Employment background check cases are becoming more common. The Fair Credit Reporting Act (or “FCRA”) governs the circumstances in which an employer may procure a “consumer report,” which the FCRA defines to include all criminal and financial background checks furnished by private companies. The FCRA also dictates the types of information which may be contained in background check reports themselves, and imposes procedural obligations on employers who rely on such reports in taking an adverse employment action against a job applicant or employee. The FCRA is a broad law that regulates a wide variety of conduct by both the users and furnishers of consumer reports, and also regulates virtually the entire industry of credit reporting. This post focuses on the provisions of the FCRA that are specific to the procurement, furnishing, and use of background reports for employment purposes.

Any employer who is purchasing a report that relates to an applicant’s or current employee’s background (criminal, financial, or otherwise) from a third party is likely to be covered by the FCRA. The FCRA places several specific duties on employers during the screening process, which are discussed below. The employer’s responsibilities under the FCRA are technical and specific.

Employers Must Provide a Stand-Alone Disclosure

An employer wishing to procure a background check from a private company must first provide the job applicant or employee with a written disclosure stating its intention to conduct a background check. Importantly, this disclosure must be provided to the applicant or employee in writing in a stand-alone document that consists solely of the disclosure and cannot be included with any other paperwork or information. Additionally, this standalone disclosure:

  • Must be made before the report is procured;
  • Must be made clearly and conspicuously;
  • Must be made in a document that consists “solely” of the disclosure. This means on a separate page dedicated only to the disclosure; it may not appear as just another page in the job application;
  • Must not contain anything other than the disclosure, i.e. no liability release, no extraneous information about benefits, no agreements from the employee, etc.
  • Must list all entities receiving the background information.

Employers Must Obtain Written Consent

The subject of the background check – the applicant or employee – must provide written permission to conduct the screening to the employer before the employer procures a background check. This consent is required prior to accessing an applicant’s or employee’s background report from a credit reporting agency.

Employers Must Certify Legal Compliance to the Consumer Reporting Agency

When procuring a background report for employment purposes, an employer must certify that it provided the required stand-alone disclosure mentioned above to the applicant or employee, that it received written authorization to obtain a consumer report, that it complied with all of the FCRA requirements, and that information in the report will not be used to violate any federal or state equal opportunity laws or regulations.

Employers Must Provide Pre-Adverse Action Notice

While the employer’s obligations discussed so far come into play before the employer obtains an applicant’s or employee’s background report, the employer’s obligations under the FCRA do no end once the consumer report is obtained. The FCRA requires that pre-adverse action notice be provided to an applicant or employee for whom a consumer report has been obtained any time that an employer intends to take adverse action based in whole or in part on the contents of the consumer report. This notice must be provided before an employer takes adverse action. Because adverse action is broadly defined in the employment context and includes action against a current or prospective employee, decisions concerning the promotion, demotion, and firing of an employee require pre-adverse action notice just as decisions concerning hiring an applicant do. Adverse action relating to employment also includes the cancellation or reduction of an employee’s benefits or a reduction in wages or salary, as well as any other adverse changes to the work environment.

The required pre-adverse action notice must provide the applicant or employee to whom the report relates:  (1) a copy of the report; and (2) a description in writing summarizing the applicant’s or employee’s rights under the FCRA. This pre-adverse action notice must be provided to the employee or applicant at least 5 days prior to taking adverse action, and possibly more than 5 days prior to adverse action if 5 days is an insufficient amount of time for the consumer reporting agency to issue a corrected report in the event that the original report contained inaccurate information. The purpose of pre-adverse action notice is to allow the applicant or employee an opportunity to review the report and notify the employer if any information contained in the report is inaccurate. It also allows time for the applicant or employee to dispute any information with the background reporting agency that is inaccurate.

Employers Must Provide Post-Adverse Action Notice

In addition to the pre-adverse action notice that employers must provide, employers must also send a letter indicating they took adverse action based in whole or part on a consumer report after taking such action. The required post-adverse action notice must contain the following information:

  • The name, address, and phone number of the consumer reporting company that provided the report;
  • A statement that the company that supplied the report did not make the decision to take the unfavorable action and cannot give specific reasons for it; and
  • A notice of the person’s right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get an additional free report from the company if the person asks for it within 60 days.

Finally, employers who obtain consumer reports must use due diligence to ensure that the reports, and any information gathered from them, are properly maintained and disposed.

Damages Available to Applicants and Employees for Violations of the FCRA

The FCRA places a number of duties on employers obtaining consumer reports for applicants or employees. Employers must follow the letter of the law or face the potential of a lawsuit if they fail to do so. Violations of the statute may result in statutory damages of up to $1,000 per violation, plus punitive damages and attorney’s fees, for successful plaintiffs.

When applying for a job or when your employer obtains your background report, it is important to review the report and ensure that the information contained in it is accurate. The reality is that employers do rely on information contained in background check reports as a basis to determine whether or not to offer an employment opportunity to an applicant or to take adverse actions against current employees. The FCRA provides protection to applicants and employees.

If you believe that your rights have been violated under the FCRA by a potential employer you applied for a job with or by an employer you worked for, you should contact an experienced employment law attorney to review your situation and discuss your rights.