What’s the Right Form?

Now is the time to assess background screening policies

By Neil Alexander and Christie Kriegsfeld

Before Jan. 1, 2013, employers should use new Fair Credit Reporting Act (FCRA) notices for their background check programs, which have modest changes to the mandatory agency- drafted FCRA Summary of Rights form. The updated form reflects the transfer of much of the responsibility for interpreting the FCRA from the Federal Trade Commission to the newly created Consumer Financial Protection Bureau (CFPB).

The form must be included: (1) with the “pre-adverse action” notice provided to an employee or applicant; and (2) with the disclosures for “investigative consumer reports” (i.e., consumer reports based on personal interviews conducted by a consumer reporting agency (CRA), such as in-depth reference checks).

Employment-Related Provisions. The FCRA requires that employers that obtain background reports from a CRA must first provide a “clear and conspicuous” written disclosure to the consumer, in a document that consists solely of the disclosure, that a consumer report may be obtained. The applicant or employee must provide written permission in advance for the employer to obtain a consumer report for employment purposes. (Investigations into suspected misconduct related to employment are subject to certain relaxed FCRA rules.)

There are additional disclosure obligations for employers that obtain investigative consumer reports. Employers must disclose to the applicant or employee that an investigative consumer report may be obtained from a consumer reporting agency. The disclosure must include a statement informing the applicant or employee of his or her right to request additional disclosures of the nature and scope of the investigation, as well as the FCRA Summary of Rights.

The employer also must certify to the CRA that its purpose for procuring a report is permissible and that the employer will comply with all requirements of the FCRA.

Adverse Action. In the event the employer decides to take adverse action against the applicant or employee based on information in the report, the employer must follow a two-step notification process. First, before the employer implements the adverse action against the applicant or employee, it must notify the individual and provide a copy of the consumer report and the FCRA Summary of Rights. The employer must wait for at least five business days after sending an “adverse action” notice to the individual before making the adverse action. The FCRA also requires employers to ensure the proper destruction of consumer reports.

Summary of FCRA Remedies. The FCRA allows an applicant or an employee to pursue a private right of action against an employer for “negligently” or “willfully” failing to comply with any of the FCRA’s requirements with respect to that individual. The statute of limitations for violations of the FCRA requires that an action must be brought by the earlier of: (1) two years after the date of discovery by the plaintiff of the violation; or (2) five years after the date on which the violation that is the basis of the alleged liability occurred. The range of available damages varies for negligent and willful violations. An employer that negligently fails to comply with any requirement of the FCRA with respect to an applicant or employee is liable for: actual damages sustained by that individual and reason- able attorneys’ fees and costs. The FCRA also sets forth remedies for willful violations of the statute. There are three different types of damages available for a willful violation: (1) actual damages or statutory damages ranging between $100 and $1,000; (2) punitive damages; and (3) attorneys’ fees and costs.

The updated form must be in use by Jan.1. Because of the intensive focus on background check programs by the Equal Employment Opportunity Commission and the wave of new state laws, it is an opportune time for employers to consider thoroughly assessing their credit and criminal record-based screening policies and procedures for opportunities to fortify compliance with all applicable laws.

Neil Alexander is a shareholder and Christie Kriegsfeld is an associate with Littler Mendelson (www.littler.com), a provider of employment and labor law solutions worldwide.