A Background Check on Unlawful Background Checks:

The Fair Credit Reporting Act Imposes Strict Requirements on Employment-Related Background Checks

Most employers have a third party perform a “background check” on job applicants. Such background checks typically involve obtaining one or more reports of a job applicant’s criminal, arrest and/or credit history. A background check can also include interviews with the applicant’s references, neighbors and/or friends regarding the applicant’s character. Any such background check constitutes a “consumer report” as defined in the Fair Credit Reporting Act (FCRA), a federal statute. Both the employer and the “credit reporting agency” (CRA) doing the background check are subject to strict requirements under the FCRA. If either the employer or the CRA violates any of the strict requirements of the FCRA, the applicant can be entitled to damages against the offending employer or CRA.

Employers’ Obligations under the FCRA

The FCRA requires an employer to obtain a job applicant’s authorization to obtain a background check report from a CRA. Thus, either electronically or by “hard copy,” the employer must obtain such an authorization from the applicant. The employer’s failure to do so is a blatant violation of the FCRA.

The most common type of FCRA violation regarding background checks is an employer’s violation of the “stand-alone” disclosure of rights requirement. In addition to obtaining authorization, the employer must provide the job applicant with a disclosure of certain rights of the applicant under the FCRA. That disclosure must inform the job applicant that “a consumer report may be obtained for employment purposes.” As to background checks that include personal interviews, the disclosure must also inform the applicant that he or she can request information regarding the “nature and scope” of the investigation, as well as a summary of his or her rights under the FCRA.

Most notably, pursuant to express dictates of the FCRA, the disclosure of rights to job applicants must be made “in a document that consists solely of the disclosure.” The only exception to this “stand-alone” disclosure of rights requirement is that the disclosure can be included in the same document as the authorization. The clear intent of Congress in including this stand-alone disclosure requirement is for the disclosure of the job applicant’s FCRA rights to stand out conspicuously, completely separate and apart from any and all other information related to the employment application generally or the background check specifically.

Typical Violations of the Stand-Alone Disclosure Requirement

Some typical violations of this stand-alone disclosure requirement are:

  • Including the disclosure in the job application or other documents related thereto.
  • Including in the disclosure a statement that the applicant releases or waives liability of the employer and/or the CRA concerning the background check.
  • Including in the disclosure other extraneous information such as: An attestation that the job applicant has provided truthful information; an attestation that the job applicant will abide by the employer’s rules or policies; a detailed description of the “nature and scope” of the investigation that will be performed; or statements regarding legal matters beyond the applicant’s FCRA rights, including but not limited to State privacy laws, non-discrimination laws, or the “at-will” status of employees to be hired.

An employer’s violation of the stand-alone disclosure requirement, in and of itself, violates the FCRA and can entitle the job applicant to damages against the employer, even if the job applicant otherwise suffered no adverse consequences from the background check.

Excluded from a Job Application Process Because of a Background Check?

The FCRA imposes additional requirements on an employer prior to taking any employment-related “adverse action.” Such an adverse action will typically take the form of eliminating a job applicant from employment consideration or terminating a recently hired job applicant due to negative information received in a background check report. Under the FCRA, prior to taking such adverse action, the employer must provide the applicant/employee with a “pre-adverse action notice” and a copy of the relevant background check report. Typical violations of the pre-adverse action requirements include:

  • Notifying the applicant/employee by telephone, rather than in writing, of the adverse action that resulted from the background check report.
  • Failing to provide a written pre-adverse action notice to the applicant/employee before taking the adverse action.
  • Failing to provide a copy of the relevant background check report to the applicant/employee before taking the adverse action.
  • Failing to give the applicant/employee a reasonable opportunity (typically 5 business days) to contest the accuracy of the information in the background check report that was the basis for the adverse action.

An employer’s failure to adhere to the “pre-adverse action notice” requirements can entitle the applicant/employee to damages against the employer, even if the applicant/employee otherwise would not have successfully challenged the accuracy of the background check report.

CRAs’ Obligations under the FCRA

The FCRA also imposes requirements on the “credit reporting agency” that prepares and provides the background check report to the employer. Typical FCRA violations by CRAs include:

  • Providing the employer with a background check report with inaccuracies, such as one that includes someone else’s criminal history.
  • Including arrests, dismissed charges or civil judgments older than 7 years in the report.
  • Including expunged convictions in the report.
  • Listing the same incident twice in the report, such as listing a single DUI under both “criminal” and “driving.”

A CRA’s violations of its obligations can entitle the applicant/employee to damages against the CRA.

Remedies to Job Applicants Subjected to Unlawful Background Checks

An FCRA violation can result in “actual damages” for lost wages, if the applicant can show that the violation negligently resulted in the denial of a job opportunity.

Nonetheless, even without such “actual damages,” the FCRA provides for “statutory damages” of between $100 and $1,000 per violation, plus potential “punitive damages.” Punitive damages are basically an amount deemed by a reasonable jury, in its discretion, to punish the offending party, with a general limit of not more than 8 to 10 times the amount of other damages available for the claim.

FCRA violations concerning employment background checks are frequently brought as “class actions” whereby one or more job applicants serve as the “Named Plaintiff(s)” on behalf of numerous (typically thousands) of “similarly situated” job applicants. As part of a class action settlement, a Named Plaintiff will often be provided with an agreed-upon, court-approved “incentive award” for doing his or her part to benefit the other class members. A court has broad discretion to approve or deny such proposed incentive payments. In recent settlements of FCRA class actions concerning unlawful background checks, incentive payments have typically been approved in amounts ranging between $1,000 and $5,000 to each Named Plaintiff.

Contact Our Kansas City Employment Attorneys

If you believe your FCRA rights have been violated regarding an employment-related background check within the past 2 years, please contact Brady & Associates in Kansas City. We offer confidential case evaluations to help you determine whether any employer or credit reporting agency could owe you money for an FCRA rights violation.

We represent employees in Kansas, Missouri, and elsewhere.