5 Ways to Avoid Getting Sued for Violating the FCRA

With an increase in litigation brought against employers for violating the FCRA, it is necessary to identify five common themes employers slip up on when conducting backgrounds checks pursuant to the FCRA.

1.) Compliant Disclosures and Authorizations

Recently, PepsiCo, Inc. was held liable with over $2 million in a class action lawsuit for violating the FCRA. The charges against PepsiCo, Inc. were brought on because the organization had additional (extraneous) language on their disclosure and authorization form. The FCRA states that employers must disclose and acquire applicant consent before conducting the employment background check. Furthermore, the disclosure form must have specific language disclosing to the candidate the scope of the background check, and the Consumer Reporting Agency (CRA) who will be procuring the screening report. Recently, federal courts have advised companies that the disclosure and authorization form must reside on two separate pages (as opposed to one “stand alone” form) with the disclosure and authorization separate from one another.

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 2.) Compliant Notices

Once a candidate completes the employer’s compliant disclosure and authorization form, certain notice must be provided. These notices provide transparency to the applicant of what public record information is provided by consumer reporting agencies. They also highlight the candidate’s right to dispute adverse information that could disqualify them from employment. This federal notice is called the Fair Credit Report Act’s “Summary of Rights.” Additionally, certain states have their own state-specific notices disclosing specific requirements that the employer must comply with when screening residence of the specific state.

3.) Utilizing Public Records

When employers engage a background screening company to pull public records, they have to ensure they are complying with the both federal and state reporting laws. With the ever growing implementation of “ban-the-box laws,” employers may not use certain type of convictions to take adverse action. An example of this would include marijuana convictions over a certain amount of time or convictions that were set aside due to diversion program. Also, employers must ensure that the public records they are receiving are convictions (pled “no contest” or found guilty) within seven years from the case disposition.

4.) Ensuring Maximum Possible Accuracy

Background screening companies, otherwise known as Consumer Reporting Agencies (CRAs), also have requirements under the FCRA that employers must be aware of. CRAs must make sure they are using maximum possible accuracy when reporting public records. This means that when a county criminal conviction is reported by the CRA, there must be at least two pieces of applicant information (full name and date of birth) identified before reporting. If employers are receiving records with a “name match,” they may only be held liable for utilizing that information when taking adverse action. This is because the record may not even be associated with the subject of the report.

5.) Applicant Dispute Process

If an employer has elected to take adverse action based on the background screening report, they must follow the pre-adverse/adverse action process. Essentially, the employer must notify the candidate in writing with a pre-adverse action letter, along with a copy of the report, and federal/state specific notices. The adverse information reported by the background screening company will be relayed, and five business day will be given to dispute the information with the background screening company if the candidate feels the information is inaccurate. If the applicant does not dispute the information within five days after an adverse action letter is sent out, employment will not be granted. It should be noted that “ban-the-box” laws state that employers must conduct an individual assessment (pursuant to the EEOC) before taking adverse action.