Anytime an employer uses an outside vendor to run a credit or criminal background check on an applicant or employee, it is obtaining a consumer report and must follow a number of technical requirements under the Fair Credit Reporting Act (FCRA).
With increasing frequency, employers are being targeted by lawsuits alleging violations of FCRA and similar state laws. Particularly when claims are brought on behalf of a class of claimants, such litigation can result in significant losses for employers who fail to comply with applicable legal requirements. Below are five practical tips for minimizing risk and liability in this regard.
Before obtaining a consumer report
Before obtaining a consumer report, an employer must (a) give the applicant or employee a clear and conspicuous written disclosure notifying him or her that it may obtain a consumer report for employment purposes, and (b) obtain the applicant’s or employee’s written authorization to do so. The disclosure must be in a stand-alone document consisting of only the disclosure, but the written authorization may be given on the same document as the disclosure.
Before taking adverse action
Before taking any adverse employment action based in whole or in part on information contained in a consumer report, an employer must provide the applicant or employee with a “pre-adverse action notice” indicating the intent to take an adverse action and providing a copy of the report and a summary of the consumer’s rights under the FCRA, available here. Employers should wait at least five business days after sending the notification before taking the contemplated action.
After taking adverse action
After taking the adverse action, the employer must provide the applicant or employee a separate “adverse action notice” indicating that such action was taken, and providing (a) the name, address and phone number of the consumer reporting agency that supplied the report; (b) a statement that the company that supplied the report did not make the decision to take the adverse action; and (c) a notice of the person’s right to dispute the accuracy or completeness of the report.
The statute of limitations for claims under the FCRA is at least five years (and possibly longer if the employee is not aware of the violation). As a result, employers should keep records relating to employment-related consumer reports and their efforts to comply with the FCRA for at least six years.
Be aware of other legal requirements
Some states and municipalities have consumer reporting laws that are similar to the FCRA but that may contain different requirements. Additionally, an increasing number of states and municipalities continue to impose hiring practice restrictions such as so-called “ban the box” laws and social media laws that limit the information employers can seek during the hiring process, and how employers may make decisions based on such information. Employers must know and comply with the laws of the states and municipalities where they operate and employ people.
Brett Coburn is a partner in Alston & Bird’s Labor & Employment Group who concentrates his practice on employment litigation and counseling relating to employment discrimination, wage and hour compliance, and other employment-related issues. He also regularly drafts restrictive covenant and employment agreements and advises clients on and litigates matters involving violation of restrictive covenants and related business torts.