FTC Issues Guidance to Landlords for the Use of Consumer Reports

The FTC has issued a publication that helps landlords understand the proper steps to take when using background checks.  Much like its guidance, Background Checks: What Employers Need to Know, this publication details the obligations of users of consumer reports under the Fair Credit Reporting Act (FCRA). The guidance details what a consumer report is, what is required before the use of a consumer report, and the proper adverse action steps.

The FTC defines a Consumer Report as any information about a person’s credit characteristics, rental history, or criminal history. These reports include:

•          A credit report from a credit bureau, such as Trans Union, Experian, and Equifax or an affiliate company;
•          A report from a tenant screening service that describes the applicant’s rental history based on reports from previous landlords or housing court records;
•          A report from a tenant screening service that describes the applicant’s rental history, and also includes a credit report the service got from a credit bureau;
•          A report from a reference checking service that contacts previous landlords or other parties listed on the rental application on behalf of the rental property owner; and
•          A report from a background check company about an applicant or tenant’s criminal history.

Before Getting a Consumer Report

The guidance puts an emphasis on permissible purpose. Permissible purpose means that landlords have a legitimate business need that requires a background check. In the case of landlords, they must only use consumer report information for the purpose of screening applicants and/or tenants who apply for rental housing or renew a lease. While written consent is not required from applicants, it is a great way for landlords to prove they have permissible purpose for the use of a consumer report.

The FTC notes that landlords should avoid a blanket policy of refusing to rent to anyone with a criminal history, as it may violate the Fair Housing Act.

Adverse Action

It is important to note that adverse action does not only consist of the denial of an application. Adverse action also includes:

•          The necessity for a cosigner on a lease if an applicant does not meet the income requirements;
•         The requirement of a deposit that would not be required for another applicant;
•         The requirement of a larger deposit than might be require for another applicant; and
•         Raising the rent to a higher amount than for another applicant.

Whether an employer or a landlord, one thing remains constant. You must provide the applicant notice that you are taking adverse action (any of the measures listed above) and the reasons for the action. While the notice can be given orally, in writing, or electronically, we recommend that the notice is given in writing for auditing purposes. Please note that an adverse action notice is required even if the consumer report wasn’t the primary reason for the decision. If the consumer report played any part in the decision making process, the applicant/tenant must be notified.

The Adverse Action Notice must include:

• the name, address, and phone number of the consumer reporting company that supplied the report;
• a statement that the company that supplied the report did not make the decision to take the unfavorable action and can't give specific reasons for it; and
• a notice of the person's right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get a free report from the company if the person asks for it within 60 days.

To view the guidance in full, click here.

Improving Your Employment Screening Program in 2015

As we kick off 2015, we thought it would be fitting to provide you with some insight on refining your employment screening program. Understanding the basics of employment screening is important, whether you are initiating an employment screening program for the first time or seeking improvements for an existing program. Is improving your program on the agenda for 2015? This 3-part blog will look at three areas in your background screening program worth reviewing: Legal Compliance, Choosing the Right Screening Package, and Customer Service. 

Part 1: Compliance

In Regards to the EEOC:

The first step to promoting compliance is creating a written policy for employment screening at your company. Creating a clearly defined policy and strictly adhering to those guidelines is a great way to protect your company. One recommendation is to clearly state exactly what background information will be utilized for each job position.

You want a non-discriminatory background screening process that does not change from person to person. However, it should be modified for each available job position. EEOC guidance suggests companies determine whether a criminal conduct exclusion is job related and consistent with business necessity. And remember, valid exclusions include relevant convictions, NOT arrests.

The EEOC, which acts in interest of Title VII of the Civil Rights Act, states that employers need to show that their policy operates to effectively link specific conduct, and its dangers, with the risks inherent in the duties of a particular position. This is one of the three factors that the EEOC suggests employers take into account when considering denial of employment. The other two factors are the nature of the crime and the time elapsed. For more information, please read the EEOC’s guidance in full.

In Regards to the FCRA:

The Fair Credit Reporting Act regulates the collection, dissemination, and use of consumer information. Employers are required to follow the regulations set forth by the FCRA when using consumer reporting agencies (like S2Verify) to obtain consumer reports for “employment purposes”. 

The numerous FCRA class action lawsuits from 2014 just go to show that employers are still getting this wrong. O’Reilly Auto Parts, Swift Transportation, Whole Foods, Canon Solutions America, Dollar General, and Publix are just a few companies that were recently involved in costly class action lawsuits. Failure to comply with the FCRA can cost companies millions of dollars. 

Below are rules you must follow to maintain FCRA compliance:    

                                           

Before obtaining background information:

1.       Disclosure and Authorization

a.       Disclosure and authorization forms were the reason many employers (O’Reilly Auto Parts, Publix, Whole Foods) faced class action lawsuits in 2014.

b.      Must be signed BEFORE the background check

c.       Disclosure and authorization forms should be standalone documents and cannot contain extraneous information such as release language

If you plan to deny employment based on the background report:

1.       A Pre-Adverse Action Notice must be sent to the applicant. It must include:

a.       Name, address, and phone number of CRA

b.      The fact that the CRA did not make the adverse decision and cannot give reasons for the decision

c.       His/her right to a free copy of the consumer report

d.      His/her right to contact the CRA to dispute the accuracy of the report

e.      Summary of Rights including any State specific requirements

2.       After allowing the applicant five days to dispute any information found in the report, an Adverse Action Notice is to be sent to the applicant. It must include:

a.       Notification to him/her of final decision to deny employment based on consumer report.

b.      All notification provisions used in Pre-Adverse Action letter.

In Regards to Local Laws:

While it is important to abide by the FCRA and EEOC’s standards, that alone is not enough for legal compliance. You must also stay up-to-date on local laws. In 2014, new local “Ban the Box” laws popped up in counties, cities, and states all over the country. These “Ban the Box” laws, as they are called, not only restrict the use of criminal history inquiry on the application, but potentially tell you at what point in the hiring process a background check may be run. 

A good resource to keep up with your particular city/state and any laws that may apply to your business is NELP.org. For the sake of caution, our best practice recommendation, in most cases, is to hold off on the background check until after a conditional offer is made.

NELP.org - http://www.nelp.org/page/content/banthebox/

FCRA Compliance: Reviewing Your Disclosure and Authorization Forms

    We would like to stress the importance of carefully reviewing the Disclosure and Authorization forms ("Authorization") that are sent to job applicants prior to obtaining background checks. You should ensure that these Authorizations do not include any indemnification or release provisions. 

    Recently an individual in California filed a class action lawsuit seeking to hold both a prospective employer and the CRA that provided a consumer report to that employer liable for failing to comply with the requirements of Section 604(b)(2) of the Fair Credit Reporting Act (FCRA).

    The Authorization that the employer used contained language asking applicants to indemnify and release both the CRA and the employer from any claims that may arise from the collection, disclosure or use of the information provided on the Authorization form. Similar release language, sometimes called a hold-harmless clause, has been the subject of many claims against employers. 

    Class action lawsuits alleging violations of the FCRA are on the rise. Therefore, please be certain that the Disclosure and Authorization forms that you provide to job applicants do not include any type of indemnity, release, or hold-harmless language."

Thanks for your attention to this important compliance matter.

S2Verify Has Received NAPBS Accreditation

We are proud to announce that we have received accreditation by the National Association of Professional Background Screeners’ (NAPBS®) Background Screening Credentialing Council (BSCC). This endorsement from the NAPBS validates our commitment to service excellence. This accreditation serves as proof of our business and process standards. It reflects the values our company has maintained since its inception in 2009.

To become BSCC-accredited, consumer reporting agencies must pass a rigorous on-site audit, conducted by an independent auditing firm, of its policies and procedures. The audit focuses on six critical areas: consumer protection, legal compliance, client education, product standards, service standards, and general business practices. Only about 10% of background screening providers in the United States are NAPBS accredited. We are so honored to be in elite company and recognized as one of the leaders in our industry. 

For more information about NAPBS accreditation and what it entails, click here. 

Three Employers Face Class Action Lawsuits from the Same Law Firm

 Despite all of the FCRA-related class action suits taking place, it appears large companies are not taking an appropriate course of action to ensure they are in compliance. One has to wonder whether, whether it is simply a lack of attention to detail (That would be a surprise) or simply HR/Legal/Compliance not staying current. The latest three companies in question are Panera, LLC, American Multi-Cinema, Inc. (AMC), and Nine West Holdings. Two of these class action suits involve the same plaintiff, and all three are from the same Florida law firm. In each of these cases, the plaintiff applied for employment online. Each of these companies allegedly failed to provide a valid, compliant consent form before initiating pre-employment background checks.

An employer’s obligation before obtaining background information is as follows (from the co-published FTC/EEOC guide):

·         Tell the applicant or employee you might use the information for decisions about his or her employment. This notice must be in writing and in stand-alone format. The notice can’t be in an employment application. You can include minor additional information in the notice (like a brief description of the nature of consumer reports), but only if it does not confuse or detract from the notice.

·         If you are asking a company to provide an “investigative report” – a report based on personal interviews concerning a person’s character, general reputation, personal characteristics, and lifestyle – you must also tell the applicant or employee of his or her right to a description of the nature and scope of the investigation.

·         Get the applicant’s or employee’s written permission to do the background check. This can be part of the document you use to notify the person that you will get the report. If you want the authorization to allow you to get background reports throughout the person’s employment, make sure you say so clearly and conspicuously.

You can find the FTC/EEOC guidance as a whole here.

Panera allegedly violated the FCRA by not providing a consent form specifically for a consumer report. The plaintiff also alleged that the bakery-café chain included extraneous information that detracted from the notice. American Multi-Cinema, Inc. (AMC) allegedly did not have a stand-alone consent form for online application for employment. And finally, Nine West Holdings allegedly had consent language that was part of a web page that contained a number of links to Nine West information on the website.

The main takeaways from these alleged violations is:

·         Your consent, AKA disclosure and authorization, must be a stand-alone (not part of the application) form.

·         The consent form cannot contain extraneous information

·         The purpose of the consent must be clearly stated (i.e. employment screening)

The lawsuit demonstrates that violations of the FCRA can create large potential liability.  Potential class members, including employees and prospective employees, may be entitled to statutory damages of up to $1,000 for each violation in the case of willful non-compliance. Class action lawsuits also create exposure for large awards of attorney’s fees and the potential exposure to punitive damages.

If you have any doubts about your company’s FCRA compliance, PLEASE act before you wind up on the wrong end of a class-action lawsuit.

FTC and EEOC Co-Publish Background Screening Compliance Guide

On March 10, 2014, the U.S. Federal Trade Commission (FTC) and Equal Employment Opportunity Commission (EEOC) co-published two guides to help employers and applicants understand how to implement a legally compliant background screening program. The two documents are titled Background Checks: What Employers Need to Know and Background Checks: What Job Applicants and Employees Should Know. The FTC is in charge of enforcing the Fair Credit Reporting Act (FCRA), a federal law that regulates collection, dissemination, and the use of consumer information. The EEOC enforces Title VII of the Civil Rights Act, which prohibits discrimination by employers on the basis of race, color, religion, sex or national origin.

Both agencies stress that employers get permission from applicants before getting background reports, and must not unlawfully discriminate in the use background checks. The agencies are both tasked with regulating background screening, so they decided to work together on this guidance. The objective of the guidance is that both sides (employers and job applicants) fully comprehend their rights as well as their obligations.

The first guide, Background Checks: What Employers Need to Know, contains instruction for employers on several steps of the background screening process. Both agencies include compliance information at each stage of the process. There is instruction on what to do before you get background information, how to use background information, and the disposal of background information.

The second short guide, Background Checks: What Job Applicants and Employees Should Know, serves to educate applicants and employees on their rights and how to handle a breach of their rights by an employer. The guidance is written in plain terms so as clearly understood by consumers. There is also contact information should an applicant/employee feel their rights have been violated.

You can find the full guide for employers here.

You can find the full guide for applicants and employees here. 

Assessment of the Effects of EEOC's 2012 Background Screening Guidance

In December of 2012, the U.S. Commission on Civil Rights held a briefing to assess the effects of the Equal Employment Opportunity Commission’s 2012 Guidance. This briefing was held to discuss the impact that their guidance had on background screening for both black/Hispanic applicants and employers. Record of this briefing was just released as a 346-page report. I have taken the time to summarize the main points discussed in the report.

The briefing consisted of 17 speakers from diverse backgrounds. While some of the speakers were pro-EEOC Guidance, many speakers took issue with the 2012 Guidance in some way or another.

The speakers are as follows: 

• Alfred Blumstein, Professor of Urban Systems, Carnegie Mellon University

• Carol Miaskoff, Acting Associate Legal Counsel, EEOC

• Don Livingston, Parter, Akin, Gump, Strauss, Hauer & Feld

• Garen Dodge, Partner, Jackson Lewis LLP

• Glenn E. Martin, Vice President of Development and Public Affairs and Director of the David Rothenberg Center for Public Policy at the Fortune Society

• Harry Holzer, Professor of Public Policy, Georgetown University

• Jeffrey Sedgwick, Co-Founder, Keswick Advisors

• Jonathan Segal, Partner, Duane Morris LLP, Legislative Director, Society for Human Resource Management

• Julie Payne, Sr. Vice President and General Counsel of G4S Secure Solutions USA

• Lucia Bone, Founder of Sue Weaver C.A.U.S.E. (Consumer Awareness of Unsafe Service Employment)

• Montserrat Miller, Partner, Arnall Golden Gregory; Counsel, National Association of Professional Background Screeners (NAPBS)

• Nick Fishman, Co-Founder, Chief Marketing Officer and Executive Vice President, EmployeeScreenIQ

• Richard Larson, President, Winning Work Teams, Inc.

• Richard Mellor, VP, Loss Prevention, National Retail Federation

• Roberta Meyers, Director of Legal Action Center’s National Helping Individuals with Criminal Records Reenter through Employment Network, Also Known as H.I.R.E

• Todd McCracken, President, National Small Business Association

• William Dombi, VP, National Association for Home Care and Hospice

Objective of EEOC Guidance

The EEOC claimed the 2012 Guidance is in response to a disparate impact background screening has had on racial minorities. In other words, minorities have been experiencing difficulties while seeking employment due to a past criminal conviction. The objective of the EEOC is to give minorities an equal chance to re-integrate into society.

The Guidance:

• Puts employers on notice that categorical exclusions for people with certain arrest and conviction records may violate Title VII

• Emphasizes its earlier recommendation that job applications not ask about criminal records, and if they do ask, that they limit inquiries to conviction records for which exclusion would be job-related with business necessity

• Offers a series of examples of common policies and practices that violate Title VII 

• Informs local and state governments that barring people with certain criminal records from jobs or occupational licenses also could violate Title VII.  

Advocates of the EEOC Guidance made several arguments for its most recent list of best practices:

• There are over 65 million individuals with criminal records in this country

• By age 35, one-third of all young black men have been incarcerated at some point. 

• A person should not be haunted many years later by a mistake they made at a young age.

• Criminal Records have a more negative impact on employment for minorities.

• Recidivism probability declines with time clean after an arrest or conviction.

• Recidivism is less probable if an individual gains employment.

Speaker Glenn E. Martin presented a study that showed that black applicants with a criminal record were twice as likely to be denied a job as white applicants. He also reported that black and Latino applicants with clean backgrounds fared no better than white applicants just released from prison.

Harry Holzer made several compelling points:

“The prevalence of arrests and convictions among less-educated American men substantially reduces employer willingness to hire them later in life and worsens their employment outcomes more generally, in ways that generate clear “disparate impacts” on minority (especially black) men.

The very high costs of previous criminal histories on employment are borne not only by the offenders themselves, but also by their families and children, their communities, and the US economy more broadly; accordingly having some successful policy efforts to improve employment outcomes for this population are in the nation’s interest.

The EEOC Guidance should be viewed as one of several potentially effective legal and policy efforts to reduce the many barriers to employment among men with criminal records and thus to improve their employment outcomes.”

The Other Side of the Argument

Many speakers stressed that employers should not be restricted in their use of background checks due to:

• The reality of recidivism

• The prevalence of violent and/or theft-related offenses among inmates. 

• OSHA rules that require employers to provide a safe workplace. 

• Federal, state and local laws and licensing requirements that restrict individuals with certain convictions from employment in selected occupations. 

• State laws that put employers at risk for hiring mistakes. 

• Employer desire to protect business assets.  

Major Concerns 

Many speakers took issue with at least some part of the 2012 Guidance. The concerns that were echoed by the majority were:

• The Guidance is unclear. It is written in a way that is confusing to small business owners.

• The Guidance is vague about the act of conducting an individualized assessment.

• A conflict may arise when a state law mandates a background check, but taking adverse action based on that background check may result in a class action.

• The EEOC’s strategic enforcement plan to create class claims from individual claims encourages investigators to conduct overbroad inquiries.

• The EEOC’s restriction on the use of criminal background checks will have disastrous effects on public safety.

• The guidance results in more risk to the employer. For instance, an employer may feel pressure to hire an employee with a criminal record against his better judgment, resulting in a negligent hiring law suit. 

The EEOC aims to give minorities a fair chance to obtain a job after a conviction. They argue that the struggle to re-integrate into society has a profound effect on not only the individuals involved, but the economy as a whole. Frankly, nobody wants an individual to be perpetually unemployed because of a single mistake they made. But according to those opposed to the guidance as it stands, here lies the dilemma. 

The opposition claims if an employer takes a chance on an applicant with a prior conviction, employees and clients are potentially put at risk. By treating minorities with prior convictions as a protected class, are we putting co-workers and customers at risk? Who is correct, the EEOC or those who spoke out against the Guidance? 

We do not have the answer, but we do feel a certain responsibility to help companies comply with the EEOC’s 2012 Guidance. Our clients can rest assured that we will provide as much information as possible to help them maintain compliance. Some of the concerns that were voiced by several speakers have not yet been answered, but we will keep an eye on any potential developments/changes the EEOC might make. 

You can find the U.S. Commission on Civil Rights’ entire report here. Comments? Concerns?

Litigation Brought Against Whole Foods for FCRA Violations

                  

On February 7, 2014, litigation was brought against Whole Foods for the use of invalid authorization forms in the background screening process. The lawsuit claims the “defendant obtained consumer reports on the plaintiff and similarly situated persons without having obtained factually valid FCRA authorization forms”. 

The online application process included a form labeled “Consent”. Whole Foods allegedly had a section in this form that states “I hereby release the company, my former employers and all other persons, corporations, partnerships and associations from any and all claims, demands or liabilities arising out of or in any way related to such investigation or disclosure.” The form also included other paragraphs that should not be part of a consent form. 

The plaintiff claims that a valid consent form was used, but not until after Whole Foods had already implemented a background check.

The invalid consent forms were allegedly used on thousands of applicants. Should this class action suit be successful, Whole Foods may be paying upwards of $1000 to each class member for the violation. 

FCRA Violations:

1) A consent form, which informs the consumer that a background check may be obtained as a condition of employment, must be signed by the applicant. The consent form, which consists of the required disclosures and requested authorization, cannot include any extraneous information. Including a section in the form about the releasing of liability for companies receiving or providing information for the background check is definitely not legal.

2) When the plaintiff allegedly received the valid consent form is also an FCRA violation. An applicant must sign a valid consent form BEFORE the background check is run, NOT after. 

$1000 per applicant is not something many companies can afford. Precaution should be taken to insure the consent form utilized does not include anything other than the disclosures and requested authorization. Also, get authorization BEFORE you run the background check on the applicant. As always, you should discuss this topic with your in house counsel.

If you have any comments or questions about FCRA compliance, please let us know.

Background Screening Compliance Update

Ban-the-Box Compliance Update

As a provider of employment screening, we feel an obligation to communicate the manner in which our services can and cannot be used. We stress compliance with FCRA requirements, adhering to EEOC guidelines, and state regulations for the well-being of your firm. Due to an increase in the number of cities and counties passing “ban-the-box” regulations, we are providing you an updated list. This will serve as an additional guide as to the role of background screening in your hiring process. Data here is from the National Employment Law Project (NELP.org). The table below details the differences in the “ban-the-box” regulations for each city. 

The differences are as follows:

• which employers the law applies to (public or private sector)

• which positions the law applies to (specific positions or all)

• when a background check can be issued (at what point in the hiring process)

• whether or not EEOC criteria is included in law

• the right of an applicant to appeal background screening results

• Whether or not a copy of the background check report is to be provided

*Policies apply to contractors doing business with the Human Services Department

You will notice that some of these cities/counties incorporate the EEOC guidelines in their ban-the-box policies. For those of you who are not familiar with these guidelines, I have included them below.

The Equal Employment Opportunity Commission’s Policy on Pre-Employment Background Checks:

“There is no Federal law that clearly prohibits an employer from asking about arrest and conviction records. However, using such records as an absolute measure to prevent an individual from being hired could limit the employment opportunities of some protected groups and thus cannot be used in this way.

Since an arrest alone does not necessarily mean that an applicant has committed a crime the employer should not assume that the applicant committed the offense. Instead, the employer should allow him or her the opportunity to explain the circumstances of the arrest(s) and should make a reasonable effort to determine whether the explanation is reliable.

Even if the employer believes that the applicant did engage in the conduct for which he or she was arrested that information should prevent him or her from employment only to the extent that it is evident that the applicant cannot be trusted to perform the duties of the position when:

• considering the nature of the job

• the nature and seriousness of the offense

• the length of time since it occurred.

This is also true for a conviction.

Several state laws limit the use of arrest and conviction records by prospective employers. These range from laws and rules prohibiting the employer from asking the applicant any questions about arrest records to those restricting the employer's use of conviction data in making an employment decision.

For more information, see,

 e.g., http://www.usis.com/commercialservices/transportation/FaqStateImpact.htm.

In some states, while there is no restriction placed on the employer, there are protections provided to the applicant with regard to what information they are required to report.

The Fair Credit Reporting Act (FCRA) imposes a number of requirements on employers who wish to investigate applicants for employment through the use of consumer credit report or criminal records check. This law requires the employer to advise the applicant in writing that a background check will be conducted, obtain the applicant's written authorization to obtain the records, and notify the applicant that a poor credit history or conviction will not automatically result in disqualification from employment.

Certain other disclosures are required upon the employee's request and prior to taking any adverse action based on the reports obtained.”

This information is from The Equal Employment Opportunity Commission

For more clarification from the EEOC about their policies, check out this article.

The importance of compliance cannot be overstated. I hope this serves as a compliance guide for you and your company. I will continue to provide updated information on the ever-changing laws in the employment screening industry. If you have any questions or comments, please feel free to provide your input. I will get back to you as soon as I can.

Modified "Summary of Rights" goes into effect January 1, 2013

The entire focus here is on wording which modifies whose authority governs the notice process..... Our forms within the system will be in full compliance as of the effective date, 1-1-2013 For our clients that  handle their own notice and disclosure, you will be required to make the changes regarding the governing body, should the consumer want to contact them.  ( CFPB V FTC )
 According to regulations from the Consumer Financial Protection Bureau (CFP, three essential forms mandated by the federal Fair Credit Reporting Act (FCRA) used in the background screening process must be modified by January 1, 2013. The forms must be changed to reflect that consumers can obtain information about their rights under the FCRA from the CFPB instead of the Federal Trade Commission (FTC). The three forms in use currently indicate that the FTC is the agency consumers can contact with questions.
The three forms at issue are:

• Summary of Consumer Rights under the FCRA
• Notice to Users of Consumer Reports of their Obligations under the 
• Notice to Furnishers of Information of their Obligations under the FCRA

Each of the three notices is mandated for use in certain situations under the Fair Credit Reporting Act:

• The “Summary of Consumer Rights under the FCRA” is a notice that a background screening firm must provide to an employer and employers in turn must provide the notice to applicants in different situations.
• The FCRA also mandates that a background screening firm (known as a Consumer Reporting Agency or “CRA”) must provide each user of its services the “Notice to Users of Consumer Reports of their Obligations under the FCRA.”
• The “Notice to Furnishers of Information of their Obligations under the FCRA” is aimed at certain furnishers of information to CRAs and must be provided in prescribed situations such as a re-investigation where the consumer disputes the report or in a situation involving identity theft.

The changes are the result of the creation of the CFPB as part of the Dodd–Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111-203, H.R. 4173) that was signed into law by President Barack Obama on July 21, 2010. The CFPB has rule making and enforcement powers over the FCRA. However, the CFPB does not have supervisory power over background screening firms. Congress specifically exempted background screening firms from being supervised by the CFPB since a background check report is not a financial product. The result may be some confusion as the CFPB and FTC determine which agency will perform which tasks.
The primary difference is that instead of listing the FTC contact information, the CFPB contact information is utilized in the form.

Click here to get a copy of the new "FCRA-Summary of Rights 2013"

FTC Issues Employers Guidance for FCRA

The Federal Trade Commission (FTC) issued Employers Guidance for the use of Consumer Reports. 

While this information is not new, the Guidance is another step by the Federal Government, both the FTC and EEOC, to ensure that companies are following the Fair Credit Reporting Act(FCRA).

Please review these brief guidelines to ensure your company is in compliance.

Pepsi Beverage Co. Pays $3.1 Million For Using Arrest Records

Pepsi Beverage Co was sued by the EEOC for using arrest records to disqualify approximately 300 applicants.    Recently the EEOC has held hearings on the use of arrest records and background checks to ensure they don't create a disparate impact for Black Americans and Hispanics.

"Companies absolutely need to review their Employment Screening Policies and also take note of using arrest records that do not have a conviction for employment decisions on an applicant."  said, Bill Whitford, CEO of S2Verify.    "As an industry, we are seeing more litigation around disparate impact and not following the FCRA (Fair Credit Reporting Act) and state laws and regulations.  It is critically important that your Employment Screening Vendor gives you all the facts and follows these rules to ensure 100% compliance."
 
"The FCRA and state laws limit the use of arrest records in making hiring decisions.   In addition, there are many state specific rules around what a CRA (Consumer Reporting Agency) can report to a client."  

"We see many new clients that still don't understand the limitations or complexity of following these rules and regulations.  There previous provider simply didn't keep them informed."

About S2VERIFY:
S2Verify is a leading process innovator in the application of background screening technologies to the needs of business and individuals for employee and tenant information that is comprehensive in scope, delivered quickly to key managers, and easy to read, understand and use by authorized personnel. With offices in Atlanta, Chicago and Miami the privately-held company specializes in providing a customizable yet fully integrated, best-in-class set of background screening services that address business and consumer needs either poorly met or not met at all by leading, nationally-branded providers of mass-market background screening solutions.

New Class Action Lawsuit against Major Financial Institution for FCRA Violations

A class action case filed against a large financial institution – one of the nation’s top 10 banks – shows once again that legal compliance is a critical part of any background screening program.  The lawsuit was filed on behalf of an employee alleging violations of the federal Fair Credit Reporting Act (FCRA). According to a press release from the Attorneys for the Plaintiff, the lawsuit alleges that the financial institution obtained background checks in violation of the FCRA and failed to provide required notices.  The Plaintiff seeks to represent a class of all of the financial institution’s employees and job applicants for the past three years.

The lawsuit – filed in the United States District Court for the District of Maryland – alleges the financial institution violated the FCRA in two ways:

• First, the lawsuit alleges that the financial institution’s authorization form is flawed. The law imposes strict formatting requirements on companies who do background checks. The Plaintiff alleges that by burying its background check authorization in a job application, including extraneous information, the financial institution violated the FCRA. The FCRA requires that a consumer receive a “clear and conspicuous” disclosure in a document that consists solely of the disclosure that a background report may be obtained for employment purposes. 
• Second, the lawsuit also alleges that the financial institution failed to provide copies of the background reports when it used them to take adverse employment actions, such as refusing to hire an applicant, refusing to promote an employee, or terminating an employee. The FCRA requires employers to provide consumers with copies of their background checks if the employer intends to take adverse action that is based in any part on the background check report, along with a statement of rights prepared by the Federal Trade Commission (FTC), so consumers have an opportunity to contest any information they feel is inaccurate or incomplete.  If the employer proceeds to take adverse action, a second post-adverse action notice is required.

Based on the Attorneys for the Plaintiff’s understanding of the financial institution’s practices, everyone who has applied or worked for the financial institution in the past three years should be eligible to receive statutory damages if the lawsuit succeeds. Additional information about the case can be found at www.nka.com/case/capital-one-fair-credit-reporting-act/

The lawsuit demonstrates that violations of the FCRA can create large potential liability.  Potential class members, including employees and prospective employees, may be entitled to statutory damages of up to $1,000 for each violation in the case of willful non-compliance. Class action lawsuits also create exposure for large awards of attorneys fees and the potential exposure to punitive damages.  A United States Supreme Court case decided in June 2007, Safeco Ins. Co. v. Burr, substantially increased the risk of punitive damages under the FCRA by ruling that a reckless disregard of the FCRA could be sufficient to show “willful” non-compliance.