Employers Must Be Cautious of the Fair Credit Reporting Act When Obtaining Criminal Background Checks

When obtaining criminal background checks on job candidates or employees is your business paying careful attention to the Fair Credit Reporting Act (“FCRA”)? If not, you may be in violation of federal law! The FCRA mandates employers to follow a distinct set of requirements when obtaining criminal background reports from a third party consumer reporting agency (“CRA”). Failure to follow these requirements may result in significant penalties and damages.

Required Procedures Before Obtaining a Criminal Background Report

Prior to ordering a criminal background report, the FCRA requires employers to comply with certain procedural hurdles. First, the employer must provide written notice to the candidate or employee informing him/her that it may obtain a background report for employment purposes. Second, the employer must obtain the candidate or employee’s advanced written consent authorizing procurement of the background report. Third, the employer must certify to the CRA that it complied with all FCRA requirements, will not use the information in the report in violation of any state or federal discrimination laws, and will provide the individual with a copy of the background report and a summary of his/her rights under the FCRA if any adverse action is taken based on information contained in the report.

Required Procedures Before Taking Adverse Action

Before an employer may take adverse employment action against a candidate or employee based on information contained in a criminal background report, the employer must provide a “pre-adverse action” notice to the individual and wait for a period of time. The waiting period is undefined by the FCRA, but it is typically recommended to wait a minimum of five business days before making an adverse employment decision. The “pre-adverse action” notice must include a copy of the individual’s background report and the FCRA’s Summary of Rights form.

Required Notice Procedures for Taking Adverse Action

After the waiting period has passed the employer may move forward with its decision to take adverse employment action. However, the employer must provide an “adverse action” notice informing the candidate or employee that adverse employment action was taken. This notice must include: (1) the CRA’s contact information; (2) a statement that the CRA did not make the adverse employment decision and cannot explain why the decision was made; (3) a statement that the individual has the right to obtain a free copy of the report from the CRA within sixty days; and (4) a statement that the individual has the right to dispute the accuracy and/or completeness of the Report with the CRA.

Potential Penalties for Violating the FCRA

The Consumer Financial Protection Bureau (“CFPB”) is charged with enforcing the FCRA. The CFPB may bring a civil action against an employer who violates the FCRA and seek civil penalties in an amount up to $3,500 per violation. Additionally, the FCRA provides candidates or employees with a private right of action to bring a civil lawsuit. In a private right of action, if any employer negligently fails to comply with the FCRA, the employer may be liable for actual damages sustained by the individual in addition to reasonable attorney’s fees and costs. If the employer willfully violates the FCRA, the employer may be liable for actual damages sustained by the individual or statutory damages ranging from $100 to not more than $1,000, punitive damages and reasonable attorney’s fees and costs.

The FCRA is filled with numerous procedural hurdles that employers are mandated to follow. Employers face stiff monetary damages and penalties for non-compliance. Additionally, many states have their own laws regulating the use of criminal background checks. If your business would like to learn more about the legal pitfalls related to criminal background checks or whether your criminal background check policies are in compliance with the FCRA or any other state or federal law, please contact one of the employment attorneys at Eckberg Lammers.


About the Author

Michael L. McCain is the lead employment law attorney at Eckberg Lammers. Mike exclusively represents businesses and management in labor, employment, and business law matters. He may be reached at 651-439-2878 or mmccain@eckberglammers.com.

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