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February 2012 Vol. 12, No. 2
1. FTC Warns Background Check Mobile Apps May Violate Fair Credit Reporting Act Regulating Consumer Reporting Agencies
In a developing story that shows why Consumer Reporting Agencies (CRAs) should follow the Fair Credit Reporting Act (FCRA) when providing background checks, the Federal Trade Commission (FTC) recently warned marketers of six background check mobile applications ("apps") that they may be violating the FCRA, a federal law enforced by the FTC that regulates CRAs. The FTC sent letters to three background check app marketers warning that they must comply with the FCRA if the background check reports they provide are being used for employment, housing, and credit purposes, according to an updated FTC press release at: http://www.ftc.gov/opa/2012/02/mobileapps.shtm.
In the press release, the FTC named the three background check mobile app marketers that received the warning letters:
The FTC - the federal agency that works to protect America's consumers - also provided links to copies of the warning letters in the press release:
According to the letters, the FTC has made no determination whether the companies are violating the FCRA, but encourages them to review their background check apps and their policies and procedures. A portion of the letters read: "At least one of your company's mobile applications involves background screening reports that include criminal histories. Employers are likely to use such criminal histories when screening job applicants. If you have reason to believe that your background reports are being used for employment or other FCRA purposes, you and your customers who are using your reports for such purposes must comply with the FCRA." The press release 'FTC Warns Marketers That Mobile Apps May Violate Fair Credit Reporting Act' is available at: http://www.ftc.gov/opa/2012/02/mobileapps.shtm.
The FCRA is designed to protect the privacy of consumer report information and ensure that the information supplied by CRAs is accurate. Consumer reports are communications that include information on an individual's character, reputation, or personal characteristics and are used or expected to be used for purposes such as employment, housing, or credit. Under the FCRA, operations that assemble or evaluate such information to provide to third parties qualify as CRAs. Background check mobile apps marketers may qualify as CRAs under the Act since they assemble or evaluate similar information to provide to third parties. As CRAs, they must:
A 2011 white paper - 'Background Check Mobile Phone Apps and Instant Background Check Web Sites: Fast and Easy, But Are They Accurate?' - also noted the same issues about FCRA compliance that the FTC warned background screening mobile apps marketers about in the letters. Co-written by Attorney Lester Rosen, founder and CEO of Employment Screening Resources (ESR), a San Francisco-area background check firm accredited by the National Association of Professional Background Screeners (NAPBS), the white paper examined the accuracy of background check mobile apps. While background check mobile apps may be fast, cheap, and easy to use, the information they provide may not be entirely accurate and "can lead to hasty and dangerous conclusions" such as:
The complimentary white paper 'Background Check Mobile Phone Apps and Instant Background Check Web Sites: Fast and Easy, But Are They Accurate?' is available on the Employment Screening Resources (ESR) website at: http://www.esrcheck.com/Download/.
Read the full article at: http://www.esrcheck.com/wordpress/2012/02/14/ftc-warns-background-check-mobile-apps-may-violate-fair-credit-reporting-act-regulating-consumer-reporting-agencies/.
2. Background Check Class Action against Employer for Violations of the Fair Credit Reporting Act Survives Challenge
In yet another class action alleging that an employer did not comply with the legal requirements of the federal Fair Credit Reporting Act (FCRA), a federal court in Maryland refused a motion to dismiss a class action that alleges that Domino's Pizza failed to comply with the requirements of the FCRA, the federal law the regulates pre-employment background screening. In a decision filed January 25, 2012, the Court did not rule on the facts, but ruled that the plaintiffs had made a sufficient showing to deny a motion by the employer to dismiss. In addition, the court refused to strike allegations that the conduct was willful, which means that the plaintiff faces statutory damages as well as potential punitive damages.
The lawsuit contended that both plaintiffs were the subject of background checks, had started working, and later were terminated after the background check was completed. In both instances, the plaintiffs were not provided with a copy of the report or advised of any rights before the termination. In addition, both plaintiffs alleged that the background screening consent they signed included a release of liability for the background check on the form that was part of the application packet. The form was called a "Background Investigation Information and Consent" or BIIC. As a result, according to the complaint, the employer failed to meet the legal requirement for a "standalone" form since the BIIC contained extraneous information and was not separate.
FCRA section 604(b)(3)(A) requires that before taking any adverse action against a consumer, such as not hiring the consumer, or termination if the background check is completed after hiring, the employer must provide certain information to the consumer, often referred to as a notice of pre-adverse action. This includes a copy of the background report as well as a statement of rights prepared by the Federal Trade Commission (FTC), the federal agency that enforces the FCRA. The purpose is to provide a safety valve in the event the report is inaccurate or incomplete. That can happen, for example, if a consumer is the victim of identity theft and a crime is committed in his or her name, or if a court record is inaccurate. The consumer then has an opportunity to set the record straight.
The second allegation was based on FCRA sections 604(b)(2)(a)(i))(ii) which regulate disclosure of information to a consumer and the need for a written authorization, including a specific requirement that the disclosure be "in a document that consists solely of the disclosure."
In this case, the lawsuit alleged that the disclosure contained a release of liability that purported to release the employer as well as any provider of information from any liability, claims, or causes of action related to the information obtained. The Court ruled that this could be the basis of a violation of the "standalone" document requirement by inserting unnecessary information on the release. In fact, two previous opinions letters from the staff of the FTC have indicated that such a release of liability would not be consistent with the FCRA:
Although the employer pointed out that the FTC staff letters are not legally binding, the Court did note that they were considered persuasive, and would bear upon whether the employer willfully violated the FCRA. The Court noted that:
Ultimately, both the statutory text and FTC advisory opinions indicate that an employer violates the FCRA by including a liability release in a disclosure document. Because the BIIC form contains such a release, Domino's has not shown, as a matter of law, that the form complies with the FCRA. Its attempt to have counts two and three dismissed on this ground must, therefore, fail.
In the motion to strike, the employer sought to avoid exposure to punitive damages by arguing that its actions did not amount to a willful violation of the FCRA and the employer should not be subject to statutory damages under FCRA section 616. If an employer is merely negligent, then a plaintiff is only entitled to actual damages as well as reasonable attorney's fees and court costs. If an employer is willful, then the damage can be up to $1,000 a person regardless of actual damages. In a class action lawsuit, the class seeks to obtain $1,000 for every person subject to the violating, which can be a large number if a large employer is involved. The class action also seeks attorney's fees and, more importantly, punitive damages.
The case is 'Singleton, et. al. vs. Domino's Pizza' (United States District Court - Maryland) Civil Action No. DKC 11-1823.
Read the full article at: http://www.esrcheck.com/wordpress/2011/12/15/new-class-action-lawsuit-against-major-financial-institution-for-fcra-violations-demonstrates-importance-of-legal-compliance/.
3. E-Verify Self Check Now Available in All 50 United States
The U.S. Citizenship and Immigration Services (USCIS) has announced that the free online service of the E-Verify electronic employment eligibility verification system called "Self Check" that allows workers to check their own employment eligibility status is now available in all 50 United states, as well as Washington, D.C., Guam, Puerto Rico, the U.S. Virgin Islands, and the Commonwealth of Northern Mariana Islands. For more information about Self Check, please visit: http://www.uscis.gov/selfcheck.
According to the news release 'USCIS Announces Expansion of E-Verify Self Check,' approximately 67,000 people have used Self Check - which is available in both English and Spanish - since its initial launch in March of 2011. Self Check allows users to access their federal employment eligibility records and for guidance on how to correct potential record discrepancies prior to the hiring process. The USCIS anticipates participation will dramatically increase with service now available to individuals across the United States.
Self Check was developed through a partnership between the Department of Homeland Security (DHS) and the Social Security Administration (SSA) to provide individuals a tool to check their own employment eligibility status and correct their DHS and SSA records. Self Check enables individuals to enter the same information into Self Check that employers enter into E-Verify and is the first online E-Verify service offered directly to workers.
The announcement from the USCIS delivers on the agency's goal of expanding Self Check nationally within one year. For more information about the E-Verify Self Check, visit http://www.uscis.gov/selfcheck. For information about the USCIS - the government agency that oversees lawful immigration to the United States - visit http://www.uscis.gov/.
Read the full article at: http://www.esrcheck.com/wordpress/2012/02/13/e-verify-self-check-now-available-in-all-50-united-states/.
ESR Articles (click for more info)
The FCRA in 4 Easy Steps
Find out how to be in compliance with the FCRA
Criminal Records and Employment Applications
What questions should employers be asking?
10 Safe Hiring Tools
These tools don’t cost anything and promote a safe and profitable workplace
Negligent Hiring
What occurs when Due Diligence is not performed
Please feel free to contact Jared Callahan at ESR at 415-898-0044 or jcallahan@esrcheck.com if you have any questions or comments about the matters in this newsletter. Please note that ESR's statements about any legal matters are not given or intended as legal advice.
Employment Screening Resources (ESR)
www.ESRcheck.com
7110 Redwood Blvd., Suite C
Novato, CA 94945
415-898-0044
