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Court Rules Against Employer in FCRA Compliance Case

Posted by Ryan Howard on Wed, Nov 01, 2017

Employer in FCRA Compliance Case.png 
Not only do employers have the task of running their businesses but they must also stay aware of laws that relate to employment. There has been a sharp increase in litigation brought against employers who may be in violation of the Fair Credit Reporting Act during their hiring and screening processes. If an applicant doesn't pass a background check, the employer must follow a set of "adverse action" procedures to inform the applicant. When these procedures aren't followed, employers are facing fines and lost resources.

A recent court case reveals another potential hit for employers if their hiring processes aren't FCRA-compliant.

Procedures for Adverse Action Notices

When an employer relies on background screening to determine a hiring or other employment decision, they must follow Fair Credit Reporting Act (FCRA) procedures including:

  • Obtaining consent and authorization to run a background check.
  • Sending pre-adverse action notice to notify the individual that adverse action may be taken due to information in their background check.
  • Providing a copy of background report to applicant, with a written summary, and allowing them to dispute the findings if they are inaccurate.  Also providing a copy of "A Summary of Rights Under the Fair Credit Reporting Act" and contact information of the CRA (credit reporting agency).
  • If after a reasonable period of time, the applicant hasn't disputed the results, sending adverse action notice to inform the applicant that adverse action will be taken based on the information in the report.  Providing contact information of credit reporting agency (CRA) that ran the report, statement that the CRA did not make the hiring decision, and notifying the applicant of their right to receive a second copy of their report and still dispute the findings.

It is the employer's responsibility to send adverse action notices, however, they may request assistance from the credit reporting agency who ran the report.

See also: Denying Employment: An Adverse Action Guide

HR

Updated Background Check May Require Updated Adverse Action Notice

A federal court judge in Eastern Pennsylvania recently allowed a plaintiff's case to go to a jury after he stated that his potential employer did not follow the rules of the FCRA. The premise of the claim was:

  • The plaintiff received a job offer contingent on a background check.
  • The employer received a partial background check that revealed a misdemeanor DUI conviction as well as two drug-related felony convictions. 
  • The employer then mailed a pre-adverse notice to the plaintiff with a copy of the partial report, notice that the report information may be used to withdraw the job offer, and a summary of his FCRA rights.
  • A final background check was received by the employer a week later with the same convictions but additional information with regards to credit.
  • Because the criminal information was the same and the plaintiff did not dispute it, the employer did not send a second pre-adverse notice when the more thorough report was received.

The plaintiff argued that he did not receive the first pre-adverse notice.  The court rejected this argument stating that the FCRA dictates the employer "provide" the notice, not that the applicant "receive" it.  

Because the second report was never sent to the plaintiff, he also argued that the employer relied on the information provided in it (the same information as the first and more) to withdraw the job offer. 

The case will now be sent to a jury to determine if the employer was, in fact, in violation of the FCRA and needed to provide a second adverse action notice. 

What Does This Mean For Employers?

VeriFirst always recommends FCRA compliance and compliant best practices to our clients. Our FCRA-certified staff works with employers to answer questions and guide them through the background check process.  With severe penalties, time, and resources involved in litigation, it behooves HR departments and hiring managers to create a standardized background screening process, updating these procedures when necessary, and follow compliance expectations to the letter. 

Human Resources Background Screening Kit and Templates

 

Topics: FCRA Compliance