Pre-Employment Screening Background Check Blog for Employers, Human Resources and Security by ESR

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?

This issue of the ESR Legal Update and Newsletter reviews two of the lawsuits filed in 2008 against background screening firms by consumers. Although an employer may not always be named as a party in a lawsuit against a screening firm, employers should be concerned if a screening firm’s practices end up as court cases.

These court cases underscore two important facts about pre-employment background checks:

It is an area that is subject to a high degree of regulation by both federal and state law, since it involves such core societal issues as privacy, protection of the public and a safe workplace, and the ability of individuals to obtain employment.

Consumers and plaintiff’s lawyers have become very familiar with the rules that govern screening, and that unless it is done properly by knowledgeable professionals, there is an increased risk of lawsuits being filed.

There is no question that background checks are mission critical for any organization. Background checks are an essential part of any company’s due diligence efforts. The lesson from these cases, however, is that background screening has become a professional endeavor that requires a great deal of legal and subject matter expertise. Employers need to exercise caution in selecting a screening partner by making sure that the screening firm has that professional knowledge and expertise required to perform legally compliant screening.

The names of the litigants are not included in this newsletter, since it is the general principals that are important. A reader of this newsletter with a need to know the details may contact Jared Callahan, Director of Sales and Marketing at ESR for more details. He can be reached by e-mail at jcallahan@esrcheck.com

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.