Although nothing has changed recently regarding the Fair Credit Reporting Act, litigation against companies that have failed to fully comply with its requirements is increasing.
Attorney Dean Pacific, of Warner Norcross and Judd, said one reason for the increase has to do with plaintiff attorneys who see this as a lucrative area of the law.
Not only are plaintiff attorneys bringing more suits, they are often bringing them in the form of class action lawsuits, which multiplies the risks for employers in terms of statutory and punitive damages that can be applied.
“There are a lot of technical requirements to meet under the statute — a lot of ‘I’ dotting and ‘T’ crossing requirements,” Pacific said.
That leaves a lot of room for mistakes, he said, and many businesses are not familiar enough with their responsibilities under the law to begin with.
“When I go out and talk to employers and HR professionals … and say, ‘How many of you know whether or how the Fair Credit Reporting Act relates to things you do in your hiring processes,’ I typically get a small smattering of hands,” Pacific said.
Pacific said the underlying policy behind the Fair Credit Reporting Act employment provisions is to provide a way for employees to clear up any mistakes that might show up during a background check conducted by an employer that could negatively impact their opportunity to be hired.
“If something (falsely) showed up that indicated someone had a record and the employer decided not to hire them, prior to these amendments there was no guarantee that the individual would even know that false information was out there, or that this employer or other employers might be making decisions based on it,” he explained.
The employment provisions of the law give applicants a chance to correct the misinformation and not lose out on a job because of it.
When an employer is using a third-party agency to conduct a background check on an applicant, it must notify the applicant in writing that it is doing so — that is step one, Pacific said.
“They have to get the employee or applicant to give consent to the background check in writing,” he added. “If they don’t consent, the employer can refuse to consider the application. They are allowed to make that a condition of being considered for employment.”
Also, the notice cannot be buried in a document containing other information. Employers must be careful it’s a separate form that only has the necessary information.
“That is an area where a lot of employers are getting tripped up and it’s an area where some of the plaintiffs’ bar has focused on,” Pacific said. “For example, you can’t have your notice that you are going to do a background check included somewhere in the application the person filled out or some other document they’ve filled out as part of the process.
“Employers have gotten sued for including too much information even when they had a standalone document.”
If the background check comes back clean, there is nothing more an employer has to do to comply with the Fair Credit Reporting Act. If it comes back with a conviction, the process continues.
“If someone’s background check comes back and shows they have some sort of conviction the employer considers disqualifying, they can’t just say, ‘I’m not going to hire this person,’” Pacific said. “They have to follow a two-step process.”
This process is known as Adverse Action Procedures. Before making any hiring decision related to the applicant, the employer must notify him or her through an adverse action disclosure statement and provide the applicant reasonable time to clear up any mistake.
“You let the person know in writing you’ve got the background check results and, based on those results, you aren’t going to hire them,” Pacific said. “Then you have to give them a copy of the actual background check … and a document published by the federal government that is called a Summary of Your Rights Under the Fair Credit Reporting Act. Then you have to give them time.”
Pacific said the amount of time is dependent on the individual, but typically a week is sufficient.
“In a lot of cases — the vast majority — those disclosures go out and the employer never hears from the applicant again,” he said. “Sometimes there are cases where someone will call up and say this wasn’t me.”
In that situation, the company needs to consider what a reasonable timeframe would be for the person to bring forth information.
“Again, it’s case by case,” Pacific said.
He said if the person is not able to provide the clarifying information within a reasonable timeframe, the employer could go ahead and implement its decision not to hire the person.
At that point a second notice needs to be sent notifying the applicant that the employer is implementing its decision not to hire the applicant.
“You also have to give them the name and address and phone number of the agency that provided the report to you so they can contact them directly,” Pacific said. “You need to give them a statement that indicates that agency isn’t the one that made the employment decision. You have to give them a statement that lets them know they have the right to get a free copy of that report from that same agency upon request for up to 60 days.
“You also have to give them a statement that lets them know, separate from the employment decision, they do have the right to go directly to that agency and dispute with them the accuracy of the information.”
Pacific warns each step in the process has its own set of smaller technical requirements that businesses need to follow carefully.
“Making a mistake on even one of those steps gets you sued,” he said.