Five Steps to Help Avoid an FCRA Class Action Lawsuit on Background Checks

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My family recently returned from a trip to the beautiful Indiana Dunes State Park. One of the attractions is a rugged, self-guided, 1.5-mile trail over three of the largest sand dunes in the park. This trail is referred to as the “Three Dune Challenge”. The start of the trail includes a warning that the Three Dune Challenge is the most difficult in the park. It is intended only for experienced, physically-fit hikers. Hikers are warned to be realistic about their hiking ability and proceed with caution.

Proceed with Caution

These words of wisdom could certainly be applied to the current challenges faced by organizations in regards to their background check programs today. We are just a little more than halfway through the year. Already, there have been at least 27 FCRA class action lawsuits filed against employers. In fact, twelve class action suits were filed in the months of June and July alone. (See Littler Report, August 2014) Employers are currently facing difficulties unheard of in past years. From retailers to trucking companies, no industry appears to be exempt and with fines of up to $1,000 per violation, employers are faced with the potential of having to pay millions of dollars in damages.

Unquestionably, now is the time to take a realistic look at your policies and make sure they are 100% compliant. Thankfully, protecting your company is certainly not an insurmountable task. Stay on the path & don’t fall into the same traps as these other employers.

The FCRA lays out a pretty clear path that employers MUST abide by. Following these five steps will help to protect your organization:

1. Disclosure – A stand-alone disclosure form stating that you are going to be performing a background check on an applicant must be provided prior to conducting any background checks. Companies have been found in violation of the FCRA because they included “extraneous” language on disclosures. The courts have ruled against employers who include disclosures within job applications or who have included a release of liability verbiage on disclosure forms.
2. Applicant Authorization – Applicants must complete an authorization form that permits you to conduct a background check on him/her. It is essential to have a valid signature on this form prior to beginning the background check process.
3. Pre-Adverse Action – If background checks uncover information that is going to negatively impact an applicant’s ability to get a job, you must first follow the required pre-adverse action procedure. Several organizations have been penalized for not providing applicants with a copy of their report, not allowing applicants a chance to dispute their report, and not providing applicants with the required Summary of Rights. It is important to note, the fact that some companies who have opted out of providing Pre-Adverse action despite their background check provider offering an FCRA Compliance service which sends out Pre-Adverse action notices have been shown in court to have “willfully” violated the FCRA.
4. Allowing a Reasonable Time for Applicant’s to Dispute Information – Another complaint against employers has been that they did not provide a sufficient amount of time for applicants to dispute the findings of their report. The FCRA does not specify the exact amount of time employers should allow for applicant’s to dispute information, but it is generally accepted as five working days.
5. Adverse Action – Applicants must be provided with an adverse action letter, a completed report, a Summary of Rights, and your CRA’s contact information.

For more detailed information about the FCRA, please download our Guide to Understanding the FCRA.

Protecting your company and remaining compliant with the FCRA can certainly feel like a challenge.  This is mainly when class action lawyers are buzzing around you looking for any small details you may have missed.

Fortunately, Justifacts is available to help with a knowledgeable staff and 35 years of industry experience. We provide detailed educational information on FCRA regulations, sample disclosure, and authorization forms. This fully automated adverse action tool that can assist our clients in generating and tracking the entire adverse action process. Our full-time Compliance Team is available to help handle situations as they arise regarding adverse information that is found on an applicant’s report.

It is important to note that Justifacts is providing this information as a service to our clients. None of the information contained herein should be construed as legal advice, nor is Justifacts engaged to provide legal advice. We go to great lengths to make sure our information is accurate and useful. We recommend you consult your attorney or legal department if you want assurance that our information, and your interpretation of it, is appropriate to your particular situation.

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