Fair Credit Reporting Act And Hiring: What Employers Need To Know

A California employer recently settled a class action lawsuit filed against it by an applicant who alleged violation of the Fair Credit Reporting Act (FCRA) in its application process.

Provisions in the FCRA require employers to furnish job applicants with a "clear and conspicuous disclosure" form prior to requesting a consumer credit report. The form must be solely for the purpose of informing the applicant of the request. The plaintiff claims the employer violated this provision when it included a liability waiver with the disclosure form, which he says was confusing to him.

The plaintiff filed the class action lawsuit on behalf of himself and more than 1,000 other affected job candidates. The settlement requires the employer to pay just under $175,000.

Employers who routinely use consumer reports as part of their background check process, need to make sure their procedures comply with FCRA guidelines. Thomas Ahearn "Judge Approves Settlement of Nearly $175,000 in FCRA Class Action Lawsuit" www.esrcheck.com (Mar. 19, 2021).

Commentary

Congress passed the FCRA in 1970 with the goal of improving the accuracy of consumer reporting information, as well as consumer privacy rights in how reporting agencies maintain and disperse consumer information.

The above case illustrates a key FCRA provision for employers. Specifically, that they must notify applicants of their intent to obtain a consumer report and how they will use the information. Employers who plan to continue requesting consumer reports throughout the individual’s employment, must also make that clear on the form. The notification must be in writing and separate from any other employment information.

Employers must also obtain written permission to obtain the report, as well as make sure the reporting agency from which they obtain the information is compliant with FCRA requirements.

If negative employment actions transpire because of the report, employers must provide the applicant with a copy of the report and notify them of their rights under the FCRA. It is important that an employer give the applicant an opportunity to address the report and refute any inaccurate information.

In addition, stay informed on applicable state laws related to obtaining consumer reports, as some states limit the use of some reports for employment purposes.

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