FirstGroup PLC, a transit operation company, recently received a harsh reminder that the Fair Credit Reporting Act (FCRA) governs not only credit checks but is broadly construed to cover most background investigations. FirstGroup agreed to pay $5.9 million to settle a class action suit in which approximately 150,000 individuals alleged that FirstGroup procured background checks in connection with their employment or prospective employment without complying with FCRA’s strict procedures.
If an employer hires a third party to conduct background checks on employees or prospective employees then those background checks are governed by the FCRA. Any employer using such background checks in connection with rendering employment decisions must do the following:
· provide prior written notice to an employee or prospective employee that the employer is procuring the background check (on a document containing no other information);
· obtain prior written authorization from the employee or prospective employee to procure the background check
· provide the employee or prospective employee with a summary of his or her rights under the FCRA; and
· if relying on all or part of the background check to render an adverse employment action, (a) send a pre-adverse action disclosure informing the employee or prospective employee that an adverse employment decision may be made on the basis of the background check and what actions the individual can take if he or she believes that the information in the background check is incorrect and, (b) after a reasonable amount of time, send an adverse action notification to the employee or prospective employee.
Even a slight and unintentional deviation from the FCRA procedures will result in liability as suggested by the First Group settlement. For example, although FirstGroup provided individuals with notice of the intention to procure background checks, this notice was not contained in a standalone document.
It is important for employers to understand how the FCRA governs employer background checks and the use of information obtained from such background checks. Employers are advised to ensure counsel reviews their procedures and notices to employees regarding background checks to ensure compliance with the FCRA.