A class action lawsuit that was allowed to go forward by a federal district court earlier this year underscores the importance of employers following the federal Fair Credit Reporting Act (FCRA) when conducting background checks, and working with background screening firms that help educate employers on following basic procedures.

The case alleged that an employer committed two violations of the FCRA:

  • 1.) The employer disqualified job applicants on the basis of information from a consumer report without appropriate disclosure forms from the  applicant, and
  • 2.) After disqualifying the applicant, the employer failed to give the applicant a reasonable period of time to dispute the information contained in the report before refusing to hire that applicant. In other  words, the class action suit alleged a violation  of the “pre-adverse action” requirements whereby a an applicant to a reasonable time to review and dispute the background check report before a final action is taken to deny employment.

The attorneys for the plaintiff are seeking statutory damages and punitive damages. The FCRA also provides for attorneys’ fees.

The case revolves around the federal rules for “certifying” a class so that a class action can proceed.  A class action suit allows the claims of numerous potential plaintiffs to be heard in one legal case, rather than separate legal actions that each person would have to bring. In its decision, the Court engaged in a preliminary analysis to determine if the case had merit.  The Court noted that at the current stage of the litigation, the plaintiff had stated a claim sufficient for certification of the case as a class action.

The court reviewed the fact that the FCRA requires that an employer obtain a disclosure on a standalone document separate from the employment application.  The purpose is to make it clear to an applicant that a background check may be obtained.  In this case, the court noted that there was no dispute that the application form signed by the plaintiff was not a “standalone form” but was contained in the form with more than one disclosure and more than one release.

Furthermore, the Court noted that under the FCRA, an applicant is entitled to a notice of “pre-adverse action” before a decision to not offer a job is made final, so that an applicant can dispute the report.  The plaintiff contended that an applicant is entitled to at least five business days, which was the time period that an opinion letter from the Federal Trade Commission (FTC) found to be reasonable. (See the Weisberg letter at: http://www.ftc.gov/os/statutes/fcra/weisberg.shtm.) If a decision is made final, an applicant is entitled to a second letter that contains a notification of certain rights.

In this case, the evidence showed that the first letter sent advising the applicant of derogatory information in her background check report was sent December 18, 2006.  The second letter notifying her that she would not be hired was dated December 22, 2006, which was four days later.

The employer argued that the FCRA was silent as to the amount of time needed between letters, and that the FTC opinion letter is not legally binding.  However, the court ruled that an FTC opinion letter is entitled to “respect,” and was sufficient at that point in the litigation to allow the plaintiff to state a claim that the FCRA was violated. The Court found that although five days may not be required as a matter of law, it was a jury issue if the plaintiff was given reasonable times to dispute the information in the report.

Employment Screening Resources (ESR) has prepared a special report for employers called “The FCRA in Four Easy Steps,” which sets out how an employer can easily comply with the basic requirements of the FCRA.  It is the position of ESR that employers should allow sufficient time between the first and second letters for an applicant to meaningfully review, reflect and react to a background check report.  ESR would recommend five days as a minimum to be on the safe side.  By following the steps set out in the ESR report, an employer would not be in the position of the defendant in this case. (See: https://www.esrcheck.com/articles/Complying-with-the-Fair-Credit-Reporting-Act.php.)

The case also underscores the fact that background checks are heavily legally regulated, and that employers are best served by working with a professional background screening firm that provides assistance with legal compliance, and not just a data vendor that sells reports.  Although a background screening firm cannot provide legal advice, a background screening firm can currently advise an employer on basic compliance issues and industry standard approaches.

The case also demonstrates another reason why an employer should consider only working with a background screening firm that is accredited by the National Association of Professional Background Screeners (NAPBS).  As part of the accreditation process, a background screening firm must demonstrate that it provides Client Education, including Client Legal Responsibilities, Client Required Documents, and Adverse Action compliance. (See: https://www.esrcheck.com/ESR-NAPBS-Accreditation.php.)

For more information about background checks, visit Employment Screening Resources (ESR) – a nationwide background check firm accredited by the NAPBS – at https://www.esrcheck.com or call Toll Free at 888.999.4474.

(ESR’s policy is to not identify any parties during litigation. However, if an attorney or researcher would like to know the name of this case, please email ESR News Editor Tom Ahearn at [email protected].)

About Employment Screening Resources (ESR):
Employment Screening Resources (ESR) literally wrote the book on background screening with “The Safe Hiring Manual” by ESR founder and President Lester Rosen. ESR streamlines the screening process and reduces administrative overhead though its proprietary technology solutions.  ESR is one of a select few firms accredited by The National Association of Professional Background Screeners (NAPBS®). This important recognition was achieved by successfully passing a third party audit demonstrating compliance with the NAPBS Background Screening Agency Accreditation Program. By choosing an accredited screening firm like ESR, employers know they have selected an agency that meets the highest industry standards. For more information about ESR, visit https://www.esrcheck.com.


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