Employers rely on background screening as part of the hiring process. Recently, numerous large, well-known employers have been accused of failing to comply with the Fair Credit Reporting Act (“FCRA”). Why is this happening? The issue is the legality of the forms these employers may be using to obtain applicants’ authorizations to collect background information.

  1. An employer using a third party consumer reporting agency to collect background information on a prospective employee must follow several steps:
  2. Employers must obtain written authorization from the individual before initiating the background check. This is the Form which is subject to much of the recent litigation. Employers must ensure that this form notifies applicants that consumer reports may be used for employment purposes and obtain applicants’ consent to such use. The Form needs to ensure that: 
  • Applicants are informed in writing that an employer may obtain a consumer report or other background screening information for purposes of evaluating their employment application.
  • This notice and the applicant’s consent may be combined into one document, but the document must be a stand-alone document, not part of the employment application.
  •  The Form must be written clearly and cannot include extraneous language (e.g., language not covered by the regulations).
  • The Form should be signed by the applicant to demonstrate their acknowledgement and receipt of the notice.
  1. To obtain information which a consumer reporting agency requires to conduct background screening, an employer may ask an applicant, on a separate form, to provide relevant information such as social security number, address, driver’s license number and date of birth. Employers should make clear that the information is only to be used in connection with the consumer reporting agency’s background screening.
  2. Outside of the notice and consent Form, the FCRA also requires that employers notify applicants, in advance, if information contained in their consumer report may be used as a basis to reject their employment application. This step is intended to permit the individual to dispute or correct any inaccuracies in the report. Thus along with the pre-adverse action notification, the employer must provide the individual with a copy of the background screening report and the publication entitled “Summary of Your Rights Under the Fair Credit Reporting Act.”
  3. If the employer still intends to deny employment to the applicant, the employer must send an adverse action notice within a reasonable period of time (generally no less than 5 days).
  4. Employers must also certify to the reporting agency that the employer will only use the information provided by the reporting agency for employment purposes and otherwise in compliance with the law.

A law like the FCRA with strict compliance requirements and an attorneys’ fee provision is an attractive weapon for employees and their attorneys. Employers should be diligent in complying with the FCRA to mitigate the risk of claims, which can result in the imposition of penalties up to $1,000 per violation, the award of attorneys’ fees and even punitive damages.

As we begin a new year, take time to review your company’s FCRA compliance as well as your company’s compliance with other applicable employment laws.