FCRA - Fair Credit Reporting Act

Employers that use investigators or agencies to conduct background checks on job applicants may be running afoul of the Fair Credit Reporting Act. At first glance, most employers using these types of services would probably ignore the FCRA unless they were running credit checks on applicants and employees to screen for adverse financial information. However, the name of the statute is deceiving because its provisions can also apply when an employer seeks non-credit information.

Under the FCRA, an employer seeking to use a "consumer report" from a "consumer reporting agency" when making a personnel decision must comply with all of the Act's notice and disclosure requirements.

A "consumer reporting agency" is anyone who "regularly engages...in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties."
A "consumer report" is broadly defined as a "communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living" which is used or collected for the purpose of determining, among other things, eligibility for employment.
The broad definition of the types of information which can be covered under the FCRA as "consumer reports" extends beyond credit information to inquiries into criminal records, driving records, results of drug tests, educational backgrounds, and employment histories.

Under the FCRA, an employer who wants to obtain a "consumer report" must first conspicuously disclose to the affected prospective or current employee in a separate document that the employer may choose to obtain a report before making an employment decision. In addition, the employer cannot order a report until it receives a signature from the individual authorizing the employee to request one. The authorization must specifically mention medical information if that type of information will be containing in the report. After these requirements have been satisfied, the employer is allowed to request a report from a consumer reporting agency. However, if the employer decides not to hire or promote an individual based in whole or in part on the report, then the employer must provide the applicant or employee with a copy of the report as well as a description of consumer rights under the FCRA published by the government.

Depending on whether a violation of the FCRA is willful or negligent, an employer who fails to comply with the Act's requirements can be held liable for the individual's actual damages, punitive damages, and costs and attorney's fees incurred in bringing a lawsuit against the employer. Employers should determine whether they are in compliance.

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