Employers who conduct background checks, beware! It might be time to revisit your standard documents and screening processes to ensure they comply with the Fair Credit Reporting Act (FCRA). The number of lawsuits brought under the FCRA has more than doubled since 2009. FRCA litigation was the highest on record at the close of 2019, and continues to rise. Many of these cases have been brought on a class basis for purely procedural violations and resulted in multi-million dollar settlements.
The good news for employers is that in the context of FCRA compliance, less is more, and a quick review of current forms and practices can alleviate any concerns regarding potential exposure.
The FCRA For “Employment Purposes”
The FCRA was enacted to protect consumers by promoting the accuracy, fairness, and privacy of information maintained by consumer reporting agencies. Anytime an employer requests a “consumer report” on an applicant or employee, obligations under the FCRA are triggered. Consumer reports can include a broad range of categories, including driving records, criminal records, credit reports, and other reports from third parties, such as drug tests.
Employers are required to both disclose their intention to obtain a consumer report and obtain written consent from applicants or current employees prior to requesting a consumer report. Upon receiving the consumer report, if the employer intends to take an adverse action, such as disqualifying the applicant or firing an employee, there are specific notice requirements the employer must follow. These two employer actions present the greatest risk for falling into noncompliance.
The Stand-Alone Disclosure and Authorization Form
Employers who wish to conduct background checks or obtain consumer reports of either job applicants or current employees must disclose to the applicant/employee that the employer may obtain a consumer report for employment purposes. The disclosure can be presented at the time of an employment application, but should be a separate document. The disclosure must be “clear and conspicuous” and must be in a “document that consists solely of the disclosure.” In the case of the disclosure, less really is more. In an article on its website, the Federal Trade Commission (FTC) recommends avoiding complicated legal jargon or adding extra acknowledgements or waivers. The article also gives the following examples of what not to include in the disclosure form: FULL ARTICLE