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Small Mistakes With Employee Background Screening Can Cause Big Problems

Posted in News & Events, News Articles on 12/04/2013

By  Scott Paler

Small employee background screening mistakes continue to give rise to large class actions with big settlements. If you obtain background screening reports from a third-party agency regarding your job applicants or employees, and have not reviewed your background screening policy and practices in a while, now is a good time to do so. Here are four things to look for:

1. Are you supplying job applicants and employees with the correct version of the federal notice entitled “A Summary of your Rights Under the Fair Credit Reporting Act”?

The government introduced a revised version of this notice on January 1, 2013, but many employers inadvertently continue to use the old format. Here’s how you can tell the difference. The new version references the Consumer Financial Protection Bureau throughout the notice. The old version references the Federal Trade Commission. Using an outdated federal summary of rights can carry big consequences. One retail employer just agreed to a $3 million settlement in part based upon allegations that it was supplying candidates with an outdated version of this federal notice.

2. Does your background screening consent form (“Disclosure and Authorization”) contain a release of liability?

One plaintiffs’ firm obtained a multi-million dollar settlement based partially on allegations that an employer had included a release of liability in its background screening consent form. It argued that such a release violated the Fair Credit Report Act’s requirement that a background screening disclosure to job applicants and employees “stand alone.” We have seen many companies—including several in the last few weeks—that have release language in their Disclosure and Authorization form. Now is a good time to consider removing it.

3. Do you provide BOTH a pre-adverse action letter and a post-adverse action letter when excluding an individual based upon a background screening report from a third-party vendor, and do those letters contain the correct information?

The Fair Credit Reporting Act requires specific adverse action procedures to ensure that job applicants and employees have an opportunity to identify errors in their background screening reports before an employer rejects them based on those reports. However, it is not unusual for companies to forget these procedures. Several companies have paid more than $2 million dollars in settlements in the last few years based partially upon allegations that the companies had not correctly followed the adverse action process.

 4. Do you have a blanket policy that excludes all convicts or felons?

In years past, many employers maintained such a policy. However, the risks associated with doing so have increased tremendously. Only last year the Equal Employment Opportunity Commission secured a $3 million settlement from a major public company on the theory that the company’s broad criminal history policy had a disparate impact on minorities. Since then, the EEOC has issued new guidance suggesting that employers must engage in a multi-faceted analysis before rejecting a candidate or employee based upon a criminal record. Further, several states—includingWisconsin—maintain state laws requiring employers to assess the relationship between a job and conviction before taking adverse action. Under these circumstances, it is important that employers update their background screening policies to reflect changes from the last few years, and consult with counsel before excluding an individual based upon a background screening report.

– Paler is an employment attorney practicing at the law firm of DeWitt Ross & Stevens. He routinely counsels employers on background screening issues, has helped defend employers’ background screening practices before administrative or judicial bodies in Wisconsin, New York and Michigan, and has written numerous articles and presentations on background screening compliance matters.