Avoiding class action lawsuits due to FCRA violations

8 May

Employers need to ensure they comply with FCRA guidelines when hiring new employees.

Employers must be certain their hiring and recruiting practices are compliant with state and federal regulations. Failure to provide the correct documentation or paperwork to new employees could result in fines or worse – a lawsuit. Personnel management software can help companies avoid landing themselves in hot water during hiring. 

Recently, there has been a wave of class action lawsuits against large companies for violating the Fair Credit Reporting Act. The Federal Trade Commission outlined the FCRA, which states any business planning to conduct a background check on prospective employees must notify the applicant that such action will be taken through a written document. Most businesses obtain consumer reports on prospective employees; consumer reports are part of the background check process. A consumer report delivers information on an applicant's criminal history, contact information and education. This information is often used to corroborate the items on the applicant's resume and identify any potential red flags that would affect the applicant's ability to perform his or her duties well.

If an applicant does not land a position due to some piece of information gleaned from the consumer report, these details must also be shared with the applicant in a standalone document.
In the past few months, there have been large class action lawsuits brought against employers by applicants claiming to have never received standalone disclosure authorization forms. Many have stated these authorization forms were embedded into other paperwork the applicant signed during the hiring process.

Recent court cases
Michaels Stores Inc., Paramount Pictures Corporation, Express Services, Inc. and Whole Foods are just a handful of the employers under fire these days, according to Employee Screen. The site also stated that businesses like K-Mart, Dollar General and Domino's Pizza have paid millions of dollars in settlements for violating these regulations. Law 360 stated violations could result in a business paying an applicant no less than $100 and no more than $1,000 for each violation depending on the severity and complexity of each individual case.

It's unclear – and varies on a case-by-case basis – exactly whether businesses are aware of their violations ahead of time or make the mistakes that land them in court on accident. In looking over the cases presently in court or recently ruled, its clear companies need to revamp their background check processes to guarantee they are compliant with state and federal regulations.

Here are several things employers can do to ensure they avoid falling into the class action lawsuit trend and paying millions in fines:

  • Talk to a legal expert: No matter what research has been done, it's worth consulting with a legal expert on the language used on disclosure forms. 
  • Review disclosure forms: As the FCRA requires both a disclosure and an authorization form, it's a good idea to taking another look at the businesses's current practices. Make sure the documents or terminology aren't outdated or no longer relevant. 
  • Triple check signatures: Without a signature on both forms, a background check cannot be administered. In an ideal world, the applicant would also add the date next to the signature. 

Personnel management software can help businesses maintain compliance for background checks, applicant interviews and much more. It's the perfect compliment to an already stellar human resources team.  

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