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.