Hiring Alert! Be Careful With Your Background Check Paperwork

Volume 16, Issue 3 
March 1, 2017

Most employers obtain some type of background check on applicants during the hiring process, either on their own or through a vendor. As you know, the Fair Credit Reporting Act (FCRA) requires an employer to notify an applicant - via a written disclosure - that the employer may obtain a "consumer report" about him. A "consumer report" is any information bearing on an applicant's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.

Before an employer can obtain such information (or allow a vendor to do so on its behalf) it must make its disclosure and obtain the applicant's permission - via a written authorization. The FCRA specifically provides that the employer's (or vendor's) disclosure must be "in a document that consists solely of the disclosure."

The FCRA's technical requirements have led to several class action lawsuits. Individuals have challenged disclosures because they are included in an employer's application or because the disclosure contains additional information that is not authorized by the statute. A recent ruling in such a lawsuit in the Ninth Circuit has resulted in liability for an employer that used a FCRA disclosure and authorization document to also obtain a waiver of the applicant's rights under the FCRA. As the first circuit court to rule in such a case, the Ninth Circuit Court found that the FCRA clearly requires an employer to present an applicant with a document that consists solely of the disclosure. The Court ruled that the only exception to this requirement is the authorization also required by the FCRA. Therefore, the employer's inclusion of a waiver violated the FCRA. The Court also ruled that the language of the FCRA on this issue was so clear, the employer's violation was willful, subjecting the employer to actual or statutory damages.

Clearly, the takeaway here is to continue to be very careful with your background check paperwork as technical violations of the FCRA can be costly. If you use a third party vendor in your hiring process, ensure that its paperwork is also compliant with the requirements of the FCRA. If you have questions about these or other hiring requirements, please contact a KZA attorney. To review the Ninth Circuit Court's decision in Syed v. M-I, LLC, and view the disclosure used by the employer in this case, click here.

KZA Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.