FCRA: Revenge of the Gossip Chain Victims

In the information age, not all information is benign. For example, you probably don't want people to think you are a convicted felon, especially if you are not. In fact, most employers are reluctant to hire convicted felons--some simply won't hire one, and others won't hire people with particular types of criminal convictions.

Congress has decided that because certain types of information can end up costing you, you should have a chance to refute such information before you bear such costs. A recent settlement of a federal lawsuit highlights some little-known rights of employees and job applicants regarding information that can impact their employment opportunities. Specifically, an employer can be liable to employees and job applicants for having a third party run criminal background checks on them without allowing them the opportunity to contest the information therein.

The Fair Credit Reporting Act (FCRA) is a federal statute generally designed to provide consumers with the opportunity to contest or correct inaccurate statements on their credit reports. The protections of the FCRA, however, extend to the employment context. The statute defines a "consumer report" to include a criminal background check performed by a third party agent of an employer regarding the criminal history of employees and job applicants. The statute requires the employer to provide conspicuous advance written notice of such a criminal background check to the person who is the subject thereof. The notice provisions in the statute are designed to provide the "consumer" who is the subject of the "consumer report" the opportunity to correct inaccuracies therein before the report can be relied upon by another party, such as an employer, to the consumer's detriment. Thus, in the employment context, the law is intended to provide an employee or a job applicant the opportunity to correct inaccuracies in a third party criminal background report before the employer relies on it to make an employment decision, such as firing or demoting the employee or not hiring the job applicant.

FCRA provides for the affected employee or job applicant to recover the higher of either "actual damages" or statutory penalties of between $100 and $1000 from the employer. Actual damages could apply where an employee lost wages from being fired or demoted, or where a job applicant lost wages from being passed over for hiring. The statutory penalties apply whether or not the employee or job applicant suffered any actual monetary loss resulting from the employer's violation of the statute.

In the recently-settled consolidated case of Hunter v. First Transit, Inc. and Joshaway v. First Student, Inc., a class action was brought on behalf of employees and job applicants against a transit and bus company for using a third party to perform criminal background checks without proper notice to the members of the class. The case was settled with varying amounts of monetary relief to the class members, depending on whether each member suffered an actual monetary loss stemming from a lost employment opportunity, or was otherwise entitled to a lesser amount as a statutory penalty.

The moral of the story: That old adage, "If you got something to say about me, say it to my face" has actually been codified as an employment right when it comes to an employer using a third party to perform criminal background checks on employees and job applicants.