Tag Archives: FCRA

New Forms! FMLA & FCRA

Contributed by Noah A. Frank, September 27, 2018

48895877 - hand with pen over application form

hand with pen over form

In September 2018, the U.S. DOL published “updated” FMLA forms and the U.S. Consumer Financial Protection Bureau published updated FCRA forms.

DOL – Family and Medical Leave Act Forms

The DOL’s September 4, 2018 update is trivial: only the expiration date changed (now extended to August 31, 2021). There are no other changes to information, questions, or even layout (indeed, they maintain their prior revision date). Nonetheless, employers should promptly update their files with these new template forms. 

The forms are all available from the DOL’s  Wage and Hour Division be individually downloaded by clicking on the following links, or simply send an email and we will gladly provide them to you:

CFPB – Fair Credit Reporting Act Form Notice

On September 12, 2018, the CFPB released an updated Fair Credit Reporting Act Notice.  This is an important document to be provided to employees when using a third-party provider to obtain a “consumer report,” such as criminal background check or financial history inquiry.

Enforced by the U.S. EEOC in the employment context, failure to strictly comply with the FCRA has resulted in a significant increase in employment class action and discrimination lawsuits, including by professional plaintiffs — those who never really intended to work for the company, but found an opportunity to make a few dollars from a noncompliant company through threatening litigation and obtaining a nice settlement.

As part of the company’s regulatory compliance, ensure that the company and any third-party vendor immediately updates their FCRA notices, available from the CFPB in English and Spanish. 

As always seek the advice of competent employment counsel if there are any concerns with the use, completion, or interpretation of any of these government documents.


Employee Background Checks: Ripe for Class Action Lawsuits

Contributed by Jonathan Hoag, May 6, 2016

Hiring a new employeeEmployers conduct employee background checks to reduce risk and improve hiring decisions. Ironically, any missteps during the background check process can open employers to significant legal exposure that easily outweighs any benefit obtained from using background checks in the hiring process. The Equal Employment Opportunity Commission’s (EEOC) has been clear that use of background checks in the hiring process might lead to discrimination claims. However, our experience shows that employers face a far greater threat to legal exposure when conducting employee background checks through a separate law – the Fair Credit Reporting Act (FCRA). Large employers have been the target of FCRA class action litigation and we have seen first-hand that this trend is continuing with increased attention on smaller-sized employers. Our advice to all employers conducting background checks is to immediately have your documents and procedures reviewed by experienced employment counsel. The claims under the FCRA are highly technical and the forms/procedures put in place by third-party background check companies have been found to be in violation of the FCRA.

To highlight the sense of urgency, employers should be aware that these highly technical claims about background check forms being in violation of the FCRA have led to massive class wide settlements based on statutory damages regardless of whether anyone has been injured or not. For example, the following have been reported as recent FCRA class action settlements: Publix Super Markets, Inc. settled for $6.8 million; Swift Transportation settled for $4.4 million; Dollar General settled for $4.08 million; K-Mart settled for $3 million; Dominos settled for $2.5 million…and the list continues. Suffice it to say, compliance with this law deserves immediate attention.

The FCRA applies to employers who use a third-party to conduct background checks. The FCRA has technical requirements regarding the type and content of notice and authorization employers must provide before conducting third-party background checks. In addition, if an employer takes an “adverse action” based on information from the background checks, there are procedural requirements of the FCRA that must be followed.

We are aware of individuals and Plaintiff’s attorneys actively reviewing employer background check forms to identify “flawed” forms. The FCRA requires that a “clear and conspicuous” disclosure be provided to applicants/employees in a stand-alone document. Seemingly minor “flaws” can prompt a demand to settle with the threat of filing a class action lawsuit.  Unfortunately, the majority of courts reviewing FCRA lawsuits agree that allegations of seemingly minor flaws may be enough to avoid dismissal of the lawsuit.

There is a simple proactive solution. Employers should conduct an immediate audit and review of background check procedures, including all documents used in the process, to ensure the highly technical requirements of the FCRA are met. Implementing and using compliant background check forms and procedures will greatly reduce the likelihood of having to defend an expensive and costly FCRA class action lawsuit.

Criminal Background Checks: What You Know Can Be Used Against You

Submitted by Caryl Lazzaro Flannery

Would you want to know if you were about to offer a job to a convicted felon? Most employers would say “of course,” but both seeking and acting on that information could land you in legal trouble.  Before obtaining criminal background information on all potential new hires, you should know that the U.S. Consumer Financial Protection Bureau, the EEOC, and your state government may have something to say about that practice.

As a general rule, it is legal to inquire into the criminal history of employees and potential employees; however, concerns about fraud and discrimination are bringing those inquiries under increased scrutiny.  An employer who uses a third party screening company to obtain information about an individual’s credit history, criminal background, or other personal information must follow the procedures set out in the Fair Credit Reporting Act (“FCRA”).  Administered by Consumer Financial Protection Bureau (“CFPB”), the FCRA is designed to give individuals a chance to clear up errors in government records before being denied employment based on inaccurate or incomplete information.  If you are using a covered third party agency, you must follow very specific procedures to obtain and act on the information you receive.  Requirements include obtaining written consent before obtaining information, giving the employee notice and a copy of the report before taking any adverse action, and providing additional, post-action notice.  Employers who do not follow FCRA procedures are subject to fines, actual and punitive damages, and even criminal prosecution.

Do-it-yourself criminal background checks may also pose problems.  Although the FCRA does not apply to an employer’s own efforts to obtain background information, an increasing number of states have enacted laws to restrict what may be obtained and considered.  Some states have enacted “ban the box” laws which prohibit most employers from making any inquiry as to criminal history.  Illinois is among several states that permit an employer to inquire about convictions, but not arrests.  Illinois goes one step further, forbidding employers to ask about convictions that have been sealed or expunged, and applicants for state government jobs are not asked about criminal convictions at all.  Indiana has similarly restrictive laws and even gives convicted persons the opportunity to petition the court to have certain conviction records expunged. Other states, such as Missouri, have no laws restricting or regulating inquiries about and use of criminal or arrest information, but this is becoming the minority position.

Recently, the EEOC has weighed in, giving increased scrutiny to the use of criminal background checks as an employment screening tool.  Citing significant disparities in arrests and convictions between people of color and Caucasians, policies that automatically disqualify convicted criminals from employment are viewed as potential tools for purposeful discrimination or unintended disparate impact.  Over the last year, the EEOC has filed several high-profile lawsuits against employers who failed to hire or terminated employees solely on the basis of criminal conviction information.  The relationship between the crime and the job will be scrutinized as will the date of the conviction, and the applicant/employee’s post-conviction job history.

If you do hire an individual with a criminal record, your liability for the employee’s actions will likely be limited to foreseeable harm that occurs within the scope of employment.  Thus, an employer who hired an inmate under a work release program was not liable when the inmate shot and killed three people on his way back to prison after work.  On the other hand, a painting company who hired a known arsonist, thief and burglar to work in clients’ homes unsupervised was held responsible when he stole credit cards from and burned down a house he was assigned to work on.

Bottom Line: Review your criminal background check practices with a knowledgeable employment attorney to determine whether your program is having a disparate impact on minority applicants and be prepared to justify your use of criminal screening in the employment process.  If you use an outside service to screen applicants, be sure that your procedures comply with the FCRA.

Updated Fair Credit Reporting Act – What Does That Mean For Employers Who Perform Background Checks?

Contributed by Heather Bailey

Not too much.  However, effective July 2011 pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, there is a new sheriff in town and its name is the Consumer Financial Protection Bureau, which will now have the rulemaking and enforcement powers over the FCRA instead of the Federal Trade Commission. 

Effective January 1, 2013, the Bureau implemented an interim FCRA rule.  The good news is, there were no substantive changes in the way employers notify applicants and employees about background checks (i.e., the consent form, pre-adverse action notice, and post-adverse action notices if any such actions are taken).   The only change employers need to worry themselves with is the new “Summary of Your Rights Under the Fair Credit Reporting Act” notice that is given to applicable applicants and employees. The revised notice can be found at http://www.gpo.gov/fdsys/pkg/FR-2012-11-14/pdf/2012-27581.pdf, page 67748 (or page 5 of the actual document).

The only other significant change for employers is they will start receiving a “Notice to Users of Consumer Reports of their Obligations” from their vendors who perform the background checks as this is now required of them.  Be on the look-out for future updates to this existing law by the Consumer Financial Protection Bureau as it does not seem like it is done with its new authority.

If you do background checks on applicants and/or employees for any reason and you do not currently have a system in place for properly getting consent or notifying employees appropriately under the requirements of the FCRA, it is imperative you speak with counsel immediately to institute a practice for compliance.