Background checks are a regular part of the hiring process, but it’s essential to educate yourself and your hiring team around the limits of what can be done based on individual background screenings. There are complex liability concerns involving a background check, particularly related to FCRA.
Understanding the Connection between Liability Risks and Background Screenings
While of course, as an employer, you want to know as much as possible about a job candidate before you commit to bringing them on board. Background checks can be a valuable source of relevant information to that decision-making process. Unfortunately for employers, the laws governing employer use of background checks, are generally highly technical, incredibly complex, and in many cases pose significant challenges for even the most well-intentioned of employers. The bottom line is this; you need to educate yourself as an employer in these laws to understand the risks you take on by making hiring decisions based on background screenings. That way, you can do your due diligence in hiring without exposing yourself to unanticipated liability.
Liability Risks and Consequences of Failing to Comply
Failing to comply with technical notice and disclosure requirements of background screenings can result in steep consequences for a business. Examples of significant impacts to such mistakes include seven-figure settlements and awards resulting from class-action lawsuits against employers under the FCRA and similar state laws. Federal judges have recently approved a $4.4 million settlement against a trucking company, and a $6.8 million settlement against a grocery store chain, both for failing to comply with the various requirements imposed by applicable background check laws. Those consequences are significant, highlighting the importance of doing background screens the right way.
The Fair Credit Reporting Act
The federal Fair Credit Reporting Act (“FCRA”) imposes multiple notices and authorization requirements on employers who intend to obtain or do obtain, information from a “Consumer Reporting Agency” about an individual for use in making an employment decision (such as hiring, promotion, or termination). A Consumer Reporting Agency is a person or company that assembles or evaluates information on individuals to provide “Consumer Reports” to unrelated persons or companies. FCRA applies if an employer engages a Consumer Reporting Agency to provide any classified information concerning a job applicant or employee, including criminal history.
Because the FCRA’s technical requirements are easily violated, claims under the FCRA are frequent subjects of class action litigation. The FCRA violations carry significant financial risk in the form of actual or statutory damages of up to $1,000 per discrete violation, plus punitive damages and attorneys’ fees. Also, worth noting is that FCRA does not include a liability cap.
Limiting Your Liability
Employers who do wish to use background information in making employment decisions must follow specific notice and authorization requirements before obtaining a Consumer Report. You must give notice to a job applicant or employee that you intend to get a Consumer Report, and that you might use the information within the report for employment decisions. You must also obtain the applicant or employee’s written approval to get the Consumer Report.
If you do decide, based on information in a Consumer Report, to take adverse action against an applicant or employee (such as deciding not to hire, or to terminate or demote), you must provide the applicant or employee with a packet of information (before you take action) containing a notice that the employer is contemplating adverse action, a copy of the Consumer Report, and a copy of the publication, “A Summary of Your Rights Under the Fair Credit Reporting Act. In addition, you must give the applicant or employee a reasonable amount of time to respond to the notice of contemplated adverse action (typically 5 days).
Then after action is taken, you must give the applicant or employee notice, in writing, and including the name, address, and telephone number of the Consumer Reporting Agency that provided the Consumer Report, a statement that the Consumer Reporting Agency did not make the adverse employment decision and cannot give specific reasons for it, as well as notice of the applicant or employee’s right to dispute the accuracy or completeness of the information the Consumer Reporting Agency provided, and the applicant or employee’s right to get a free copy of the report from the Consumer Reporting Agency if the applicant or employee asks for it within 60 days.
Consult Williams About Your Background Screening Process
Be aware that these laws are designed to protect employees, not employers, so make sure you know the process and the requirements for your specific case. Keep in mind that dozens of states have passed their versions of the FCRA, and a number of these state laws provide greater protection for applicants and employees than the FCRA does. Do your homework and make sure you are protecting your business from liability based on your background screening process. If you don’t, it can cost you.
For more information about background screening processes and limiting liability, reach out to Williams Industrial Services Group, LLC!