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March 31st, 2016 | Sterling

Two Key Ways to Improve FCRA Compliance and Limit Lawsuit Exposure

Has Your State Banned the Box?

It seems a day doesn’t go by without seeing yet another employer caught up in the turmoil of a Fair Credit Reporting Act (FCRA) class action lawsuit. Following these stories we see many of the same purported violations again and again. Most commonly, these allegations focus on the employers’ disclosure and authorization or adverse action practices. And unfortunately getting it wrong in one of these areas can lead to large class sizes as employers repeat the same steps over and over while screening their candidates, totally unaware something in their process is amiss.

So what could be amiss if you’re getting consent and sending the adverse action notices? Today’s devil is in the details, and protection from current litigation trends requires screening procedures that follow the strict reading of the statute; not just the intent.

The disclosure and authorization process.

This is the first, and arguably the most common, point at which an employer can run afoul of the FCRA and find itself knee-deep in attorney fees. A background check cannot be obtained from a Consumer Reporting Agency, like TalentWise, without the employer first obtaining the candidate’s consent. But that’s the simple part. The way it’s written in the FCRA (and the way claims are filed against employers), the background check disclosure must be “clear and conspicuous… in a document that consists solely of the disclosure.”

Accordingly, employers need disclosures that are free of superfluous or extraneous language. That’s the kind of language on the disclosure page that may be called into question for obscuring what should be an unambiguous notice to the candidate regarding their background check. Frequent challenges to employers’ disclosure forms include its placement on an application, disclaimers or releases of liability language, and inclusion of state or locally required notices.

The adverse action process.

Here again, it’s the strict reading of the statute that employers must watch. “Before” taking “any” adverse action based on the report, the employer must provide the candidate with notice of their “intended” adverse decision. Therefore this notice, and its required documents (a copy of the report and Summary of Rights), should be received by the candidate before a final decision is made. Missteps at this stage, commonly referred to as the pre-adverse notification stage, can lead to litigation. Situations where “adverse action” can inadvertently occur before candidates are properly notified may include calling or emailing the candidate to let them know they didn’t get the job or promotion before they’ve received their pre-adverse notice documents. Even suspending an employee may have unintended consequences. So working with your legal counsel on the various situations your HR department comes across and establishing appropriate protocols for notifying the candidate is essential.

After providing pre-adverse notice, the employer needs to notify the candidate if a final adverse decision is made. The FTC has opined that 5 days is a reasonable period of time between the pre-adverse and final adverse notification. This gives the candidate an opportunity to dispute the accuracy or completeness of their report. It also, per Equal Employment Opportunity Commission’s guidance, gives employers time to solicit information regarding a candidate’s rehabilitation or good conduct, both of which should be taken into consideration before employers make a final hiring decision.

Staying alert to these two common areas for missteps will help to safeguard both you and your organization from FCRA headaches. Here at SterlingBackcheck we have built FCRA compliance best practices into our background screening products and services. Add in a centralized dashboard to further increase visibility into the results of your background checks as well as relevant next steps and you’re on your way to a more compliant screening experience.

SterlingBackcheck is not a law firm, and nothing contained in this publication should be construed as legal advice. We encourage you to consult with your attorney for a legal opinion specific to your needs.

This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.