Court Holds Federal Fair Credit Reporting Act Is Constitutional and Does Not Violate First Amendment

A large background screening firm facing a class action lawsuit alleging inaccurate reports in violation of the federal Fair Credit Reporting Act (FCRA) failed in its attempt to have the FCRA declared unconstitutional on the basis that it violates the right to free speech under the First Amendment. A Pennsylvania federal court ruled on November 6, 2012 that the FCRA was constitutional since it regulated information disseminated for private purposes for a fee, and not to the public. More information about the ruling is available at http://www.paed.uscourts.gov/documents/opinions/12D1046P.pdf.

The FCRA is the federal law that regulates background checks.  The lawsuit alleges that the screening firm provided inaccurate reports by providing  a prospective employer with information on past arrests that were dismissed and were older than seven years, which is prohibited by FCRA section 605 (U.S.C 1681c). That law prohibits a background firm, known as a Consumer Reporting Agency (CRA) from providing arrests records to employers that are more than seven years old.  There is an exception, however, if the annual salary is expected to be $75,000 or more a year.

In this case, the lead plaintiff in the class action lawsuit alleged that the CRA reported ten cases older than seven years where she was arrested but no prosecutions occurred.  It appears that the parties agreed with the fact that the arrests too old to report under the FCRA. However, the CRA argued that the FCRA itself was unconstitutional since it violated the CRA’s right to free speech.

The CRA contended that a 2011 U.S. Supreme Court case on commercial speech marked a major change in the protections provided to commercial speech and required a court to apply a stricter standard of review.  The plaintiff, as well as the federal government which entered the case, argued that a background report is not protected since it deals with private matters, and that the information is only disseminated to an employer that purchases the services.  After a lengthy review of the arguments and an analysis of the applicable law, the court concluded that the FCRA was constitutional

The Court also noted that “…the federal government enacted section 1681c of the FCRA to provide businesses with the most accurate and relevant information while simultaneously protecting the privacy right of consumers. More important, section 1681c’s speech restriction is appropriately justified.”

The ruling had the effect of denying the background firm’s effort to have the case dismissed.

(NOTE:  The case is from the U.S. District Court for the Eastern District of Pennsylvania, No. 10-6850, and filed 11/06/12). It is ESR’s policy not to identify firms where a matter is only in the pre-trial state since the complaints are just allegations.)

Regardless of the eventual outcome of the lawsuit, the case demonstrates yet again that background checks are subject to ever increasing levels of litigation, legislation, and regulation.  On the other hand, failure to perform background checks will almost certainly subject an employer to the legal and financial nightmare of a bad hire. The solution is a background check program done in full legal compliance.

Employment Screening Resources (ESR) utilizes a proprietary system of ESR Assured ComplianceSM to make sure that all applicant rights are provided for. In addition, ESR has a policy of using primary sources only so that all records are reviewed for accuracy. ESR does not report criminal records from databases directly to an employer without taking reasonable steps to verify that the record is current and up to date, that it belongs to the applicant, and that it is reportable under the many complex federal and state laws.

For more information about ESR Assured ComplianceSM, available only from Employment Screening Resources, visit http://www.esrcheck.com/ESR-Assured-Compliance.php. To learn more about background checks, visit Employment Screening Resources (ESR) – ‘The Background Check AuthoritySM’ and nationwide background screening firm accredited by The National Association of Professional Background Screeners (NAPBS®) – at http://www.esrcheck.com/, call Toll Free 888.999.4474, or email customerservice@esrcheck.com.

Related ESR News Blog: ESR Assured Compliance Offers Employers Automated Compliance with Employment Screening Laws through Online Paperless AGR System

About Employment Screening Resources (ESR):

Founded by safe hiring expert Attorney Les Rosen in 1997, Employment Screening Resources (ESR) – ‘The Background Check AuthoritySM’– provides accurate and actionable information that empowers employers to make informed hiring decisions for the benefit of their organizations, employees, and the public. CEO Rosen literally wrote the book on background checks with “The Safe Hiring Manual” and ESR is accredited by The National Association of Professional Background Screeners (NAPBS), a distinction held by a small percent of screening firms. Employers choosing ESR know they have selected an agency meeting the highest industry standards. To learn more, visit http://www.esrcheck.com, call 888.999.4474, or email customerservice@esrcheck.com.

About ESR News:

The Employment Screening Resources (ESR) News blog – ESR News – provides employment screening information for employers, recruiters, and jobseekers on a variety of topics including credit reports, criminal records, data privacy, discrimination, E-Verify, jobs reports, legal updates, negligent hiring, workplace violence, and use of search engines and social network sites for background checks. For more information about ESR News or to send comments or questions, please email ESR News Editor Thomas Ahearn at tahearn@esrcheck.com. To subscribe to the complimentary ESRcheck Report monthly newsletter, please visit http://www.esrcheck.com/Newsletter/.