The Fair Credit Reporting Act is complicated. And scary. And confusing. For these reasons, even the largest and most sophisticated U.S. employers can find themselves ensnared in the FCRA's myriad of hyper-technical background check requirements.
Take Amazon, which reported a net income of $3 billion in 2017. Based upon a motion to preliminarily approve a settlement (July 17, 2018), Amazon has agreed to pay $5 million to a nationwide class of 454,000 job applicants who were (allegedly) not provided a "stand alone" FCRA Disclosure and/or were not provided a pre-adverse action notice and a chance to dispute negative background information prior to Amazon denying hire.
The Amazon settlement should be a wake-up call for any employer conducting background checks without legal guidance. FCRA statutory damages range from $100 to $1,000 per violation and lawsuits are generally brought as class actions.
Which FCRA violations create the most liability for employers?
- Failure to provide a stand alone disclosure. The FCRA requires that applicants or employees receive a "clear and conspicuous" written disclosure informing them that a consumer report may be obtained for employment purposes and they must provide written consent before the employer may obtain a background check report. The disclosure must be in a "stand alone" document - that is, the document consists solely of the disclosure. The disclosure cannot include other information, such as a liability release, EEO statement, request for personal information, or any other extraneous information; and cannot be buried in the middle of an employment application or other pre-employment documents.
- Failure to provide a Pre-Adverse Action notice and reasonable dispute period before taking (or telling the individual) of an adverse employment action based on a background check report. The Pre-Adverse Action notification must provide specific information, including a "reasonable" time period for the individual to dispute information contained within the background check report. 5 days has been deemed too short by multiple courts!
- Failure to provide a complete copy of the background check report, "A Summary of Your Rights Under the Fair Credit Reporting Act" (2015 CFPB version), and any required local/state-specific disclosures to the individual along with the Pre-Adverse Action notice.
- Failure to provide an Adverse Action notice containing FCRA-required language, including the name / contact information of the consumer reporting agency (background check vendor) that provided the report, the fact that the background check vendor did not make the employment decision (and cannot explain the reason for the decision), and notice of the individual's rights to obtain a copy of the report within 60 days and to dispute the information in the report.
To minimize risk, ensure that your company's background check and credit report processes, including all relevant forms, comply with the FCRA's requirements.
In addition, ensure that background checks and credit reports are only obtained when permissible under applicable federal, state and local law.
Finally, ensure that your job application complies with applicable state and local "ban the box" laws-i.e., laws that prohibit employers from asking job applicants questions about criminal history prior to the interview or contingent offer of employment.