Companies often face lawsuits under the Fair Credit Reporting Act (FCRA) regarding the sufficiency of disclosures informing prospective employees that a background screening report will be obtained. As the Federal Trade Commission reminds in a recent blog posting on its website, employers must avoid lapses that could create FCRA liability.

Background screening reports are “consumer reports” under the FCRA when they serve as a factor in determining a person’s eligibility for employment, housing, credit, insurance or other purposes and they include information “bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics[] or mode of living.”

FCRA requires the following of employers:

• Before obtaining a background screening report about a prospective employee, disclose to the person the intention to get the report and get the candidate’s written authorization allowing you to do that. • If the background screening report reveals facts affecting a decision not to hire, the employer must notify the candidate of the results of the report and provide a copy. Next, the employer must give sufficient time to review the report so the candidate can challenge any elements that might be incorrect.

• If the employer ultimately decides not to hire someone based in whole or in part on the contents of a background screening report, the employer must provide a notice to that person stating that the hiring decision was at least in part the result of the background screening report.

Under FCRA, a company may put the required disclosure and its request for their authorization in one document. The wording must be clear so that the prospective employee will understand. Within the document, complicated legal jargon or extra acknowledgements or waivers could create FCRA liability. The FTC notes some examples of language that should not be in the document:

• Don’t include language claiming to release the company from liability for conducting, obtaining or using the background screening report

• Don’t include a certification by the prospective employee that all information in his or her job application is accurate

• Delete any wording that purports to require the prospective employee to acknowledge that hiring decisions are based on legitimate non-discriminatory reasons

• Avoid overly broad authorizations that permit the release of information that the FCRA doesn’t allow to be included in a background screening report—for example, bankruptcies that are more than 10-years old.

If the employer has additional waivers, authorizations or disclosures that it provides to prospective employees, it should do so in a separate document. Don’t include them in the FCRA disclosure and authorization document.

These guidelines should be integrated into a company’s hiring practices to avoid the substantial costs and risks associated with FCRA lawsuits, which can often include efforts to proceed as a class action.