Pre-Employment Background Checks

Background Check Update: There’s A New FCRA Form in TownIf you conduct pre-hire background checks, you know you have to comply with the Fair Credit Reporting Act (FCRA) or risk trouble (called lawsuits). Part of that compliance is providing notice to the applicant if you are going to take an adverse action based on the background check, along with a Summary of Your Rights Under the Fair Credit Reporting Act. Well, without any fanfare (or advance notice), the Consumer Financial Protection Bureau (CFPB) changed that Summary form, and we are all supposed to be using it.

Why you ask? In May 2018, Congress passed the Economic Growth, Regulatory Relief, and Consumer Protection Act. This law was a response to some big time data breaches and requires nationwide consumer protection agencies to provide free “national security freezes,” which was supposed to make it harder for identity thieves to open accounts in the consumer’s name. The law further required that if someone gets the Summary of Your Rights under FCRA or the Summary of Consumer Identity Theft Rights, the consumer would also get a notice about the security freeze. The new form adds the language about the security freeze. So start using it.

Now that you are compliant, if you have any comments or possible revisions to the form, you have until November 19, 2018, to send them to the CFPB.

Background Checks are Still Big Litigation Business—Just Ask BMWYet another reminder that everyone using criminal background checks in the hiring process needs to review their standards—BMW just entered a consent decree with the EEOC under which it will pay $1.6 million and offer to hire dozens of people previously rejected as having unacceptable criminal histories. BMW had (note the past tense) a criminal background check requirement that excluded applicants with certain felony convictions, no matter how old the conviction or the type of job at issue. In 2008, when BMW changed contractors providing logistics services at its South Carolina facility, it required the new contractor to apply the criminal history standard. The new contractor did so and, according to the EEOC, ended up excluding about 100 candidates, 80% of which are African American. That is what the EEOC calls a disparate impact. (The EEOC’s press release does not suggest that BMW or its contractor intentionally discriminated on the basis of race.) If that wasn’t enough to get the EEOC’s attention, most of these applicants were already performing the jobs for the old contractor—so not only were they not hired, they actually lost their jobs.

These events all occurred before the EEOC issued its April 2012 Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII. Under that Guidance and Title VII, employers can use criminal histories in employment decisions but if the criminal history policy has an adverse impact against a protected category, the employer must prove that the policy is job-related and consistent with business necessity. The Guidance strongly encourages employers’ policies to include an individualized assessment, including consideration of the nature of the crime, the time elapsed since the crime, and the nature of the job.

Although a disparate impact theory only arises when a neutral hiring practice has an adverse impact on the basis of race or another protected category, employers who want to stay off of the EEOC’s radar should consider following the Guidance. Doing so may not change whom you hire, but it will certainly improve your ability to defend the decision.

The focus on employment background checks is not going away. A few weeks ago I wrote about Dollar General’s $4 million dollar settlement of a class action lawsuit based on alleged violations of the Fair Credit Reporting Act (FCRA). Since that time, Publix Super Markets Inc. settled an alleged FCRA class for roughly $6.8 million for an alleged failure to have a stand alone disclosure about a background check in its application process. To top it all off, the Federal Trade Commission (FTC) just issued Background Checks: Tips For Job Applicants and Employees with tips for the potential FCRA plaintiff The FTC’s guide all but tells applicants and employees to call a lawyer:

Some employers check into your background before deciding whether to hire you or keep you on the job. When they do a background check, you have legal rights under federal law. Depending on where you live, your city or state may offer additional protections. It’s important to know whom to contact if you think an employer has broken the law related to background checks, and an equally good idea to check with someone who knows the laws where you live.

I say again, if you have not updated your background check procedures, maybe it’s time.