As the Milwaukee Journal Sentinel recently reported, a Wisconsin man has recently made a career by threatening and filing lawsuits against numerous businesses around the country for technical violations of the federal Fair Credit Reporting Act (FCRA). FCRA imposes a number of requirements on employers who obtain background checks of employees and applicants through background checking or consumer reporting agencies. In the past 18 months, this professional FCRA plaintiff has threatened or filed complaints against more than 46 companies and obtained more than $230,000 in settlements—all over technical disclosure requirements in the law. Click here to read the article.
And he is not the only one trying to strike it rich off employers’ FCRA missteps. In 2015, more than 400 class action lawsuits were filed for alleged violations of FCRA. With FCRA claims on the rise, and showing no sign of slowing down, now is the time to review your company’s background check procedures to help ensure it is not the next in line for a FCRA claim. Here are some important FCRA requirements to keep in mind:
Employers must disclose to an individual that they intend to seek his or her “consumer report” (e.g., a credit report) and/or an “investigative consumer report” (e.g. a report bearing on an individual’s character and general reputation). The disclosure must be a standalone document and it should be easy for the individual to understand.
Employers must also obtain written authorization from the individual before they obtain his or her consumer report and/or an investigative consumer report.
Adverse Employment Action
If an employer does not want to hire an applicant (or wants to discharge a current employee) based at least in part on the individual’s consumer report/investigative consumer report, then the employer must:
Notify the individual that it intends or may decline an offer of employment based on the report findings
- Provide a copy of the report
- Provide a written description of the individual’s rights under FCRA
- Wait five days before making a final decision
Send a final notice to the individual that the employer is not extending an offer of employment
Additional Requirements for Investigative Consumer Reports
Employers seeking investigative consumer reports must also (in addition to the requirements mentioned above):
- Provide an individual with written notice that it is seeking an investigative consumer report at least three days before it requests a report
- Inform the individual of the right to request a complete and accurate disclosure of the nature and scope of the investigation. If requested, the employer must deliver the disclosure within five days after receiving the individual’s request
- Provide employer must provide a summary of rights under FCRA
- On top of the technical requirements imposed by FCRA, the federal Equal Employment Opportunity Commission (EEOC) has been scrutinizing business' use of background and credit checks when it believes the use of such reports have discriminatory effects. Additionally, numerous states have jumped on the "Ban the Box" bandwagon, and prohibited employers from asking applicants about their criminal records on employment applications. This is an increasingly regulated area of the law and a minefield for businesses. Ensuring that your business is aware of and complying with the myriad of applicable laws is critical to avoid being next in line for the professional plaintiffs.