The Fair Credit Reporting Act (“FCRA”) requires that employers take certain steps before they ask a “consumer reporting agency” to run a background check on applicants or current employees. What does this mean? Employers who use background checks often must first give applicants and employees written notice that they will obtain a consumer report, get the employee’s written consent, and provide multiple notices of an intent to take an adverse action (ie, not hire!). Moreover, some states have adopted FCRA-like statutes with even more hoops to jump through.
Class action suits against employers violating these federal and state consumer reporting laws are on the rise for a number of reasons. First, the FCRA’s relief provisions are attractive to class action plaintiffs’ lawyers. Employers who negligently fail to comply with any of the statute’s technical requirements can be liable for actual damages for each violation. Courts have even held that plaintiffs do not need to show that they suffered actual damages in order to pursue a monetary award. Second, employers who willfully violate the FCRA can be liable for additional punitive damages. Willful has been defined broadly to include repeated and systematic violations. And to make matters worse, the statute of limitations for bringing a claim under the FCRA is five long years.
Overall, employers should carefully review and revise their forms and procedures, specifically their background check consent forms, their notice forms, and any other policies or procedures used when conducting background checks for applicants and employees. The vendors who do background checks often provide forms – but beware, the vendor’s form is primarily designed to protect the vendor. It may be wise to review those forms and make sure the employer’s interest also is protected. Failure to do so can result in large damage awards and legal fees.