Be FCRA Compliant - It’s Time To Take Action With Adverse Action!

Is your company making some of the same hiring mistakes as Disney, Whole Foods, Dollar General, and Kmart? – just to name a few… These companies recently paid millions in class action lawsuits due to violating FCRA (Fair Credit Reporting Act) hiring practices. According to McAfee & Taft, many issues may stem from third party vendors not initiating checks in accordance with FCRA compliance.

Are these mistakes and lawsuits preventable? Or has FCRA hiring practices become so complicated that it’s almost impossible to avoid multi-million lawsuits?

To help companies avoid the lawsuits, we recently hosted a webinar with John Robinson, HR ProFile’s Compliance Officer, about FCRA compliance and the steps to take in the event of Adverse Action. To view this webinar, go to FCRA: Are YOUR Employment Screening and Background Checks FAIR for your Applicants?

Before following Action steps, it’s important to understand, that the FCRA is a Federal Law that regulates the collection, assembly and use of Consumer Report Information. Be aware that FCRA applies to Credit Bureaus, Data Furnishers, Consumer Reporting Agencies (CRA’s), Employers, and Landlords.

There are 5 Basic steps to FCRA compliance:

1. Disclosure
2. Authorization
3. Pre-Adverse Action
4. Waiting Period
5. Adverse Action

Let’s take a closer look at each step. First, be aware that BEFORE a Background Check is conducted, Disclosure and Authorization is required.

1. Disclosure: The applicant must be informed that a Consumer Report is going to be obtained and included in the hiring decision. This disclosure MUST be a stand-alone document and NOT part of the application. Consumer Reports include Criminal Records, Driving Records, Employment Verifications, Education Verifications, and Credit Checks, etc).
2. Authorization: The applicant MUST provide written consent for the reports to be obtained
3. Pre-Adverse Action: Review the report results. Does the report contain any derogatory and disqualifying that may impact the hiring decision?
   • If No – Hire the applicant
   • If Yes – Follow Adverse Action Steps!
     • Pre-Adverse Action - Informs the applicant something came back that could affect their employment. If this type of disqualifying information is found on the consumer report, the  APPLICANT SHOULD BE GIVEN:
     1. Pre-Adverse Letter
     2. Copy of Report
     3. Summary of Rights
4. Wait! The employer must wait at least 5 days before deciding not to hire, giving the applicant time to respond.
   • If reasonable explanation or  paperwork mistake – Hire
   • If no response and/or information is correct – Don’t Hire and continue with Adverse Action.
5. Adverse Action: Send the Applicant a letter informing the candidate you are NOT hiring them based in whole or in part on their consumer report. Be sure to:
   • Check ALL Documents with Legal Council to ensure FCRA Compliance.
   • Review all documents provided by CRA, make sure your are following their guidance and recommendations
   • Keep Documents on Hand! HRP Recommendation: 7 years if hired, 5 years if not hired. § 618. Jurisdiction of courts; limitation of actions [15 U.S.C. § 1681p]
   • Give Disclosure form 1st, here are your rights IF you sign the authorization.

Since this process has legal implications, we recommend consulting an attorney to review all documents and procedures. To listen to the entire webinar, click here:FCRA: Are YOUR Employment Screening and Background Checks FAIR for your Applicants?

Disclaimer: We are not practicing counsel and this blog is not intended to be legal advice. This blog contains guidelines, but if you want legal advice you will have to consult your attorney.

Blog Post by: Jennifer Holt

References:

1) McAfee & Taft: The Fair Credit Reporting Act: Why Background Checks are Fueling the Latest Wave of Class Actions. Josh Solberg.
http://employerlinc.com/2015/05/the-fair-credit-reporting-act-why-background-checks-are-fueling-the-latest-wave-of-class-actions/