Background Checks And Compliance With The FCRA: A Class Action Waiting To Happen

7-Eleven will pay $1,972,500 to settle a class action lawsuit, which contained allegations of Fair Credit Reporting Act (FCRA) violations. The class included approximately 50,000 job applicants.

The plaintiffs alleged that 7-Eleven violated FCRA's stand-alone disclosure requirement by including additional information about state law, the background check provider, and a blanket authorization allowing the disclosure of information directly to 7-Eleven in its consumer report disclosures to applicants and employees.

The plaintiffs also allege that 7-Eleven had the resources to comply with FCRA, including regular access to legal counsel, so its systematic failure to comply was "willful."

As part of the settlement, 7-Eleven agreed to use a stand-alone disclosure in the future. Jennifer Carsen "7-Eleven pays out nearly $2M to settle background check allegations" hrdrive.com (Jun. 27, 2019).


Commentary

Employment background checks are consumer reports. When an organization uses consumer reports to make employment decisions, including hiring, retention, promotion or reassignment, it must comply with the Fair Credit Reporting Act (FCRA). The Federal Trade Commission (FTC) enforces the FCRA. Consumer reports can include credit reports and criminal records, as well as other information.

Before accessing background information, you must comply with procedures beforehand, as stated by the EEOC:

  • Tell the applicant or employee you might use the information for decisions about his or her employment. This notice must be in writing and in a stand-alone format. The notice can't be in an employment application. You can include some minor additional information in the notice (like a brief description of the nature of consumer reports), but only if it doesn't confuse or detract from the notice.
  • If you are asking a company to provide an "investigative report" - a report based on personal interviews concerning a person's character, general reputation, personal characteristics, and lifestyle - you must also tell the applicant or employee of his or her right to a description of the nature and scope of the investigation.
  • Get the applicant's or employee's written permission to do the background check. This can be part of the document you use to notify the person that you will get the report. If you want the authorization to allow you to get background reports throughout the person's employment, make sure you say so clearly and conspicuously.
  • Certify to the company from which you are getting the report that you:
    • notified the applicant and got their permission to get a background report;
    • complied with all of the FCRA requirements; and
    • won't discriminate against the applicant or employee, or otherwise misuse the information in violation of federal or state equal opportunity laws or regulations.”

For more information about FCRA requirements, visit the EEOC’s website: https://www.eeoc.gov/eeoc/publications/background_checks_employers.cfm

and the Federal Trade Commission’s website: https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-credit-reporting-act

Work with legal counsel to make sure your background check process complies with FCRA requirements as well as other federal, state, and local laws.

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