On May 10, 2016, the Federal Trade Commission (FTC) issued new guidance for background screening companies. The publication focuses on Fair Credit Reporting Act (FCRA) requirements for background screening companies aka consumer reporting agencies (CRAs) when providing background reports for employment-related purposes. This guidance, titled: What Employment Background Screening Companies Need to Know About the Fair Credit Reporting Act, is in play when CRAs provide social media background checks for employers, and thus, employers and CRAs, and employers, should review the guidelines closely.
Avoid Multi-Million Dollar Lawsuits
The importance of complying with the FCRA cannot be overstated. This is particularly so because employers continue to investigate the social media activities of potential and current employees. Some employers are doing it “in-house” while others are relying on third-party CRAs. Either way, knowing what needs to be done to complete the screens lawfully is of significant importance.
In fact, recently, several well-publicized class action lawsuits alleging FCRA violations against employers illustrate the importance of compliance. For example, a federal judge in California recently approved a $3 million settlement in a class action alleging that Home Depot used non-compliant background check forms on employment applications. Similarly, in April 2016, Uber agreed to pay at least $10 million to settle claims regarding driver background checks. And, earlier, Dollar General agreed to pay $4 million to resolve an alleged class action of more than 200,000 job applicants who were allegedly not properly notified that they would be subject to background screening.
What’s In The New FCRA Publication?
First, the publication addresses the question “When is an employment background screening company a ‘consumer reporting agency'”? According to the FTC, “background screening reports are ‘consumer reports’ under the FCRA when they serve as a factor in determining a person’s eligibility for employment, credit, insurance, housing, or other purposes and they include information ‘bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.'” Consequently, “companies that sell or provide those reports are ‘consumer reporting agencies’ under the FCRA. So even if you don’t think of your company as a consumer reporting agency, it may be one if it provides information about people to employers for use in hiring or other employment decisions.” Thus, employers should check that their vendors are in compliance since the FCRA extends to employers relying on the CRA reports.
Next, the publication focuses on what should be done if the background screening company that is being used is a CRA:
“Follow reasonable procedures to assure accuracy.” According to the publication, the FCRA “requires you to establish and follow ‘reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.'” The article notes that there are some obvious “indicators that a background screening company isn’t following reasonable procedures. For example, if a report lists criminal convictions for people other than the applicant or employee – for instance, a person with a middle name or date of birth different from the applicant’s – that raises FCRA compliance concerns. Other indications that a company’s procedures might not be reasonable include screening reports with multiple entries for the same offense or that list criminal records that have been expunged or otherwise sealed.”
CRAs Should Get Certifications From Clients. In the post, the FTC states that CRAs “may provide consumer reports only to those with a specific permissible purpose, like employment. So verify that your clients are legitimate and get them to certify that they will use the reports only for employment purposes. In addition, the FCRA gives job applicants and employees the right to know that information about them is being reported to employers or potential employers. Therefore, you must get certifications from your clients attesting that:
- The employer notified the applicant and got the applicant’s written permission to get a background report;
- The employer will comply with the FCRA’s requirements; and
- The employer won’t discriminate against the applicant or employee, or otherwise misuse the information in violation of federal or state equal opportunity laws or regulations.”
CRAs Should Provide Clients With Information About The FCRA. According to the publication, the “FCRA requires you to provide your clients with information about their responsibilities under the statute (Notice to Users of Consumer Reports) and a summary of consumer rights under the FCRA (A Summary of Your Rights Under the Fair Credit Reporting Act), which you can provide with the background screening report or before providing a report.”
CRAs Should Honor The Rights of Applicants and Employees. Applicants and employees have “certain rights with which you must comply. For example, you must give them access to their files when they ask for them, conduct a reasonable investigation when they dispute the accuracy of information, and give them written notice of the results of investigations. It’s a violation of the FCRA not to respond in a timely way to consumers’ inquiries and disputes. Another FCRA violation: creating unreasonable obstacles for consumers trying to exercise their rights under the FCRA.”
Employers who rely on CRAs for background screening (including social media background checks) should understand their FCRA obligations, and should be able to evaluate whether the CRA of their choice is compliant or not. This is particularly true as more laws are passed regarding social media screening, and as new social media platforms are launched. Furthermore, employers who conduct social media screening in-house would be wise to follow many of the same requirements that pertain to CRAs. Avoiding multimillion dollar class action settlements should be a priority for every employer.
DISCLAIMER: Information provided on this website is not legal advice, and it does not create an attorney-client relationship, nor should you act on anything stated in this article without conferring with the Author or other legal counsel regarding your specific situation.