Employers across the country should dust off their background check policies and forms and be mindful of recent developments related to the federal Fair Credit Reporting Act (FCRA).
FCRA mandates specific, technical steps for employers using consumer reports to make employment decisions, including hiring, retention, promotion or reassignment. While many employers are familiar with the importance of following FCRA requirements, actual compliance with the law can be tedious and challenging. As the law continues to evolve, employers should be aware of recent updates to the model federal form for consumer rights and recent guidance from a California federal court related to the "stand-alone" disclosure and authorization requirement.
Updated "Summary of Your Rights under the Fair Credit Reporting Act"
Those familiar with the background check process understand that FCRA requires employers to disclose to candidates that consumer reports may be used for employment decisions and to obtain authorization in order to obtain such reports. If the employer relies on information from a consumer report to take an adverse employment action, the employer must provide the candidate with a copy of the report and a copy of his or her FCRA rights before taking such action.
The Consumer Financial Protection Bureau (CFBP) just released a new standard form "Summary of Your Rights Under the Fair Credit Reporting Act" that must be used starting September 21, 2018. This revised form includes new language to notify consumers of their rights regarding security freezes, as mandated by the Economic Growth, Regulatory Relief, and Consumer Protection Act, passed in May 2018. Specifically, where a consumer initiates a security freeze, a consumer reporting agency may not release information in a credit report without the consumer's express authorization. The security freeze is further designed to prevent potential lenders from providing access the consumer's credit report or opening accounts in the consumer's name. A copy of the updated form is available here, and employers should incorporate this form into practice immediately.
Recent Guidance on FRCA "Stand Alone" Disclosure Requirement
FCRA continues to spawn a number of class action complaints against employers for allegedly failing to comply with the law's hyper-technical disclosure and consent requirements before conducting background checks or proceeding with "adverse actions."
Just recently, the Central District of California issued summary judgment in an employer's favor on the issue of how conspicuous the FCRA notice must be in order to obtain proper consent. In Luna v. Hansen & Adkins Auto Transp., Inc., 313 F. Supp. 3d 1151 (C.D. Cal. 2018), a job applicant brought a putative FCRA class action on behalf of 3,0000 applicants, alleging that the employer failed to provide a "clear and conspicuous" disclosure to satisfy FCRA's requirement that notice be provided as a stand-alone document. Specifically, the plaintiff argued that the employer violated FCRA (1) by providing the disclosure as part of an application package containing six other documents, and (2) because the consent form was "buried" at the back of the application packet. The Court disagreed on both arguments, concluding that while the disclosure must be provided separately, nothing in the statute requires it be provided "separate in time from any other documents" and there are no specific "requirements about the form in which the authorization must be presented[.]"
Although appeal to the Ninth Circuit is likely, this ruling provides useful guidance for employers that conduct background checks or otherwise rely on consumer reports in making employment decisions.
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