Is your company’s Background Screening program FCRA Compliant?
Running background checks: 3 legal requirements
We all want to know we’re hiring the best candidates. That often requires running thorough background checks on applicants. However, that can be a tricky process—and it could cost you in court if you mishandle it and an applicant sues.
After years of debate, the EEOC published controversial new guidance on employers’ use of background-check policies and practices. Then, it used those guidelines to file a pair of important lawsuits — against BMW and Dollar General — alleging violation of federal discrimination law. Every employer needs to be in compliance.
Wells Fargo found that out the hard way last month. The banking giant just agreed to pay a total of $12 million to several thousand unsuccessful applicants for background check violations. Although Wells Fargo did not outright admit liability, it did settle the class-action complaint for that tidy sum.
The original plaintiff in the case, Terrell, alleged that Wells Fargo flubbed some of the most basic background check procedures.
After Terrell applied for a job, Wells Fargo ran what its background check vendor calls an “employment purposed consumer report.” The bank, however, didn’t tell Terrell it had done so at least five days before deciding not to hire him, as the law requires. Nor did Wells Fargo give Terrell a copy of the report, something also required by law.
Terrell’s enterprising attorneys found 6,254 other similarly situated unsuccessful applicants, which dramatically increased Wells Fargo’s liability—and the size of its settlement.
Pepsi thought its background checks were in compliance. The company believed it was using background checks in a nondiscriminatory way. But the EEOC saw things differently. The result: Pepsi paid $3.2 million to settle an EEOC race-bias charge. Kmart also thought it was in compliance, but it was hit with a class-action lawsuit alleging violations of background-check laws including the federal Fair Credit Reporting Act. The result: Kmart paid a $3 million settlement. The list of well-reported companies continues to grow… will you be next?
Don’t let the same thing happen to you. No matter who runs your background checks—either you or a vendor—be sure to comply with the Fair Credit Reporting Act, which governs background checks and requires:
- Telling the applicant—in writing, in a stand-alone document—that you plan to use information in their consumer report for decisions related to their employment.
- Getting written permission from the applicant. This can be part of the document you use to notify the person that you will get a consumer report.
- Notifying the applicant or employee at least five days before making an adverse decision. Provide a copy of the report to the applicant so he or she has time to challenge it.