In a trend that show no signs of slowing down, lawsuits continue to be filed against employers for violating the Fair Credit Reporting Act’s (“FCRA”) strict requirements concerning background check disclosure forms. If the past is any indication of the future, many of the lawsuits, some of which are class action, will settle prior to going to trial but the costs will still be in the thousands and even millions of dollars in damages and legal fees. Time spent reviewing your background disclosure form may be a worthwhile investment.
The FCRA Stand Alone Disclosure
Like most employers, your company probably conducts background checks on perspective employees. If you contract with a third party to obtain the background check reports, you are required to comply with the FCRA. Under the FCRA, employers must, among other things, disclose to their applicants that a consumer report (the background check report) may be obtained for employment purposes. Specifically, Section 604(b)(2) of the FCRA requires employers to provide “a clear and conspicuous disclosure” in writing to perspective employees on whom the background checks are to be conducted. Section 604(b)(2) further states that the written disclosure must be “in a document that consists solely of the disclosure.”
It is this strict “stand-alone” requirement that has generated an uptick in FCRA related litigation. A disclosure form that contains any extraneous information potentially violates the FCRA and serves as a basis for a lawsuit against an employer. Lawsuits can allege and seek recovery for statutory FCRA violations without the plaintiff applicants having suffered any actual damages. Statutory damages amount to between $100 and $1,000 for each FCRA violation. Lawsuits can also (and typically do) seek punitive damages for willful FCRA violations. Even in a relatively small class of 100 applicants turned plaintiffs, the potential damages and legal fees can be staggering.
Defining Extraneous Information
Unfortunately, the FCRA does not define what it means to be a “document that consists solely of the disclosure.” It does provide, however, that the required written authorization from the applicant may be included with the disclosure. Employers may therefore include the authorization requirement on the disclosure form without running afoul of the stand-alone requirement. Any other information on the form may jeopardize compliance.
Some courts have strictly interpreted the FCRA’s stand-alone requirement. For example, in December 2013, the U.S. District Court for the Western District of Pennsylvania granted summary judgment in part in favor of 1,800 plaintiffs in the FCRA class action case of Reardon v. ClosetMaid Corporation, 2013 U.S. Dist. LEXIS 169821 (W.D. Pa. Dec. 2, 2013). In Reardon, which has been cited in other court opinions, the court ruled that the employer’s inclusion of liability waiver language on the disclosure form was “extraneous information” that detracted from the disclosure notice and therefore violated the FCRA. Similarly the court in Landrum v. Harris Cnty. Emergency Corps, 2015 U.S. Dist. LEXIS 92361 (S.D. Tex. July 16, 2015) also determined that a liability waiver provision embedded in the disclosure form used by the defendant employer violated the stand alone restriction of the FCRA.
Check Your Forms
Take time now to review your background check disclosure and authorization forms. Make sure your FCRA disclosure and authorization is not imbedded or buried in your employment application. Also, check if your form includes a liability waiver. If so, it likely violates the FCRA’s stand-alone disclosure requirement. This type of violation can be easy pickings for attorneys who specialize in FCRA class action litigation, so taking action now will go a long way toward avoiding being hauled into court. As always, we recommend consulting with counsel to assure compliance with the FCRA.
Thomas T. Hearn is an attorney in the Labor Relations and Employment Law Department at Obermayer where he concentrates his practice in labor and management relations, employment discrimination and employee contracts. He can be reached at 215.665.3013 or Thomas.Hearn@obermayer.com.