Get the Latest Industry Insights

Employers should assess background checking procedures to avoid running afoul of the Fair Credit Reporting Act

More & more employers are experiencing increased pressure to comply with the FCRA.

Please be sure to read the attached article and consult with your legal counsel regarding your individual practices.

Class action suits challenging the employer’s background check disclosures tend to center on disclosures that are embedded within the employer’s job application, or if separate from the job application, that include so-called unacceptable text, such as a release of liability.

The most common claims are that:

• the employer’s background check disclosure form contains language that is “extraneous” (i.e., is not limited to just the disclosure required); and

• the employer fails to provide any pre-adverse action notice, or if notice has been provided, to wait an appropriate amount of time before taking final adverse action against an individual.

Employers should stay alert to recent developments, and should consider their options to defend against class action threats.


Employers should assess background checking procedures to avoid running afoul of the Fair Credit Reporting Act

There has been a recent uptick in class action litigation initiated by job applicants claiming that employers

violated the Fair Credit Reporting Act (the FCRA) in the manner they procured and used consumer reports

about the applicants, such as credit reports and criminal background checks. Because the use of consumer

reports is coming under increased scrutiny, employers are advised to review their background checking

procedures to ensure they comply with the FCRA.

The most common accusations in lawsuits challenging employers’ procurement procedures are that

employers have improperly included too much information on required disclosure and authorization forms.

The FCRA requires employers to (1) disclose to applicants, in a document containing only the disclosure,

that the employer may request a consumer report about the applicants and (2) obtain applicants’ authorization to request

the consumer report. Both these steps must be completed before a consumer report is obtained. Employers are

permitted to combine the disclosure and the authorization into one form, but some employers include additional

information in their disclosures and authorizations, such as explanations of at-will employment, explanations of privacy

policies, and requests for additional information about an applicant that arguably is unrelated to the request for consumer

reports. It is the inclusion of the additional information, and the omission of the term “consumer report” from those

documents, that has resulted in recent class action lawsuits. Employers can take steps to avoid these claims by excluding

any extraneous information in their disclosures and authorizations. Employers might also consider providing their

disclosure statements and authorizations in completely separate documents.

If an employer intends to make an adverse decision (such as deciding not to hire) based on information contained in a

consumer report, the FCRA requires the employer to follow a detailed process that includes providing the applicant with a

pre-adverse action notice and a subsequent adverse action notice. The pre-adverse action notice should include, among

other information, a copy of the consumer report the employer will rely on for its decision and a document known as “A

Summary of Your Rights Under the Fair Credit Reporting Act,” which the company hired to generate the consumer report

should provide to employers.

More detailed employer guidance on the procurement and use of consumer reports can be found on the Federal Trade

Commission’s website .

Although recent class action lawsuits have been brought by job applicants, employers should keep in mind that the FCRA

also applies when employers request and use consumer reports about current employees for employment purposes, such

as making decisions about promotions, discipline, termination and other conditions of employment.


The above information was provided by Sam Ciulla of NAPS and the author of the article is David Woodard of Poyner and Spruill LLP