Background Checks, Regulations, and Avoiding Litigation
Given the increase in litigation against businesses using background checks, now is a good time for employers to review and strengthen their compliance practices when it comes to applicant screening. Every employer must be aware of class action litigation against employers for violating rules in obtaining and using a background report. Those rules specifically include the federal Fair Credit Reporting Act (FCRA) and in California, the Investigative Consumer Reporting Agencies Act (ICRAA). (CA Civil Code 1786)
Non-Compliance with The Fair Credit Reporting Act (FCRA) can result in multimillion dollar settlements as many large companies have already experienced. Willfully violating the FCRA’s Mandated Adverse Action Process has become one of the primary targets for class action litigation and will be reviewed in this article.
Employers who use the results of a background investigation for their hiring, promoting, suspending, or termination decisions need to understand Adverse Action and its procedures under the Fair Credit Reporting Act. Under the FCRA employers are obligated to follow a two-step adverse action process; pre-adverse action and adverse action. This process provides the applicant or employee the opportunity to review and dispute information on the report, if they so choose. Once the applicant has undergone a background check, if the report that the employer receives from the background screening company has information that may be used to make a negative hiring decision, the pre-adverse action process begins.
BEFORE taking any adverse employment action the employer must provide the applicant or employee with:
- Pre-Adverse Action letter
- A copy of the consumer report (background check) you relied on to make your decision
- A description in writing of the rights of the consumer under the FCRA, and if in California, a copy of CA Civil Code 1786.22
- Provide a reasonable opportunity to dispute the information before rendering the adverse employment decision. Typically, a reasonable amount of time is 5-10 business days.
After a “reasonable amount of time” has passed for the candidate to contact the background screening company to dispute or explain the contents of the report, the employer must notify the applicant/employee of the fact that Adverse Action has been taken based on a consumer report and must include:
- Adverse Action letter containing the name, address, and phone number of the background screening company that furnished the report: a statement that the background screening company did not decide to take the adverse action and is unable to provide the consumer with specific reasons for the action, and notice of the applicant’s/employee’s rights to obtain another free copy of his or her report from the background screening company within 60 days.
- A copy of the report you relied upon to make your decision
- A description in writing of the rights of the consumer under the FCRA, and if in California, a copy of CA Civil Code 1786.
Americhek is a Southern California, Orange County based Background Screening Company. We strongly urge you to always contact your employment attorney for direction and legal advice.