Federal law requires employers that intend to perform a background check on an applicant or employee to provide a written disclosure prior to performing any investigation. This disclosure has recently been the subject of considerable litigation for many employers. This makes it important to understand the most common errors employers make and how you can avoid them.

FCRA Requirements

The Fair Credit Reporting Act (FCRA) is a federal law that regulates consumer reports, including background checks. This law requires employers to provide a disclosure prior to performing a background check for employment purposes. This background check must follow strict criteria, including a clear disclosure that solely consists of the disclosure. What this means is that the disclosure must consist of its own document where the disclosure is clearly displayed.

Effortless Litigation

Recently FCRA disclosure lawsuits have become a favorite target for attorneys, particularly in the form of class-action lawsuits. Through utilizing these, plaintiffs are able to collect large penalties for ultimately minor details. Through a class-action lawsuit, plaintiffs can pursue penalties on behalf of all individuals who have received a faulty disclosure. 

The FCRA provides for anywhere between $100 to up to $1,000 for every faulty disclosure. It is easy to see how this can quickly add up to even seven-digit penalties, with the end result depending on the number of individuals who received the disclosure. If plaintiffs succeed in pursuing these penalties, they are also entitled to pursue attorney’s fees as well.

Attorneys find these lawsuits highly attractive due to the simple nature of proving that violations occurred without the need for lengthy testimony. Though these disclosures may be difficult for employers to craft, the fact is that once a violation is discovered, it is easy to prove the violation occurred whether actual harm resulted or not.

New Developments

Unfortunately, employers are facing more threats than ever due to evolving case law and the rapidly changing regulations they impose on FCRA compliance. Many employers reasonably depend on third-party background check providers to supply them with disclosures, but unfortunately, not all of these third-party providers are trustworthy to remain up to date with the latest requirements themselves. 

Courts have recently focused on the standalone requirement that requires the information solely to contain the required disclosure information. Court rulings have established that not only must the required FCRA material be contained in the disclosure, but it must be the only information regardless of the importance of other information or how well-intentioned it may be.

Employer Takeaways

Many employers, particularly those that have not updated their disclosures within the last year should do so now. Also, when in doubt about employment disclosures, it is important to talk with employment counsel and work with a background check provider you can actually trust to remain up to date with the latest FCRA developments.