Background Checks: Fair Credit Reporting Act Compliance

Employees – and unsuccessful applicants for employment – are increasingly asserting claims under the Fair Credit Reporting Act (FCRA) for violations arising out of background checks conducted by third party credit reporting agencies. Successful claimants can recover actual damages, statutory damages, attorneys’ fees, and costs from an employer who violates FCRA. Accordingly, employers should be aware of FCRA’s strict requirements for employment-related background checks.

Employers must provide the information required by the statute (and nothing more!) to an applicant or employee to obtain valid consent to conduct a background check through a third party credit reporting agency. Employers must also provide timely pre-adverse action and post-adverse action notices to the applicant or employee in connection with any adverse action that may be taken (pre-adverse) or will be taken (post-adverse) as a result of information contained in the report provided by the third party credit reporting agency.

Employers should review their (i) background check disclosure and authorization forms and (ii) pre- and post-adverse action notices and procedures to ensure FCRA compliance and position themselves to avoid or successfully defend claims for FCRA violations. ###

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