The Fair Credit Reporting Act Needs Your Respect

The Fair Credit Reporting Act (FCRA) is one of those laws that often fails to get the respect it deserves. Just the sound of it—it seems to apply to credit reports, so why would an employer need to worry about it? Because the FCRA can also apply to applicant and employee background checks.

A recent decision from a federal court in New York shows us the potential legal consequences of failing to comply with the FCRA. In Garcia v. Execu , S.D.N.Y., No. 17-cv-9401, 2/19/19, Mr. Garcia was terminated on the second day of work because a criminal background check showed that he had open criminal charges. Mr. Garcia said the charges had been dismissed. His termination stood.

So Mr. Garcia filed a class action against the company that hired and fired him, alleging that it violated the FCRA by failing to provide him a copy of his consumer credit report or a written description of his FCRA rights before taking an adverse employment action against him based on the report. The federal district court denied the employer's motion to dismiss the class allegations. Now the company must defend a class action simply because it failed to provide a copy of Mr. Garcia's background check to him. This is an expensive lesson for that company.

Here's what employers need to know about the FCRA: when a company runs background checks through a company in the business of compiling background information, it must comply with the FCRA. Specifically, the FCRA requires the following before the company seeks the background check:

• 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 a stand-alone format. The notice can't be in an employment application. You can include some minor additional information in the notice (like a brief description of the nature of consumer reports), but only if it doesn't 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.
  
• Certify to the company from which you are getting the report that you:
  
  • notified the applicant and got their permission to get a background report;
    
  • complied with all of the FCRA requirements; and
    
  • won't discriminate against the applicant or employee, or otherwise misuse the information in violation of federal or state equal opportunity laws or regulations.
    

Additionally, when taking an adverse action (for example, not hiring an applicant or firing an employee) based on background information obtained through a company in the business of compiling background information, the FCRA has the following additional requirements:

• Before you take an adverse employment action, you must give the applicant or employee:
  
  • a notice that includes a copy of the consumer report you relied on to make your decision; and
    
  • a copy of "A Summary of Your Rights Under the Fair Credit Reporting Act," which you should have received from the company that sold you the report.
    

(By giving the person the notice in advance, the person has an opportunity to review the report and explain any negative information.)

• After you take an adverse employment action, you must tell the applicant or employee (orally, in writing, or electronically):
  
  • that he or she was rejected because of information in the report;
    
  • the name, address, and phone number of the company that sold the report;
    
  • that the company selling the report didn't make the hiring decision, and can't give specific reasons for it; and
    
  • that he or she has a right to dispute the accuracy or completeness of the report, and to get an additional free report from the reporting company within 60 days.