THE PROBLEM: Employers commonly obtain consumer reports as part of a routine background check. Plaintiff's attorneys have recently latched onto some lesser-known consumer report requirements within the Fair Credit Reporting Act (FCRA). Possibly, common practices of some employers do not strictly adhere to the statutory fine print. In 2014, the number of cases filed against employers relating to these requirements skyrocketed. Courts are currently scrutinizing this routine employers' tool.
Willful violators of the FCRA are liable to up to $1,000 per violation, punitive damages, court costs and attorney's fees. Negligent violators are liable for any actual damages sustained by the consumer, as well as court costs and attorney's fees.
THE LAW: The FCRA requires employers to make specific disclosures before obtaining consumer reports. Employers must provide a clear and conspicuous disclosure, in a stand-alone document, that a consumer report may be obtained for employment purposes. The consumer must authorize, in writing, the employer to obtain the report.
These disclosure rules apply when employers us a consumer report to evaluate a person for employment, promotion, reassignment, or retention as an employee. Any adverse action taken as a result of the report prompts additional disclosures to the consumer.
RECENT CASES: On May 5, 2014, a nationwide class action was filed against CSK Auto Enterprises LLC and O'Reilly Automotive Stores, Inc. Plaintiffs alleged that there was no stand-alone disclosure, a liability waiver on the disclosure form and adverse action without proper notification.
On June, 24,2014, Panera LLC was sued in Florida federal court for alleged failures in its online employment application. The plaintiff alleged that Panera failed to use the phrase, "consumer report" and included extraneous information beyond the disclosure and authorization.
THE SOLUTION: Create a stand-alone document containing a clear, conspicuous disclaimer that a consumer report may be obtained for employment purposes. Don NOT include liability waivers, releases, at-will employment provisions or any other extraneous information. Include a spot for the employee to authorize their consent to the procurement of the consumer report. Obtain the employee's authorization prior to obtaining the consumer report.
If you intend to take any adverse action bases on a consumer report, you must first disclose to the consumer a copy of the report and a written description of the consumer's rights. Slightly different rules apply to adverse actions taken against consumers applying for employment via mail, telephone or computer. Such consumers must be notified within three business days of an adverse action. The notification may be written, oral, or electronic. it must include the contact information of the consumer reporting agency, explain that the agency did NOT make the decision to take the adverse action, and that the consumer may request a free copy of the report and dispute any inaccuracies with the consumer reporting agency.
If you intend to conduct investigative consumer reports - where information regarding character, general reputation, personal characteristics or mode of living are obtained through personal interviews with neighbors, friends or acquaintances of the employee - you must comply with additional requirements.