Sometimes Less is More: Background Check Disclosures Can Go Too Far and Lead to FCRA Violations Fisher phillips

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Under federal law, an employer who conducts a background check on a candidate or employee must first provide written notice, also known as disclosure, to that person – but court rulings Recent developments demonstrate how misguided attempts to provide this disclosure can lead to legal action. exposure. What have been the most common mistakes employers make in this regard, and what can you do to avoid these pitfalls?

Understanding the basics: what does FRCA need?

The Fair Credit Reporting Act (FCRA) is a federal law that requires you to make a disclosure to employees or applicants informing them that you will get a consumer report about them for employment purposes. The form of disclosure must meet very specific criteria set out in law. Specifically, the FCRA requires that you provide a “clear and visible” written notice that consists of “disclosure only”. In other words, the disclosure must be (1) clear and visible; and (2) exist as a stand-alone document.

Ripe for litigation

In recent years, FCRA lawsuits have become a cottage industry for knowledgeable plaintiff lawyers. Often, FCRA claims take the form of class actions, which allow plaintiffs to accumulate a multitude of penalties for final “ticky tack” violations. In class actions, a plaintiff can sue and seek redress on behalf of all of the people who received the faulty disclosure and for whom a background check was performed. Under the FCRA, an employer can be held liable for actual or statutory damages between $ 100 and $ 1,000 per disclosure and background check obtained per person. These legal penalties can quickly reach a seven-figure exposure, depending on the number of individuals to whom the infringing disclosure has been issued. In addition to legal penalties, a plaintiff who succeeds in proving that FCRA violations have taken place will also be entitled to collect attorney’s fees and costs.

FCRA disclosure lawsuits are very attractive to plaintiff lawyers due to the straightforward nature of establishing an FCRA violation. Unlike other consumer and labor law actions, where both parties must engage in a voluminous discovery and where the facts are often based on rebuttable testimony she says, the facts of a trial FCRA disclosures are relatively easy to establish. The disclosure is either FCRA compliant or not. To that end, a complainant need only prove that an FCRA disclosure violation has occurred – not necessarily that it resulted in actual and calculable harm.

New disturbing trend in FCRA litigation

Unfortunately, the development of case law interpreting FCRA’s disclosure requirements has only increased the potential liability and pitfalls of unsuspecting employers. On many occasions, employers are not even aware of potential disclosure issues as they assume that the disclosure templates and notices provided by third-party background check companies comply with FCRA’s ever-changing disclosure requirements. . This assumption is unfortunately not the reality.

Recent case law from the Ninth Circuit court (covering almost the entire west coast, Washington to Arizona, California to Montana, Alaska to Hawaii and all places in between) has created difficult results for employers who have used disclosures containing seemingly common and otherwise fine terms. intended. Indeed, courts recently ruled that the FCRA was violated when a disclosure contained any of the following:

  • Liability disclaimers (included in an attempt to exonerate the employer from his responsibility);
  • Notice and Acknowledgment of FCRA’s Summary of Rights (which the Bureau of Consumer Financial Protection has published and requires all employers to issue background checks);
  • Multiple state-specific background check notices not considered relevant to that particular person; and
  • Specific instructions on how a person can request and inspect consumer information agency records related to background checks.

It may seem counterintuitive to punish an employer for informing individuals of all of their rights related to the background check process. However, FCRA’s “clear and visible” and “stand-alone” disclosure requirements have been implemented to ensure that the information to be communicated in the disclosure is not obscured or obscured by other information, even if that information are just as important.

What did the courts say?

For example, in the founding case Gilberg v. California Check Cashing Stores, LLC (2019), the Ninth Circuit Court of Appeals ruled that the operational disclosure violated the FCRA’s “stand-alone” requirement because the disclosure included additional information related to other laws on a background check. other than California, including Minnesota, Oklahoma, and New York requirements. York, which did not apply to the Applicant.

Likewise, in Walker v. Fred Meyer, Inc. (2020), the Ninth Circuit held that an FCRA violation occurred when the disclosure contained specific instructions and a list of rights regarding how a person could request and obtain a background check from the third-party consumer information agency. In that case, the court even mentioned that such a provision was probably “included in good faith”. Nonetheless, the Ninth Circuit held the employer liable because the disclosure no longer met the “stand-alone” requirement.

What should you do

It is not uncommon for a disclosure template to contain at least one of the above contrary elements, especially if it has not been drafted within the previous year. We strongly recommend that you have an attorney review your current background check disclosure, as well as any other notices issued during the background check process, as the court’s interpretation of the FCRA’s disclosure requirements evolves. frequently. While this overview focuses on litigation on the West Coast, it is not uncommon for litigation trends to spill east – so employers across the country need to be on the lookout for this troubling new trend. . One simple misstep could potentially leave your organization on the right path and expose it to substantial class actions for otherwise minor violations.


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