Designed to protect the information in the files of consumer reporting agencies, the Fair Credit Reporting Act (FCRA) also instructs employers on the steps they need to take when they use credit reports to evaluate job applicants. Recently, there has been an uptick in class action over noncompliant credit checks.
“As more [plaintiffs attorneys] realize what’s out there to be had, that’s when I think the smaller companies are going to start to feel some pain as well, as this litigation trend trickles down to them,” said Brett Coburn, partner in Alston & Bird’s Labor and Employment Group.
Coburn offers four ways to remain compliant when ordering credit reports for a job applicant.
“I think that the important thing is to keep it simple,” he said. “Make your disclosure so that the applicant or employee can easily understand it.”
The FCRA requires that the notice be separate from other provisions of the application.
“In the disclosure itself, if you put other things like a liability waiver or a notice that the person would be an at-will employee, that takes the document from being one that consists solely of this disclosure about the background check issue to something more than that,” Coburn continued. “And that doesn’t comply with the statute.”
Coburn also cautions employers to be aware of which pages within online applications contain which disclosures, because even online disclosures and authorization need to be “separate and freestanding.”
The FCRA employers are obligated to let the candidate know that their credit report has prompted an adverse employment action by sending a preadverse action notice.
What the FCRA doesn’t specify, explained Coburn, is how much time employers should allow between the preadverse notice and final action.
“I think the general thinking on it is that five business days is the right amount of time to give somebody, unless there are unique facts that suggest otherwise,” he noted. “Whatever you tell them, you absolutely need to stick to it. What’s reasonable is going to depend on the circumstances, it’s going to depend on how you get the preadverse action to the person – whether by regular mail, hand delivery, email or next-day delivery.”
Coburn also cautioned against relying on a vendor to remain compliant.
“I think it’s important that the employer dig in and understand those requirements itself, rather than relying on a vendor to do it for them,” he said. “At the end of the day, the employer is likely going to be the one who is getting sued.”
While the FCRA provides federal requirements, there are also state laws to consider.
“It’s not enough to say: we comply with federal law, we’re good to go,” Coburn warned.