Latest Class Action - Canon Solutions America Inc.

Canon Solutions America Inc. is the latest company to come under compliance fire for an alleged failure to follow FCRA guidelines. Anya McPherson, the individual responsible for the class action, claims that Canon Solutions America fired her without offering her a chance to dispute the results of a background check. McPherson also claims that the charge was more than a decade old and that the conviction was expunged. To make matters more complicated for Canon, the plaintiff also stated that she did not receive a copy of her report, and did not receive a summary of her rights under the FCRA.

Due to the high frequency of cases being brought against employers for FCRA violations, I decided to include a ‘refresher’ for FCRA compliance. 

Please be sure to take into consideration the following:

1) Before Obtaining A Consumer Report

If you intend to use a consumer report for employment purposes, you must provide written disclosure of your intent to perform a background check as a condition of employment. You must also get permission from the applicant. This comes in the form of a written consent form. Once you have obtained consent from the applicant, you can move forward with the background check. The Disclosure and Consent should be kept as separate clearly defined documents or ‘pages’ if you will.

2) Pre-Adverse Action

Adverse Action basically means that you may or intend to deny the applicant employment based on the information you obtained from the background check. If based on your review of the background you plan to pass on the applicant based on this info, you must send the applicant a pre-adverse action letter. 

The Pre-Adverse Action letter must include the following re notification:

• The name, address, and phone number of the Credit Reporting Agency (CRA)

• The fact that the CRA didn't make the adverse decision and cannot give reasons for the decision

• His/her right to a free copy of the consumer report within 60 days

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

• Summary of Rights including any State specific requirements

3) Adverse Action

After you have given the applicant 5 days to dispute the report, you may take Adverse Action against the applicant. You must notify them of your final decision to deny employment based upon their consumer report, through use of an Adverse Action Letter, which also must contain all of the above notification provisions mentioned above under pre adverse.

The FTC and EEOC also co-published guidance on the proper procedure for background screening, which can be found here. 

Large National Retailer Settles Class Action for $3 Million

A large retailer reached a settlement for $3 million dollars over allegations that it violated the Fair Credit Reporting Act (FCRA).  The allegation stated that the large retailer failed to notify over 64,500 applicants and give them  due process to dispute the accuracy of the information contained in the Consumer Report.

The FCRA clearly states that you must notify an applicant if a "Consumer Report" contains derogatory information about the applicant and give them time to dispute or correct the information prior to making a final determination on their employment.   It further states that you must give the applicant the contact information of the Credit Reporting Agency (CRA).  This process is defined as pre-adverse action.

It is alleged that the large retailer bypassed this step in the process and simply notified the applicants of the adverse action or their potential denial of employment.

As a reminder to employers, you are obligated to follow the Fair Credit Reporting Act (FCRA) as well as state laws.

The obligation for the employer under the FCRA:

1) Provide the applicant with a separate "Disclosure and Consent" form.
2) Ensure that your consent covers any additional State Laws if they applicant is located in that state.
3) Give the applicant access to the "Summary of Rights" that was updated as of January 1, 2013.
4) If their "Consumer Report" contains derogatory information that will affect their employment, notify the applicant with pre-adverse action and let them know what Credit Reporting Agency to contact to clear up any information that is inaccurate. 
5) If the information is accurate and you determine that the applicant is not suited for a specific job, then notify the applicant of adverse action and again give the applicant the name of the CRA and another copy of the "Summary of Rights."

For more information regarding the employers responsibility, please refer to the Fair Credit Reporting Act.

Indiana to Restrict Use of Criminal Records

The State of Indiana recently passed a law that prohibits the use of certain criminal records.   The new law Indiana House Bill 1033 limits the use of what Employers may obtain from an applicant, what a "consumer reporting agency" (CRA) may obtain from the state courts and what a CRA can report to employers. 

Effective July 1, 2012, the prohibits courts from disclosing information on alleged infractions where the records is:

• is not prosecuted or if the action against the person is dismissed;
• is adjudged not to have committed the infraction; or
• is adjudged to have committed the infraction and the adjudication is subsequently vacated;
• was convicted of the infraction and satisfied any judgement attendant to the infraction conviction more than five years ago.
• the court in which the action was filed shall order the clerk not to disclose or permit disclosure of information related to the infraction to a noncriminal justice organization or an individual.

The bill also contains additional requirements that take effect on July 1, 2013.  We will send out more information on these new requirements as we move closer to the effective date.

FTC Sends Warning Letters to Background Companies Using Mobile Apps

The Federal Trade Commission (FTC) issued warning letters to several companies that have designed and implemented easy background checks thru mobile devices.  In the letter the FTC states that the apps could violate consumer reporting laws.


The letter states the following:

"Under the FCRA, a company is a consumer reporting agency (CRA) if it assembles or
evaluates information on consumers for the purpose of furnishing consumer reports to third
parties. Consumer reports include information that relates to an individual's character,
reputation or personal characteristics and are used or expected to be used for employment,
housing, credit, or other similar purposes. For example, when companies provide information to
employers regarding current or prospective employee's criminal histories, they are providing
consumer reports because the data involves the individual's character, general reputation, or
personal characteristics. Such companies, therefore, are acting as CRAs in this capacity and
must comply with the FCRA. .....

The Commission reserves the right to take action against you based on past or future law
violations; your practices also may be subject to laws enforced by other federal, state, or local
law enforcement agencies. A violation of the FCRA may result in legal action by the FTC, in
which it is entitled to seek injunctive relief and/or monetary penalties of up to $3,500 per
violation."  says the FTC.

"The FTC and EEOC have stepped up efforts to enforce the Fair Credit Reporting Act.  With the adoption of the internet and the amount of data that can be accessed by companies, Credit Reporting Agencies (CRA's) must take additional steps to ensure the accuracy and efficacy of the data they report.   This cannot happen if the companies making these apps aren't reviewing the applicants records to ensure that they are held to the state and federal rules and standards." says Bill Whitford, CEO of S2Verify.

"Although I applaud the technology initiative, there can be steps taken to review the information before it is reported."  ... Bill Whitford

About S2VERIFY:
S2Verify is a leading process innovator in the application of background screening and employment 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

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.

Company Settles "Class Action Lawsuit" for $4.3 million

The company failed to follow the Fair Credit Reporting Act (FCRA) by first obtaining written consent to conduct background checks and second they failed to offer the applicants a copy of their report or the Credit Reporting Agency's (CRA) contact information to obtain a copy.

The proposed settlement would pay the worker that was terminated because of a background check between $2,000 and $4,000 each.

This company was a subcontractor to a large metropolitan school district and provided transportation for children. 

Maybe it is time for you to reevaluate how you perform your employment screening, your consent, and how you notify your applicants of the outcome.  In addition, you should understand what your current CRA is providing and how it is impacted by the FCRA and State Laws.

Recently, we were preparing a consent for a new client.  After reviewing several Fortune 500 companies existing consents, we found NONE of them were in compliance with both the FCRA and the state regulations.  

Companies need to understand that these types of lawsuits and actions by the Federal Trade Commission over violations of the FCRA and state regulations will continue.