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Please enjoy this week’s Compliance News Flash with blurbs about the largest FCRA-related jury award, litigation involving a public record vendor, the President’s travel ban, the Form I-9, and increased vetting of visa applicants.

Click here to read the Compliance News Flash.

Please join me next week for a discussion about what employers need to be aware of regarding pre-employment background checks to ensure you have compliant background screening policies and procedures in place. Some of the topics I will discuss include the Fair Credit Reporting Act, state law regarding restrictions on the use of credit information for employment screening purposes, the EEOC’s guidance on the use of criminal history records, and Fair Chance Hiring laws (aka Ban the Box ordinances).

The webinar is hosted by ClearStar.  Please register by clicking here.

Details: The free webinar is Wednesday, March 15, 2017 from 2:00 PM – 3:00 PM EDT.

Are you an employer that conducts pre-employment background checks for new hires, or maybe background checks for existing employees for promotion, reassignment or retention purposes?  Ever randomly wonder if you can use that report and information in it for a purpose other than employment screening?  The short answer is, no.

The FTC recently posted on its blog how to use information in such consumer reports and the fact that an employer or other “user” of consumer reports cannot “double dip.” Meaning, if you receive a “consumer report” (aka a background check report) from a background screening company for employment screening purposes, you cannot use it for a different purpose. If you engage the services of a background screening company make sure to read the Notice to Users of Consumer Reports: Obligations of Users Under the FCRA, which explains employers obligations under the law.  Your background screener should provide you with a copy of this notice.

An employer’s obligations include:

  • Having a “permissible purpose” to request a consumer report from a background screening company — for hiring, promotion, retention or reassignment, the “permissible purpose” is employment. Your background screening vendor should ask you to certify your permissible purpose prior to furnishing a report, which is why you may see language about this in the contract as well as other language related to the parties obligations under the Fair Credit Reporting Act (FCRA) (15 U.S.C. § 1681 et seq.).
  • Providing certain disclosures to the job applicant or employee (i) prior to requesting a background check; (ii) when information contained in the report may affect eligibility for employment; and (iii) if an adverse action is going to be taken as a result of information in the report.
  • Providing notice regarding the background investigation and securing the job applicant or employee’s written consent.
  • Properly dispose of these reports, including by burning, pulverizing, shredding or electronically purging the information — for more on proper disposal of reports click here.

Note section III in the Notice to Users of Consumer Reports: Obligations of Users Under the FCRA as it specifically addresses the use of background check reports for employment purposes.  The FCRA imposes additional requirements when employers use reports for employment screening purposes.

After a battle of motions between the parties, on August 9th a Wisconsin federal judge dismissed a proposed class action for alleged violations under the Fair Credit Reporting Act (FCRA) against Cory Groshek. Why is this important?  Well, some of you may be familiar with Mr. Groshek as he is a noted (some may say serial) plaintiff who has filed multiple lawsuits and/or sent demand letters to employers alleging violations of the FCRA. 

It appears that Mr. Groshek’s master plan was to apply for employment and get to the point where the hiring entity would provide him with the FCRA required disclosure and authorization as part of the background check/investigation.  From there, the alleged FCRA violations began either in the form of a lawsuit or a demand letter. Our firm handled one such demand letter by Mr. Groshek.

Same thing happened in the instant case, Mr. Groshek alleged “that he applied for employment with the defendant, and that in the course of considering his application, the defendant obtained a consumer report on him ‘without first providing [him] a clear and conspicuous written disclosure, in a document consisting solely of the disclosure, that a consumer report may be obtained for employment purposes.'” (Decision and Order at 4).  Here though, the judge put the brakes on this case noting that nowhere in plaintiff’s complaint did he allege any concrete harm suffered as a result of the alleged violation. The court also stated that while allegations of a statutory violation satisfy the particularized injury prong of the injury-in-fact requirement for standing discussed in Spokeo, that in and of itself does not satisfy the concreteness requirement. (Decision and Order at 5).  One damaging statement by Mr. Groshek that the court noted is that during a deposition, when he was asked by defense counsel if he was aware of anything that might entitle him to actual damages he stated, “‘I do not know of any actual damages that I am claiming nor do I believe I’ve ever actually claimed actual damages….'” (Decision and Order at 6).

In the instant case the court granted Time Warner’s motion to dismiss the case, stating that the complaint is dismissed for lack of subject matter jurisdiction.

Ironically, Mr. Groshek requested that the court “seal various portions of his desposition transcipts, supplemental answers to discovery, and any other document that might make mention of any settlement agreement between him and ‘another party.'” (Decision and Order at 7).  I’m thinking that’s because he has brought similar claims under the FCRA against at least 40 companies and his master plan may be unraveling.  The court denied his request stating, “…plaintiff’s argument [to seal records] ignores the fact that he came to the court–a public forum–and instituted this lawsuit. He sued the defendant on a cause of action for which he has sued a number of other companies, and yet he argues that those other suits are irrelevant to this one. In essence, he indicates that while he wants to be able to file suit against the defendant in federal court, he wants to prevent the defendant from enquiring into similar suits that he has filed against other companies for the same alleged conduct. That is not an appropriate basis for the court to seal documents from public view.”  (Decision and Order at 9-10).

Cory Groshek v. Time Warner Cable, Inc., case number 2:15-cv-00157, in the U.S. District Court for the Eastern District of Wisconsin.

Yesterday I attended an interesting webinar regarding Fair Credit Reporting Act (FCRA) developments.  Susan Camp Stocks from the Consumer Financial Protection Bureau (CFPB) and Katherine Ripley White from the Federal Trade Commission (FTC) participated, along with my colleagues Bob Belair and Kevin Coy. The speakers covered a fair amount of ground on different FCRA issues, including the importance of furnishers of information having written policies and procedures.  However, I want to focus on what they said about the background screening industry.

FTC Comments

  • They are focusing on background screening and in particular the use of criminal history records in employment screening
  • Accuracy of the reports is essential
  • Red flags that background screeners should review/consider when reporting public records — different names or DOBs, multiple entries for the same offense, and the reporting of expunged cases
  • They are working with the Federal Interagency Reentry Council to address accuracy related issues in the criminal justice system
  • They will turn their attention to focus on tenant screening in the next year and it is likely that we will see revised guidance in this area

CFPB Comments

  • Among their policy priorities is consumer reporting
  • It appeared that there is a belief that there is weak oversight of public record providers and that they believe more audits of such providers should be conducted to address accuracy issues
  • Accuracy of the reports is very important to them and they spoke about the enforcement action against General Information Services and e-Backgroundchecks.com to illustrate the point

The Federal Trade Commission (FTC) just issued guidance for companies providing employment screening services.   According to the FTC, they have “created new guidance for businesses aimed at giving employment background screening companies information on how to comply with the Fair Credit Reporting Act (FCRA).” The FTC is referring to it as an “FCRA brochure” … I guess like a travel brochure you would pick up at a travel agency.  Anyhow, click here to view the FTC’s blog posting on this subject.

As a practitioner in this area I don’t see anything particularly ground breaking or earth shattering about the FTC’s publication.  I think this publication will be most helpful for newer participants in the background screening industry.

My main takeaways for seasoned background screening firms is that the guidance provides insight into potentially what the FTC considers most important.  FTC — if you are reading this, everything about you and the FCRA is important.  Key points for background screeners to focus on with respect to their compliance programs:

  • Accuracy of the reports — use your identifiers and check your identifiers on the reports (including middle initials); don’t provide reports with multiple entries for the same offense; and for crying out loud don’t report expunged or sealed records.
  • Know your customer before furnishing consumer reports and get your section 604(b) certifications.
  • Provide the appropriate federal notices to users and subjects of the reports.
  • Have consumer dispute procedures in place to appropriately respond to disputes or file requests, conduct reasonable reinvestigations and provide notices to consumers about the results of any reinvestigation.  And finally, don’t make it difficult or challenging for a consumer to request their file or dispute a report.
  • When reporting public records that are likely to have an adverse effect on the consumer’s ability to obtain employment, either provide consumers with notice or follow “strict procedures” as per section 613 of the FCRA.

Above points shouldn’t come as a surprise to seasoned background screening firms.  If they do, or you are not familiar with any of these points, speak with an FCRA attorney to come up to speed on these rapido (that’s Spanish for “fast”).

Here’s a free webinar that will snap you out of your deep despair over the fact that it is now dark at 5:02 pm.

I will join Hire Image CEO, Christine Cunneen, to present a 1 hour webinar packed with actionable information and best practices to help you:
  • Minimize the risk associated with background screening of applicants and current employees;
  • Be aware of new state laws that are increasing restrictions on employers;
  • Know what you need to do in light of recent EEOC activities that could signal major changes to come in the background screening process.

This activity has been approved for 1 HR (General) recertification credit hour toward California, GPHR, HRBP, HRMP, PHR and SPHR recertification through the HR Certification Institute.

Click here to register. The webinar is November 17th at 3 pm EST.

The Consumer Financial Protection Bureau (CFPB) announced that it has taken action against two large background screening companies.  Yes, you are reading this correctly.  The CFPB…not the Federal Trade Commission, has taken an enforcement action against two background screening companies.  Holy smokes Batman!  This is very big news and screening companies must take note.

Breaking it down.  The Consent Order is about: (i) the accuracy of the reports under section 607(b) of the Fair Credit Reporting Act (FCRA); (ii) public records and section 613 of the FCRA related to notice versus strict procedures; and (iii) the obsolescence rule under section 605(a) of the FCRA.  It is about employment background screening reports to employers.  Action is pursuant to the FCRA. The fines total $13 million.

If you are a background screening company the Consent Order is mandatory reading so you can reflect upon and consider how the allegations/findings are addreseed (or not) by your company.  Here’s what the CFPB alleges about the screening companies:

  • They failed to take basic steps to assure accuracy: The CFPB alleges, among other things, that there was no requirement for employers to provide consumers’ middle names; no written policy for researching consumers with common names or nicknames; and a failure to use an audit process to adequately test the accuracy of the reports provided.
  • They failed to meet certain requirements when reporting public records: this part of the Consent Order blends with the 607(b) allegations about accuracy and failure to maintain appropriate procedures under section 613 of the FCRA.
  • They included impermissible information in consumer reports: The CFPB alleges that both companies failed to take measures to prevent non-reportable civil suit and civil judgment information older than seven years from being impermissibly included in their reports because they did not have sufficient policies and procedures in place.

Important – starting on page 11 of the Consent Order the CFPB spells out what a Compliance Plan should look like. Read it if you are a background screener.  If you need counsel, we can assist.

The day is almost upon us.  Halloween, you say?  No, oral arguments in the Spokeo case.  Way more exciting.

Spokeo, Inc. v. Robins is important because it goes to the heart of when a claim for non-compliance can be brought under the Fair Credit Reporting Act (“FCRA”) (15 U.S.C. § 1681).  The case comes from the 9th Circuit.  Short version is that the plaintiff alleges that Spokeo posted information about him which was inaccurate and failed to provide certain notices.  But no actual harm.

Issue before the Supreme Court: Whether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm, and who therefore could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action based on a bare violation of a federal statute.

Lots of people have filed amici briefs (friend of the court briefs), including NAPBS, the Chamber of Commerce, CDIA, the credit bureaus and so on.  Even the government got in on brief writing, in favor of Robins.   Click here to read more.

Bottom line — oral arguments are next week and expect the Supreme Court to decide by June of 2016. While the issue may seem one better suited for legal geeks — can an individual bring a claim alleging an injury in law, but not one where he suffered actual harm — the reality is that this case could have significant ramifications for consumer lawsuits. Plaintiff’s bar is going bonkers (not a legal term) filing individual and class action complaints against employers alleging technical violations of the FCRA (e.g., not providing the disclosure or authorization or failure to follow adverse action steps). If the Supreme Court decides that plaintiffs must demonstrate actual harm, not just a mere technical violation of the law, that would be significant and limit such claims.  However, if the Supreme Court goes the other way, employers and others who operate under the FCRA can expect more litigation alleging technical violations of the FCRA, not grounded in any injury or harm.

Spokeo, Inc. v. Robins, 742 F.3d 409 (9th Cir. 2014), cert. granted, 135 S. Ct. 323 (U.S. Apr. 27, 2015) (No. 13-1339).