The law places stringent requirements on employers who use background and credit checks for employment purposes. Whether an employer is conducting a background check for hiring purposes or to help maintain a safe working environment, the federal Fair Credit Reporting Act (FCRA) imposes certain criteria on employers when it comes to the information that they are permitted to collect. Notably, there are specific procedures in place for employers to inform applicants and employees about the background check that will be conducted — and an employee may be entitled to take legal action for non-compliance.

What is the Fair Credit Reporting Act?

The Fair Credit Reporting Act is a federal law that regulates the use of investigative and credit reports on consumers — and employees. This includes those obtained for hiring and employment purposes. The FCRA is applicable to all consumer reports obtained by employers, both written and oral. It also covers any information that relates to any employee’s credit worthiness, general reputation and character, personal characteristics, or mode of living.

Third parties that conduct background checks and credit bureaus are both considered to be reporting agencies under the statute. Importantly, the FCRA does not apply to employers who conduct background checks for themselves.

Can Employers Conduct a Background Check of Employees?

While internal investigations are not subject to the FCRA, an employer may conduct employee misconduct investigation reports — as well as investigation reports into compliance with federal, state, and local laws. Employers may also request an applicant’s employment history, education history, criminal history, and motor vehicle history. However, if an employer will be using a third party to collect information about job applicants or employees, they must adhere to the FCRA.

Specifically, an employer must comply with the following requirements under the FCRA:

• An employer must provide an employee with disclosure — An employer must inform an employee that a background check is required in writing and obtain their written authorization to obtain the employee’s records. The notice must be a stand-alone document and cannot be given to an employee or a job applicant with other papers. In the event an investigative report will also be conducted into the employee’s reputation, character, and lifestyle, written notice must also be given.
• An employer must obtain consent from the employee — After an employee has received and reviewed written notice, an employee must provide their signed consent in order for the employer to complete the background check.
• An employer must inform the consumer reporting agency of the employee’s consent — An employer must provide a certification to the agency that they complied with the FCRA’s requirements, obtained consent to perform the background check, and confirm they will not misuse any information in the report.
• An employer must provide the applicant or employee with a pre-adverse action notice — An applicant or employee must be provided with a pre-adverse action notice, along with a copy of the background check report and a “Summary of Your Rights Under the Fair Credit Reporting Act” from the FTC. The applicant/employee must be provided with at least five business days to dispute any of the information in the background check report.
• The applicant or employee must be provided with a final notice of adverse action — If the employer decides to make an adverse decision based on the information in the background check report, the applicant or employee must be given a final notice of the adverse action. Any inaccurate information furnished by the reporting agency can be disputed.

Significantly, the FCRA restricts the information that may be reported to an employer. Reports may not contain bankruptcies that occurred more than ten years ago, lawsuits from over seven years ago, convictions more than seven years old, paid tax liens more than seven years old, and any other adverse information more than seven years old.

What are Your Remedies if Your Employer Violated the FCRA?

An employee doesn’t need to be terminated to bring a claim under the FCRA. Violations of the law, including a failure to provide a stand-alone notice, are enough for an employer to incur liability. While remedies are often sought in class actions, various provisions of the FCRA make individual suits a viable alternative.

An action must be brought within two years after the employee/applicant or employer learns about the facts that constitute the violation, otherwise within five years (whichever is earlier). A plaintiff who is able to demonstrate they incurred damages due to the employer’s violation may be entitled to recover their actual monetary losses and attorneys’ fees. In cases where a willful violation can be shown, punitive damages may also be available.

Contact an Experienced Ohio Employment Law Attorney

If your employer has violated your rights under the FCRA, you may be entitled to take legal action. However, these types of cases are complicated and it’s critical to have a skillful employment law attorney who can advise you regarding your rights and remedies. Located in the Cleveland area and providing trusted representation to clients throughout Ohio, employment law attorney Chris Lalak works tirelessly to obtain the best possible outcome for each of his clients. Contact Lalak LLC today to schedule a free, confidential, no-obligation consultation and learn how we can help.