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Avoid Getting Sued Over Background Check Forms

Tens of thousands of companies across America today are at risk for a crippling lawsuit because they conduct employment background checks and the form they make their applicants read and sign, authorizing the background check, contains language that is not legally permitted. By reading this blog, reviewing your disclosure & authorization form, and consulting legal counsel, you can avoid getting sued over this form and all of the problems that accompany one of these lawsuits.

First, let us state up front that we are not lawyers and this blog should NOT be construed as legal advice, guidance or counsel. Employers should consult their own attorney about their compliance responsibilities under the Fair Credit Reporting Act and applicable state law, and local ordinances. 

When it comes to lawsuits for disclosure form violations, larger household brands like Whole Foods, Pizza Hut, and others get the media spotlight, but thousands of companies have been hit with these lawsuits over the past two years. And it doesn’t help that there are people out there intentionally looking for and suing violators.

The current focus is on disclosure forms that include extraneous information. Here’s what you need to know to lessen your risk of a similar class action lawsuit.

Disclosure & Authorization Form is Legally Required

If you purchase employment background checks from a consumer reporting agency that provides employment screening services, you must comply with the Fair Credit Reporting Act (FCRA). The FCRA includes a requirement that employers disclose to applicants or employees (or subcontractors or even volunteers) that a consumer report may be obtained on them. Specifically, an employer must provide “a clear and conspicuous disclosure” in writing to the individual on whom the report is to be conducted and the disclosure must be “in a document that consists solely of the disclosure.”

This stand-alone disclosure requirement is the subject of many class action lawsuits. Applicants (and their lawyers) scrutinize the background check disclosure forms used by employers and if there is any extraneous information included on the form, they file a lawsuit alleging that the employer violated the FCRA by failing to provide a stand-alone disclosure. They can seek recovery of between $100 and $1,000 for each member of the class of applicants who were provided the same form. They can also seek punitive damages for willful violations of the FCRA.

Extraneous Information on FCRA Forms

The text of the FCRA does not define what it means to be a “document that consists solely of the disclosure.” It does, however, state that the required written authorization from the applicant/employee may be included with the disclosure. Consequently, employers may combine the FCRA disclosure with the authorization & consent requirement, but any other information on the form may jeopardize compliance.

As these cases proceed through the courts, judges have found certain types of additional information on the FCRA disclosure form to be problematic, including:

  • Imbedding the FCRA disclosure within a job application
  • Release of liability, e.g., “I hereby release [employer] and any of its authorized agents from liability”
  • Acknowledgement of no discrimination, e.g., “I fully understand that all employment decisions are based on legitimate non-discriminatory reasons”
  • Ramifications of falsified information, e.g., “I understand that submission of false information on this or any employment forms may result in non-selection or termination if hired”
  • State-specific notices, e.g., notices specific to California or New York applicants on the form – not separate from the form
  • Procedures for how to dispute information on the reports, including time frames for challenging the accuracy of any report

In most cases, the courts have refused to dismiss these lawsuits at an early stage, allowing the class representatives to proceed with their allegations of FCRA violations based on these types of extraneous information in disclosure forms. It is unclear whether a judge or jury will ultimately conclude that an FCRA violation exists in these cases, but the affected employers face significant risk of liability as well as the time, expense and reputation problems related to defending these actions in court.

On April 28, 2017, the Federal Trade Commission (FTC) issued a blog article entitled “Background checks on prospective employees: Keep required disclosures simple.” While the article falls far short of any serious effort by the regulator to help bring clarity to an uncertain and important area of the law, it does serve to remind employers that “less is more” when it comes to drafting background check disclosure and authorization forms. 

Don’t Rely On Your Screener 

If you think you are out of danger because you rely on FCRA forms provided by your background screening company, think again. Consider the recent class action filed against Big Lots in Philadelphia. The national chain of retail stores used a “Consent to Request Consumer Report & Investigative Consumer Report Information” form provided by its background check provider, Sterling Infosystems, that did not contain the required disclosure language. Instead, the form included allegedly extraneous information, including an implied liability waiver, a full page of state-specific notices, and information about how background information will be gathered and how disputed information may be challenged. State specfic notices are typically considered acceptable if the state specific notice is provided as a separate stand-alone document and not printed on or attached to the original form.

The form that SafestHires makes available to its clients is a sample form. It was prepared by legal experts at one of the nation’s largest and most respected employment law firms, but we clearly state on the form that it’s just a sample and that employers should consult their own attorney about their compliance responsibilities under the FCRA and applicable state law, and local ordinances.

Review Your FCRA Forms

Take the time to review your background check disclosure and authorization forms now. Make sure your FCRA disclosure and authorization is not imbedded or buried in your employment application. If your disclosure forms include extraneous statements, such as liability waivers, state-specific disclosures, or other background check procedures, your forms may not meet the FCRA requirement to be a stand-alone disclosure. Consider removing the extra wording from the FCRA disclosure forms and move them to a different, non-FCRA-related document. These sorts of class actions can be easy pickings, so taking action now will go a long way toward avoiding being hauled into court.

Owned by four US Navy Veterans and a Coastie, SafestHires combines modern technology with tenacious service, flexible choices and favorable pricing to create a background screening experience like no other.

In side-by-side comparisons with 300 other screening firms, our turnaround was always faster; the screening system was deemed easier; and pricing was 25 to 50 percent less.

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