A staffing firm that places individuals in temporary positions with independent employers cannot be sued under the federal Fair Credit Reporting Act (FCRA) when a background check firm hired by the staffing firm delivers a background check report that is inaccurate or erroneous.
In a case from the United States District Court for the Eastern District of Tennessee, a staffing firm retained an employment screening firm to provide a background check report. The background check report indicated that the plaintiff had been convicted of a felony and misdemeanor, had served jail item, was serving probation, and had made restitution for theft and assault.
According to the lawsuit, the problem with the background check report was that it was false and erroneous. As a result, the plaintiff lost an opportunity to become a permanent employee at the location where she was assigned, and was also terminated from working for the staffing firm.
Among other rulings, the Court dismissed the allegations that the staffing firm violated the FCRA for the simple reason that a staffing firm that hires a background check firm is not a Consumer Reporting Agency (CRA) under federal law. The FCRA regulates employment background checks in the United States.
A firm that provides background checks is known as a Consumer Reporting Agency (CRA). A CRA, among other things, is a firm that “regularly engages in whole or in part in the practice of assembling or evaluating…information on consumers for the purpose of furnishing consumer report to third parties…” (FCRA section 603f).
In this case, the staffing firm outsourced that function to a background check firm. The Court held that the staffing firm clearly did not qualify as a CRA because it was not engaged in conducting background checks as defined by the FCRA.
However, this does not mean that staffing firms are always in the clear. Although not alleged in this case, a staffing firm could still potentially be the subject of litigation for “negligent” selection of a background screening firm if a consumer can show that the staffing firm fell below an acceptable standard of care in choosing a background screening firm and that firm produced an inaccurate background check report.
For example, if a staffing firm selects a background check firm based only on price without considering other qualifications, a plaintiff may be able to state a cause of action for negligence. That means that a staffing firms should be careful in how they select a background screening partner.
One way to ensure a good selection process is to determine if a background check firm is accredited by the National Association of Professional Background Screeners (NAPBS). A staffing firm may also want to issue a Request for Proposal (RFP) in order to demonstrate due diligence in their partner selection process. For information on how to select a background screening firm, visit: http://www.esrcheck.com/ESRadvantage.php.
(As a general rule, Employment Screening Resources (ESR) does not identity the parties involved in litigation concerning background checks. However, if any reader has a legitimate research need for the actual case and cannot locate it, please contact ESR News Editor Thomas Ahearn at [email protected].)
Founded in 1996 in the San Francisco area, Employment Screening Resources (ESR) wrote the book on background checks with ‘The Safe Hiring Manual’ by ESR founder and President Lester Rosen and is accredited by The National Association of Professional Background Screeners (NAPBS®) . To learn more about Employment Screening Resources, visit http://www.ESRcheck.com or contact Jared Callahan, ESR Director of Client Relations, at 415.898.0044 or [email protected].