You found an applicant for your open position, extended an offer, and received the results of the background verification. The report has items listed under the criminal or driving checks that you don’t like, so you decide to rescind the offer. That’s no problem because of the background check, right? Actually, that is very wrong and can put your company at risk for a lawsuit.

If you run background checks, make sure that you are familiar with your Fair Credit Reporting Act (FCRA) obligations, and that you stay in compliance. State and federal regulations are constantly being updated, so make sure you stay current with the laws in the location where you conduct business, as well as with anti-discrimination laws.

An area in which many employers lack knowledge is in the two-step adverse action process. Prior to taking any adverse action – be it rejecting an applicant, reassigning, terminating a current employee, or any other adverse action based on a background report – you must follow the pre-adverse action process:

·        Notify the individual that you may take an adverse action based on the report.

·        Provide a copy of the consumer report and the Summary of Rights to him/her, which gives the candidate the opportunity to tell you if the information is correct.

·        Give him/her a minimum of five business days to initiate the dispute process with the reporting company.

The reporting company should notify you if/when the subject initiates the dispute process. The amount of time it takes to complete a re-investigation can vary, but typically takes anywhere from a couple of days to a month. If the subject can provide any legal documentation such as documents stating a charge was dismissed, should have been expunged, or was downgraded, etc., their dispute request process will move much quicker.

The records will be updated with the vendor who supplied the information, but the subject should also work with the entity providing the report to the vendor, such as the state or county. If the records are not correct with the entity that owns the database where the records are stored, the information can come up in future background checks which are completed through a different reporting agency.

If you decide to take an adverse action after the pre-adverse action process has been completed, you must notify the individual. The notification can be oral, written, or electronic. The adverse notification must include:

·        the name, address, and phone number of the consumer reporting company that supplied the report;

·        a statement that the company that supplied the report did not make the decision to take the unfavorable action and can't give specific reasons for it; and

·        a notice of the person's right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get an additional free report from the company if the person asks for it within 60 days.

There has been a lot of focus lately on the growing number of lawsuits regarding non-compliant authorization forms for backgrounds, but the number of lawsuits due to failure to follow the pre-adverse/adverse action process is also growing.

In the class action lawsuit, Jones v. Halstead Management Company, LLC et al, Kevin A. Jones was offered the position of Doorman on one of the Halstead properties. The background report came back with records of criminal convictions for Kevin M. Jones. Halstead rescinded the offer of employment to Kevin without providing him the opportunity to dispute the information. The lawsuit was settled for approximately $1 million dollars.

Delhaize America settled a lawsuit regarding FCRA violations for $2.9 million. Part of the lawsuit was based on their failure to follow the two-step adverse action process.

The FCRA is very serious about protecting the rights of those who are subjects of background checks. Anyone who is making employment decisions for your company must be educated on, and compliant with, the laws and regulations around the background checking process.

Additional ASE Resources:
Background Screening - ASE can protect your organization from the cost of bad hiring decisions with our complete background screening services.  For more information contact Susan Chance, Manager, Pre-Employment Services.

Sources:  employment-law.usattorneys.com, shrm.org, ftc.gov, littler.com