Pre-Employment Background Screening 101

Mitigate Your Risk

A series of recent class action complaints against employers leads me to write about what employers can do to mitigate risk with respect to their background screening program.

I’m talking about pre-employment background checks when an employer uses the services of a third-party background screening company. Under the Fair Credit Reporting Act (FCRA) (15 U.S.C. § 1681 et seq.) employers have two critical responsibilities when using the services of a third-party background screening firm to request background checks on prospective employees.

Employers must do the following in order to comply with the FCRA when requesting a background check:

  1. Employers must provide prospective employees a clear and conspicuous disclosure regarding the fact that you will conduct a background check AND you must get the individual’s written authorization to conduct such. This is typically called the disclosure and authorization notice and it must be in a stand-alone document. The FCRA requires that when an employer requests a background check (aka a “consumer report”) for employment purposes they must provide “a clear an conspicuous disclosure” in writing “before the report is procured or caused to be procured, in a document that consists solely of the disclosure” and “the consumer has authorized in writing….” (15 U.S.C. § 1681b(b)(2)(A)(i)-(ii))
  2. Employers must follow the adverse action process, which is potentially a two-step process. The first step is typically referred to as the “pre-adverse action step” and you cannot send a final “no hire” letter until you complete this step. So, hypothetically speaking, after completing step 1 above you receive the results of a background check from your background screening vendor. The report indicates a criminal history or some other adverse item of information.  Based on this information, you may decide not to hire the individual.  Now what?  Before you take any final adverse action you must first provide the individual with a copy of the report you are reviewing and a summary of their rights as prescribed by the Consumer Financial Protection Bureau.  This allows the prospective employee to review the report and alert you if any information contained therein is inaccurate or incomplete and also to act on that incorrect or incomplete information with the background screening company. You should wait at least five business days before taking any final adverse action although realize that in some states and cities, Fair Chance laws and ordinances (aka Ban the Box laws and ordinances) may impose greater time periods. For more about Ban the Box, click here.

At a minimum, employers must follow above two steps to comply with the FCRA.  Depending on what state or city you are in there may be additional requirements, but these are the basics when doing pre-employment background checks on prospective employees.

Which brings me to the class action litigation and a sampling of the cases brought against employers for alleged non-compliance with the FCRA related to steps 1 and/or 2 described above.

  • Class action complaint filed against an airline catering and provisioning company (Case No. 2:17-cv-1298) for allegedly not following the pre-adverse action process.
  • Class action complaint filed against a major retail pharmacy chain (Case No. 5:17-cv-6019) for not providing the proper disclosure that a background check would be conducted and failure to follow the pre-adverse action process.
  • Class action complaint filed against a plasma provider (Case No. 5:17-cv-6018) for not following the pre-adverse action process.

There is a very active plaintiff’s bar filing complaints against both employers and background screening companies for alleged violations of the FCRA.  They do not discriminate based on type of employer or size of your business.  You’ve been warned.

But not all is lost as these are curable compliance issues. You start by reviewing your background screening program–your policies and procedures–with counsel versed in the FCRA and state consumer protection laws and guidance that govern background screening. You need to go step by step through the hiring process to understand where you may have deficiencies and need to shore up your compliance. For instance–if, as an employer, you utilize an adjudication matrix or screening standards to automatically classify individuals as “ineligible” for hire and automatically proceed to send a no hire letter we should talk about your background screening program and whether it complies with the requirements of the FCRA.  Or, your FCRA disclosure and authorization has a lot of “extraneous language” such as a release of liability language, we should talk.  Willful violations of the FCRA are eligible for statutory damages of $100 to $1,000/violation, plus punitive damages and attorney’s fees.

About the Author

Montserrat C. Miller

She began her career as a trial attorney with the Immigration and Naturalization Service handling, among other cases, employer sanctions matters.  Over the years Miller has worked in both private practice and on Capitol Hill as counsel to Senator Dianne Feinstein on the Senate Judiciary Committee.  She is now a partner at Arnall Golden Gregory’s Privacy and Consumer Regulatory, Immigration and Global Migration, and Government and Regulatory practices.

You can read more from her at her blog.