Background Firm Sued for Reporting Criminal Matters without Using Reasonable Procedures

In another 2008 federal case, a consumer sued a national background screening firm for negligent violation of the FCRA, on the basis that the screening firm failed to utilize reasonable procedures before reporting possible criminal hits.

The federal trial court had granted a summary judgment in favor of the background screening firm, since the plaintiff did not present any expert testimony that the procedures used by the screening firm was unreasonable. On appeal to the United States Court of Appeals for the District of Columbia District, the appellate court reversed the trial court ruling, and ruled that an expert witness was not required in a case against a screening firm for negligence, and that the report by itself can be used as “evidencing unreasonable procedures.

Here are the facts of the case: the employer, a large national insurance company offered the plaintiff a job. On August 12, 2002, the background firm performing checks hired an outside researcher to check courts for criminal records. The outside researcher in turn hired a researcher.

The outside research firm reported 13 possible cases on the consumer, but with a note indicating “it was at a loss.

The employer apparently received this information as well, because the employer told the plaintiff he had a criminal record. Almost three weeks after being retained, the outside research firm faxed the background screening firm more information on the 13 potential cases. It turned out that six of the cases could not have been related to the Plaintiff because they had different names, birthdays and/or race.

On September 2, 2002, the employer withdrew the job offer because it had “not received complete and satisfactory background verification in a reasonable amount of time. The Plaintiff was provided with a copy of the background report indicating that there were ‘pending’ investigations apparently involving the Plaintiff.

On the same day, the Plaintiff began his own investigation by contacting the Oklahoma State Bureau of Investigation and the Oklahoma State Courts Network that confirmed that the Plaintiff in fact had NO criminal record. On September 6, 2002, the background firm reached the same conclusion. However, the employer never hired the Plaintiff, despite a lack of a criminal record. The court also noted that the Plaintiff’s own investigation took ten minutes spread over 2-3 days, while the background screening firm took 36 days.

The Court found, based upon previous cases, that the standard for judging the reasonableness of procedures “is what a reasonable prudent person would do under the circumstances. For a background firm, that involves weighing the potential harm from inaccuracy against the burden of safeguarding such accuracy. The court noted that where the potential harm is great and the burden is small, the duty of a background screening firm to clarify inaccurate or incomplete information is at its highest.

In this case, the federal Appellate court ruled that although expert testimony can be helpful, it is not absolutely required and that in some cases, inaccurate reports ‘by themselves can fairly be read as evidencing unreasonable procedure.’

This case demonstrates a number of potential issues of concern to employers, which include:

How does a screening firm select its court researchers?

How does a screening firm maintain quality control over its researchers?

Is an employer getting unfiltered information directly from outside court researchers or is the negative information professionally reviewed by the background screening firm before it is passed onto the employer?