documents. If all the candidates were honest, there’d be no need for us.)
However, there is no prohibition under the FCRA or, to my knowledge, state law prohibiting a nanny agency from sharing a consumer report (background check) with a family but doing so may create additional compliance burdens for the nanny agency.
I would still encourage agencies to notify candidates in writing that the report may be shared with families. Many candidates have misconceptions about “the law” and “privacy”. The more clarity and openness about the process is always better. We can include such a notification in our electronic background check authorization process.
[Warning: Here comes a lot of nuance.]
There is a federal court opinion out of Connecticut that says that a nanny agency that shares a consumer report (background check) with an employer becomes a “consumer reporting agency” (a legal term that includes employment-background check companies) and has all of the burdens and responsibilities placed on a consumer reporting agency under the Fair Credit Reporting Act.
This was a case where the background screening company told the staffing agency that an applicant may have a criminal history (she didn’t) and then the agency prematurely told the employer there was an issue with her background check and the employer disqualified her from consideration.
There is also another opinion from a different federal court that disagrees with the Connecticut opinion.
As far as I know, this issue has never made it to an appeals court, so the actual law is a bit muddled.
If the Connecticut court’s opinion turns out to be correct, sharing the report with a family makes the nanny agency a consumer reporting agency bound by the FCRA. Having the candidate’s written permission to share the info with the family wouldn’t affect that.
Some nanny agencies charge families an additional discrete fee for the background check, often over and above the fee Imperative/PFC charges the nanny agency. I think this practice makes the agency much more likely to be considered a consumer reporting agency.
From a practical point of view, if an Imperative/PFC client shares a report with the family, the chances of anything negative happening—even if they are considered a consumer reporting agency—are almost nil as long as the agency follows the FCRA’s pre-adverse and adverse action notification requirements.
Because we strictly comply with the FCRA and the state analogues in preparing our reports, our clients who might share the information with someone else with a legitimate need to know will also be in compliance with the FCRA’s requirements about report preparation and accuracy.
And because we are so nuts about making sure that our reports are thorough and accurate, the chance that an individual will even dispute the accuracy of our report is miniscule.
And on those exceedingly rare instances where we receive a dispute, we handle them in strict compliance with the FCRA, so our clients would be protected there, as well.
On the other hand, if a nanny agency was running a background check from some of our competitors, then I’d advise them never to share reports directly with families. Most screening companies cut a lot of corners. (But they’re still at more risk of missing a legitimate record than having an incorrect one reported.)
Anytime something potentially negative shows up on a background check (even if it is something that the nanny agency doesn’t care about, but a family might), my recommendation is that the agency always initiate the pre-adverse action process in our system (which will electronically share the report and federal summary of rights with the candidate) before sharing the report with the family. (Some clients have us do this automatically on every report, which isn’t a horrible idea.)
This gives the candidate an opportunity to review the information and decide whether they wish to dispute the accuracy of the information with us. It also gives them the opportunity to withdraw from consideration before the report is shared with the family.
If the family decides not to proceed with a candidate after receiving the report, the nanny agency should initiate the adverse action notification process through our system—even if the candidate may be considered for placement with another family.
Of course, anytime information on the report may negatively impact the agency’s decision as to whether or not to present the candidate to a family, the pre-adverse and adverse action notifications should be provided.
That seems like an overly-complicated answer to a simple question but I hope it is helpful.
Finally, I’d like to plug my podcast, Good Morning, HR, where I talk to business leaders about bringing people together to create value for customers, shareholders, and the community.
As always, please feel free to reach out to discuss this or any other questions you may have.