Last year saw a dramatic rise in the number of Fair Credit Reporting Act (FCRA) class action lawsuits brought against employers.  [See our 2014 blog posts from March and October.]  With those numbers expected to rise even more in 2015, the importance of compliance cannot be overstated.  Employers must pay close attention to the rules and regulations that pertain to background screenings and hiring policies.  From disclosures to adverse action procedures, complying with employment laws will spare businesses the hassle and expense of lawsuits that could break the bank.

Compliance can seem onerous.  The rules are often imprecise and difficult to follow to the letter, even if an employer is quite familiar with the FCRA. To add to this uncertainty, different courts may not always agree on the interpretation of the laws, so the outcome of a lawsuit is never guaranteed.  Plaintiffs’ attorneys are taking this opportunity to cash in on the ambiguity of the law, putting employers in the hot seat.

Simply put, there are four basic compliance requirements employers must follow when screening applicants and employees:

  1. Employers must provide a disclosure and obtain written authorization from an individual before performing a background check on him/her;
  2. Disclosure and authorization must not be incorporated into the employment application, so that it’s clearly disclosed that the applicant is consenting to a consumer report for employment purposes (the disclosure and authorization can be combined in the same document or stand-alone);
  3. Employers must provide applicants with a copy of the FTC’s document, “A Summary of Your Rights under the Fair Credit Reporting Act;”
  4. Employers must use a two-step process to notify applicants before and when an adverse employment decision is made based in whole or in part on the background check.

While FCRA requirements regarding background screenings go well beyond those listed above, violations of these stipulations are commonplace in the class action lawsuits sweeping the country.  Regardless of outcome, defense attorneys cost money. Luckily, many of the violations cited in recent lawsuits are easily preventable.

The best option for employers is to stay abreast of and compliant with FCRA laws. Working with an NAPBS certified and accredited company that performs your background checks and keeps you up-to-date with compliance laws is one of the best ways to help ensure you don’t wind up in court for non-compliance with the FCRA.

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