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Seeger Weiss Blog: Legal News and Analysis

Background Check Errors Prompt Talk of Further Legislation

February 28th, 2013

Companies strive to hire honest employees with strong credentials. In an effort to make informed decisions, employers conduct background checks prior to hiring an employee. These background checks might examine a prospective employee’s employment history, driving record, criminal records, and credit report.

Various laws have been enacted to ensure that the employee is protected throughout this process. The Federal Trade Commission (FTC) enforces the Fair Credit Reporting Act (FCRA), which protects a job applicant’s information found in a credit report and ensures that the information is accurate. The extent to which an employer can legally analyze a job applicant’s criminal history varies on a state-by-state basis. The U.S. Equal Employment Opportunity Commission (EEOC) enforces Title VII of the Civil Rights Act of 1964, which bars employers from using job-screening standards that have a disparate racial impact.

Despite these legal safeguards, job applicants are often treated unfairly during the employment hiring phase. Take, for instance, Green Mountain Coffee Co., who allegedly rejected job applicants after examining unauthorized consumer reports (per FCRA guidelines), which they obtained from a consumer-reporting agency. The Judge agreed to dismiss the suit after the parties resolved the dispute in an undisclosed nature. Another example is Dominoes, who also allegedly violated the FCRA by running employee background reports without proper authorization and by not sharing the reports with applicants and employees before terminating employees or denying job applicants of employment. The case is currently in litigation. LexisNexis agreed to settle their dispute for more than $1.3 million. The company was accused of failing to notify timely thousands of individuals about negative background reports because of a computer glitch.  In light of these cases, it is fair to anticipate similar suits being filed in the near future.

When companies violate laws or make errors in the background check process, perfectly eligible candidates are denied jobs. Common mistakes include multiple reports of a single offense, the inclusion of convictions and arrests that were legally expunged, and even the inclusion of another person’s criminal offenses. Job applicants can contest any mistake made by employers, but what happens when employers don’t even share the information (like the alleged behavior of Dominoes)? Worse, even if a prospective applicant contests the mistake, the appeal process usually takes about thirty days. The position is often filled by the time the appeal process ends, and the candidate is left without a job even if the appeal succeeds.

As stories of companies acting negligently during employment background checks continue to brew, new legislation will continue to pass limiting the employer’s access to job applicants’ personal information. In May 2012, Vermont became the 8th state to restrict the use of credit reports for employment purposes claiming that the results of a credit report have “no correlation to job performance” and do not provide “meaningful insight into a candidate’s character, responsibility, or prospective job performance.” Vermont joined California, Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington to enact such a law. At the federal level, the EEOC is currently investigating the use of credit reports for employment purposes, but has yet to rule on the issue.

Employee Rights When Applying for a Job
It’s become clear that legislative bodies are recognizing the risk of error associated with companies conducting employment background checks. Therefore, it is important that you know your rights when applying for a job.

First, the Fair Credit Reporting Act enables you to get a free copy of your credit report through each of three national credit reporting companies: TransUnion, Equifax and Experian. Each company must provide one free copy of your credit report every twelve months. It might be a good idea to have a current copy of your credit report for your reference before applying for a job.

Second, an employer must get your authorize before obtaining any credit information from third parties. You should probably get this authorization in writing.

Finally, if you have unfortunately been denied employment or had your employment terminated because of a failed background check, an employer must provide you with a written report of the information used to make their decision and a document called “A Summary of Your Rights Under the Fair Credit Reporting Act.” You should carefully analyze the information used in their decision, and you have the right to contest any information you believe to be erroneous.

Background Check Lawsuits
Unfortunately, not all employers will follow the law when conducting employment background checks, and Green Mountain and Dominoes are only a sample of how companies might be acting negligently when making employment decisions. Sometimes it takes a legal proceeding to hold large companies accountable and provide employees with a voice to speak out against the wrongdoings associated with background check errors. As such, we are sure to see class action lawsuits develop against more companies



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