Background Firm Sued for Violation of FCRA by Reporting Existence of Prohibited Records

In this federal case, a national employment screening firm uncovered information that the applicant had an arrest record over seven years ago. There were no convictions, but arrests only. The federal Fair Credit Reporting Act (FCRA) prohibits the reporting of an arrest older than seven years old, unless the applicant is reasonably expected to make a salary of over $75,000 per year. See FCRA section 605 (15 U.S.C. 1681c).

In order to determine if the arrests were reportable, the screening firm sent a communication to the prospective employer indicating that there was a criminal history that was over seven years old that was not a conviction, and that it could only be reported if the applicant was going to make over the $75,000 yearly limit. The employer was told that if they wished to receive this information, they must confirm to the screening firm if the applicant met the salary threshold.

The job applicant filed a lawsuit in the United States District Court for the Eastern District of Pennsylvania, alleging damages for the practice of disclosing the existence of outdated arrest records. The basis of the lawsuit was that the manner in which the background firm asked about salary amounted to a notification that an applicant has an arrest record.

The screening firm, among other arguments, suggested that merely reporting the existence of old arrest records did not violate the FCRA, since the background firm did not provide disclosure of the actual records.

The court denied the screening firm’s motion to dismiss and allowed the lawsuit to proceed. The Court ruled that even if the FCRA was ambiguous on what constitutes reporting an arrest record, the FCRA was clear that the general prohibition against reporting items of adverse information over seven years old was violated. By informing the employer that there was such information in the process of establishing the applicant’s salary, the screening firm ended up reporting something adverse that may have been prohibited.

The walk-away point is that a background firm needs to understand that any communication of negative information to an employer has potential ramification, even if the communication is not contained in the actual report. It also underscores that screening is a legally regulated professional service, and not merely data reporting.