Background Checks and $6.7 Million Dollar Settlement
Non-Compliance with The Fair Credit Reporting Act (FCRA) can result in multi-million dollar settlements. Recent trends suggest there are three areas being targeted; Disclosure and Authorization Forms, The Adverse Action Process, and reasonable procedures taken to ensure maximum possible accuracy of information reported; Section 607 of the FCRA.
Recently Kelly Services settled their class action lawsuit pertaining to their Disclosure and Authorization Forms (source). The lawsuit was filed because Kelly Services included a liability clause within their Disclosure and Authorization Form and they are not alone in that many other companies have also violated the FCRA in the same way. The following paragraphs will help clarify Section 604 (b)(2) of the FCRA pertaining to the Disclosure and Release Form.
The “Disclosure and Authorization” form is used to initiate the background screening process and is required pursuant to Section 604(B)(2) of the Fair Credit Reporting Act (“FCRA”). The intent of this form is to disclose to the applicant that, as part of the hiring process, an employer may obtain a consumer report for employment purposes and that the employer is seeking the applicant's written authorization to do the same.
Section 604 (b)(2) of the FCRA specifically provides that a person may not procure a consumer report (background check) for employment purposes with respect to any consumer, unless—
A clear and conspicuous disclosure has been made in writing to the consumer at any time BEFORE the report is procured...in a document that CONSISTS SOLELY of the disclosure, that a consumer report may be obtained for employment purposes: and
The consumer has authorized in writing...the procurement of the report by that person.
The statute requires this disclosure in a completely standalone document, without any EXTRANEOUS information.
The Consumer Financial Protection Bureau (CRPB) and the courts agree that the authorization portion can be part of this standalone document and therefore certain identifying information may also be included to initiate a background check (i.e. name, date of birth, SSN).
In Summary: The Disclosure and Authorization Form must be a standalone document that is clear and conspicuous, understandable and noticeable, and MUST NOT contain extraneous information like a release of liability clause. Certain states like California, Minnesota, and Oklahoma impose additional obligations and require the inclusion of additional information in the notice. These three states require “check the box” language that the candidate can initial to receive a copy of the completed report. This additional information is permitted to be included in the Disclosure and Authorization Form.
It is advisable that employers conducting background checks on applicants and employees consult counsel to review forms and processes to ensure compliance with FCRA regulations.
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