Criminal Background Check Litigation on the Rise: What Employers Need to Know

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Criminal Background Check Litigation on the Rise- What Employers Need to Know

When it comes to conducting criminal background checks on job candidates and potential hires, there are several pitfalls that employers must be aware of and be sure to avoid. For instance, the Federal Trade Commission (FTC) considers conducting credit checks or criminal investigations only on people of a certain race as evidence of discrimination. Although quite inevitable, the amount of class action litigation over criminal background checks in the hiring process has hit a rather alarming level.

According to a recent publication by WebRecon, plaintiffs filed over 5,000 claims related to the Fair Credit Reporting Act (FCRA) in 2020 alone. When closely analyzed, these litigations reveal some key takeaways, including current trends relating to the FCRA and how employers can further ensure that their employee background check processes comply with the Act. 

This article reviews some of these developing FCRA trends and provides some valuable recommendations to help employers stay compliant. 

General Nature of Recent FCRA-Related Litigation Claims

According to a recent survey, employers have paid more than $150 million in the last ten years in close to 150 FCRA class action lawsuits as penalties to settle litigation claims for alleged FCRA violations in the U.S. Interestingly, the majority of the violations, as observed from litigation trends last year, are based on the failure of employers to notify job candidates that a background check will be conducted on them and also the alleged failure of employers to allow candidates to defend themselves before taking any action based on the result of the background checks conducted. 

Recent FCRA Litigation Trends and Defenses

Double Dipping: more plaintiffs seek to “double-dip” in FCRA damages, a situation arising from filing two different litigations based on a single violation by the employer. Fortunately for employers, the FCRA does not have any provisions for two separate claims, so attempts to bifurcate a single cause of action may not be heard unless they come as defenses for two separate lawsuits. 

Summary of Rights Claims: As mentioned earlier, some of the claims are based on plaintiffs asserting that an employer did not inform them about a background check, include a copy of their right, or pre-inform them regarding an adverse action. However, the federal court rules that a plaintiff may not make such an assertion if they already learned what their FCRA rights are. 

Compliance Certification: This is coming from assertions that a consumer reporting agency vendor (background check services) failed to get a certification of compliance from the employer that has engaged its services to show that the background check would be used only for lawful purposes. This is primarily directed at the vendor, but the employer is still at risk for non-compliance should the plaintiff choose to seek discovery regarding the employer’s compliance with the FCRA.

Disclosure Forms: Interestingly, some claims are now based on the inclusion of languages regarding “investigative consumer reports” in a regular consumer report disclosure. Even though the law is unsettled about this, plaintiffs now claim that this violates the FCRA’s stand-alone requirement for “consumer report disclosures”.

What Employers Must Do to Avoid Getting Trapped in FCRA Litigations

To reduce exposure to FCRA litigations and equally position themselves for better defense, employers can make the following adjustments: 

Get a Written Consent

Employers must get written consent from the candidate through a stand-alone disclosure permitting them to run a background check on them. Failure to do this exposes such employers to lawsuits, violating the FCRA provisions on background checks. Additionally, be sure that the vendor or screening partner obtains this authorization before proceeding. Be sure to allow the candidates to defend themselves through a pre-adverse action notice before using your findings. 

Audit and Update Your FCRA Forms and Background Check Policy

This should be done regularly because it helps you make real-time adjustments to your processes and avoid falling behind current practices. It’s essential to recognize that background check processes have many phases, and the use of automation and online portals could make you fall short of compliance.

If possible, try to enlist the assistance of FCRA litigators that understand how minor errors expose you to litigation.

Avoid Reporting Information Not Allowed In Your Jurisdiction

Note that the employer takes most of the blame for the outcome of the background screening. Therefore, you need to ensure that the process is conducted in compliance with the FCRA and only seeks information to make a hiring decision specific to a particular candidate. 

For instance, it is illegal to try to get an applicant’s or employee’s genetic information, including family medical history. Even if you have that information, it should not be used to make an employment decision.

Review Your Relationship With Your Background Check Service Provider

Not only is it critical that you find a background check vendor whose services you can rely on, but it is also much more critical that both parties have a clear understanding of the scope of their responsibilities. Many FCRA claims arise because the employer failed to examine and update the mutual obligations under its contract with its employee background check vendor. 

Another important part to consider is making sure that the reports from the vendor are in line with your company’s background screening policy and do not reflect any form of discrimination or permit violations of the FCRA. This is one of the best strategies towards shielding yourself from background check litigation.

Finding the Right Background Screening Provider

Even though you can’t rely on your vendor’s expertise as a defense for FCRA violations, you must seek out a vendor that operates in compliance with the FCRA. You can also negotiate for reasonable indemnification obligations from your preferred vendor should a claim be filed later.

At Pre-Employ, we are both experts and are FCRA-compliant. We ensure that our background screening services are constantly in compliance with the Fair Credit Reporting Act (FCRA) and the Equal Employment Opportunity Commission (EEOC). We guarantee your peace of mind when you engage us for your employee background check services. Learn more about our screening services or contact us today for a free quote.