FCRA lawsuits have big companies paying out millions for non-compliant background checks

A report last month from Good Jobs First, highlighted the huge amounts big companies are paying out in the face of FCRA lawsuits. These class action lawsuits totaled over $174 million in the past decade, for a wide range of violations. When even big companies are making mistakes that cost millions, how can you be sure your company is compliant to avoid a lawsuit of your own?

Most small companies shouldn’t expect to have to deal with the huge lawsuits that large companies are taking on with class actions. However, large corporations can handle million-dollar settlements while small businesses might not be able to manage much smaller, but still significant fines. Small businesses do get charged with FCRA violations and those fines can be devastating to their business. As Good Jobs First’s lawsuit tracker shows, these lawsuits are constant and ongoing with many different possible employment screening violations. To view a few of the highlights, HireSafe keeps a list of larger FCRA lawsuit settlements in recent years.

To ensure your company does not get caught in an FCRA lawsuit it’s important to always think compliance. The Fair Credit Reporting Act dictates the manner in which employers can legally background check and screen their potential hires. When dealing with background screening we typically look at a few major pitfalls that commonly result in the lawsuits mentioned above, consent, proper notifications and adverse action.

Background Check Consent

Employers must receive consent from the potential hire prior to running a background screening report. This usually entails a form advising that the employer can conduct a criminal record check and other searches for the purpose of receiving employment.

With HireSafe’s online portal, the applicant consent form is automatically sent to the candidate and all necessary information provided electronically. Candidates are prompted to enter information required for the check to continue via a secure portal eliminating errors common with transcribing forms a candidate might fill out in your business. By avoiding these errors, and ensuring candidates consent forms are filled out properly you can eliminate a huge source of possible FCRA violations.

Proper Notifications

When originally providing the consent forms, candidates must also be given a notice of their rights under the FCRA that are separate from the actual consent forms. Many of the lawsuits where big companies are paying out millions involve several failures, but this one is a consistent failure in non-compliant companies.

To avoid this pitfall, HireSafe automatically provides the required notices so you don’t have to worry about the potential for FCRA violations with improper notifications.

Adverse Action

Finally, employers often stumble when a background check result may cause them to not offer the candidate a position. When this happens, it is imperative that employers offer the candidate an opportunity to challenge the data and provide necessary FCRA notifications. It is imperative that the business does make a hiring decision until the candidate has been given an opportunity to respond. This is because records returned by some background check sources, or matching some of the candidates personal data can be incorrect. There are many high profile FCRA lawsuits that allege employment was denied based on incorrect records.

The HireSafe online portal allows our clients to send an adverse action notice advising the candidate they may not be hired due to a record. This is also when the candidate is given opportunity to retrieve a copy of their background check report. Once adequate time has passed, employers can decide to send a second notice advising the candidate they were not selected due to the report.

By paying attention to the requirements for procuring consent, notifying applicants and adverse action employers can avoid many pitfalls that result in huge fines.

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