Happy New Year!

Here are two editions of the AGG Compliance News Flash covering the following topics:

  • E-Verify;
  • California’s Consumer Privacy Act;
  • Ban the box and salary history restrictions in the hiring process;
  • Investigation by the Department of Justice into hiring practices;
  • The Fair Credit Reporting Act and who qualifies as an “employee”; and
  • News about the Consumer Financial Protection Bureau.

Click here for the 12/21 edition of the Compliance News Flash.

Click here for the 1/4 edition of the Compliance News Flash.

Check out this week’s Compliance News Flash with blurbs about:

  • Salary history bans and employment applications
  • FCRA enforcement by the Federal Trade Commission
  • FCRA related litigation helpful to employers
  • EU-Japan data transfers
  • Changes to San Francisco’s Fair Chance Ordinance

Click here to read the 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.

The Federal Trade Commission (“FTC”) recently issued guidance applicable to background screening companies (aka consumer reporting agencies) who engage in tenant screening.  The FTC highlights four key responsibilities of background screening companies covered by the Fair Credit Reporting Act (“FCRA”), specifically:

  • “Follow reasonable procedures to ensure accuracy.
  • Get certifications from your clients.
  • Provide your clients with information about the FCRA.
  • Honor the rights of applicants and tenants.”

For background screening companies I encourage you to look at those responsibilities as described in the guidance carefully because the FTC opines on what “reasonable procedures to ensure accuracy” are and those should be read to apply to employment screening as well.  The FTC states, “[c]ertain practices may be indicators that a background screening company isn’t following reasonable procedures. For example, if a report lists criminal convictions for people other than the applicant or tenant – for instance, a person with a middle name or date of birth different from the applicant’s – that raises FCRA compliance concerns. Other examples that raise FCRA compliance concerns include screening reports with multiple entries for the same offense or that list criminal records that have been expunged or otherwise sealed.  Another indication that a company’s procedures might not be reasonable are reports that list housing court actions, but do not include the outcome of the action – for instance, that a case was resolved in the tenant’s favor.”

Background screeners–notice that the FTC calls out reports with multiple entries for the same offense, the reporting of expunged or sealed records, reports with no dispositions, and finally, the failure to use a middle name to ensure accuracy.

The Affordable Care Act provides grants to states to implement background check programs for prospective long-term-care employees in settings such as nursing facilities, home health agencies and hospices. The grant program,  known as the National Background Check Program (NBCP), is intended to ensure that long-term-care employees undergo a minimum level of screening to protect patients.  Three types of background checks are required by the NBCP: (1) a search of State-based abuse and neglect registries and databases; (2) a check of State criminal history records, and (3) a fingerprint-based check of FBI criminal history records.  However, according to a recent Department of Health and Human Services Office of Inspector General (OIG) report, the NBCP has a long way to go before it is fully viable. (National Background Check Program for Long-Term-Care Employees: Interim Report, January 2016)

This is just as well considering that the third type of check – a fingerprint-based check by FBI records – is not, in this author’s opinion the panacea that many believe it to be. Name-based checks, when done using multiple identifiers, can be more accurate.  Moreover, information in the FBI’s database is limited and does not always contain final disposition information.  But fingerprint-based checks and the FBI are for another article.  In the meantime, what are steps that long-term-care facilities and providers can take to protect themselves, their workforce and their patients.  It is important to note that the guidance provided in this article is applicable across-the-board, to all employers in the United States who conduct background checks and not limited to long-term-care facilities and providers.

Regardless of whether a facility or organization is mandated to conduct certain background checks on employees, or is conducting such checks for due diligence purposes, it is important to understand the basics behind ensuring a legally compliant background screening program. The following bullet points will address the basics and some key elements of a complaint background screening program.

  • First, if your organization works with a third-party background screening company and they provide you with your background check reports, you are covered by the federal Fair Credit Reporting Act (15 U.S.C. § 1681 et seq.) in addition to analog state consumer protection statutes. As the “end-user” of “consumer reports” provided by a “consumer reporting agency” you have certain responsibilities under the FCRA. Failure to follow these responsibilities can lead to private litigation for violations of the FCRA and state laws, especially when we consider a very active plaintiff’s bar bringing claims against primarily end-users of consumer reports (i.e., employers) but also consumer reporting agencies (i.e., background screening companies).
  • Second, employers have an obligation to provide certain disclosures to job applicants when conducting a background check for employment purposes. A key disclosure is frequently called the “Disclosure and Authorization” notice. This notice is required by the FCRA to inform the job applicant that a background check will be conducted for employment purposes, among other things. Not providing a legally sufficient or defensible notice advising the job candidate of the fact that a background check will be conducted in a document that is “clear and conspicuous” and in a stand-alone format is the subject of significant amount of litigation around the country.
  • Third, still on the topic of the above notice and the content therein. Although the FCRA does not specify the exact content of the notice, the courts have stated that including extraneous information in it, such as a release of liability, a waiver of rights under the FCRA or language about the employment itself can cause the notice to be legally deficient.
  • Fourth, organizations must secure a job candidate’s written authorization for the background check to be conducted by a background screening vendor.
  • Fifth, whenever an organization reviews the background check report for purposes of determining employment eligibility, the FCRA requires that organization to follow certain steps if information in the report will be used “in whole or in part” to take adverse action against the subject of the report. This is called the “adverse action” process and it is a two-step process.
    • The first step is triggered when an organization reviews information in the report and makes the initial determination that the individual may be excluded from employment based on information in the report. This triggers what is known as the pre-adverse action step which requires the organization provide the job applicant with a copy of the report and a federal notice called “A Summary of Your Rights Under the Fair Credit Reporting Act.” Then, as a general rule, the organization should wait at least five (5) business days to allow the individual to review the report and challenge any inaccuracy or incomplete information in the report with both the organization and the background screening company. Sometimes, the reports do include inaccuracies and the FCRA is set up to allow individuals to address such inaccuracies through a consumer dispute process.
    • If, after a reasonable period of time (e.g., five business days) the organization determines it will not hire the individual due to information in the report, the second step is triggered. This is known as the adverse action step, and it requires that the job applicant be provided with a letter with specific content, as per the FCRA.

To be clear, above points are intended to provide a basic or general overview of what is required when conducting a background check using a background screening company and the focus is on the FCRA. Drafting or reviewing of corporate policies and procedures, as well as the forms/notices legally required is something that should be done with the assistance of legal counsel. It is also important to note that there are other factors an organization must consider as part of its background screening program.  Organizations need to be mindful of “Ban the Box” laws in their states and local jurisdictions and know whether they can “ask the question” on the job application about criminal history. Also, whenever an employer uses criminal history information to screen a candidate they must be aware of guidance by the Equal Employment Opportunity Commission on the use of criminal history information for employment purposes.  (Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964, Number 915.002, April 2012)  Finally, they must factor in state restrictions on the use of credit in the employment context.

To close the loop on the OIG report mentioned in the first paragraph. The OIG found that, four years into the grant program, the 25 states receiving grants reported varying levels of program implementation. In the six states that submitted sufficient data to calculate the percentage of prospective employees who were disqualified because of a background check, 3% of prospective employees were disqualified from employment. The OIG recommended that the Centers for Medicare & Medicaid Services continue to work with participating states to fully implement their programs and to improve required reporting.

Nevada has removed the 7-year restriction on background screening company’s ability to report criminal conviction information for employment screening purposes.  Which means that convictions can be reported without regard to a seven year look-back period.  Such a restriction on the reporting of convictions is a state restriction, followed by a handful of other states.  The federal Fair Credit Reporting Act (FCRA) allows for the reporting of convictions in a consumer report, regardless of a time period.  Having said that, the reporting of “other adverse item(s) of information” is limited to seven years in the FCRA, with the exception of certain bankruptcies.  See section 605(a) of the FCRA.

The bill, signed by Governor Bob Sandoval (R), went into effect June 9, 2015. See SB 409 for text of the legislation and note that it amends, in part, the consumer reporting chapter of Nevada Revised Statute section 598C.150(2).

Join me for a free webinar on Wednesday (June 10) at 1 pm EST.  I will discuss the basics of implementing and maintaining a legally compliant background check program for employment screening purposes. The webinar is hosted by Crimcheck.com, a background screening company.  The webinar is geared toward HR professionals, in-house counsel and others who are responsible for their company’s background check program.

Click here to register.

The webinar will cover:

  • Steps employers must take before and after conducting a background check pursuant to the Fair Credit Reporting Act (FCRA).
  • Common errors employers make when conducting background checks.
  • FCRA litigation and how to mitigate your company’s risk.
  • Ban the Box measures and how they could impact your company.

I hope you will join me to learn more about the legal requirements under the FCRA and state consumer protection laws regarding the use of background checks for employment screening purposes.

I recognize this is a few days late, but the content is still timely.  Last month I attended the NAPBS Mid-Year Conference in Washington, DC both as an attendee and speaker. One session of particular interest to me was Maneesha Mittal’s presentation.  Maneesha is the Associate Director of the Division of Privacy and Identity Protection at the Federal Trade Commission (FTC).  Her team is the team that would bring an enforcement action against a background screening company for non-compliance under the Fair Credit Reporting Act (FCRA).

Below are the take-away points I found most helpful for purposes of my day to day practice advising background screening companies on their compliance with the FCRA:

  • Reasonable security of data – Maneesha stressed the importance of “knowing your customer” when transacting with them and provided examples of companies who failed to maintain appropriate data security through reasonable procedures, and failed to ensure a permissible purpose to the reports (e.g., ACRAnet, Inc., SettlementOne Credit Corporation, Statewide Credit Services).
  • The FCRA applies equally to social media when used for background screening purposes and she gave as examples the FTC letter to Social Intelligence Corporation and the ongoing Spokeo v. Robins case.  For the Spokeo case, note that the U.S. Supreme Court granted cert. and will take up this important case next year.  The Spokeo case goes to the issue of whether a plaintiff has to show actual injury in fact in order to have Article III standing, or whether a mere violation of the statute is sufficient to bring suit.  Let’s hope the former and not the latter.
  • Companies cannot disclaim liability under the FCRA and then proceed to sell information to employers which could be used for background screening purposes.  As an example she cited the settlement against Filiquarian Publishing LLC, Choice Level LLC and their CEO for alleged failure to ensure that the information they sold was accurate and could only be used for a permissible purposes.   In this matter, the maker of the mobile app claimed that users could use the app to conduct criminal background searches on individuals but used disclaimers stating that they were not FCRA complaint and that the products should not be used for employment screening purposes.
  • Accuracy of the reports – reports with multiple entries listing the same offense are not acceptable. Basically, a data dump is not acceptable as it does not comply with the FCRA requirement to maintain maximum possible accuracy.  As an example she cited the HireRight Solutions enforcement action and settlement.
  • Consumer disclosures — have adequate staff to respond to consumer requests for their reports.
  • Use of section 603(y) of the FCRA as a defense to litigation is on the rise.  It is the FTC ‘s opinion that this section of the FCRA, which relates to investigations of suspected employee misconduct, is only intended to cover current employees and not job applicants.  Stay tuned for potential guidance from the FTC on this point.
  • U.S. based background screening companies doing background checks on international employees – the FCRA would apply.
  • Regarding the amicus brief in Moran v. The Screening Pros tied to section 605 of the FCRA and the obsolescence rule for dismissals, this is an FTC “opinion” and not just a staff view as the Commission approved the FTC’s participation in the amicus brief.

The Federal Trade Commission (FTC) has issued an updated guide for employers regarding compliance with the federal Fair Credit Reporting Act (FCRA) when conducting background checks, as well as the Equal Employment Opportunity Commission’s (EEOC) guidance on the use of criminal history records for employment screening under Title VII of the Civil Rights Act of 1964.  Read more here.

The publications featured by the FTC are the following:

Given the amount of private litigation in this space, which I have previously discussed on this blog many times, including here and here, employers should be mindful of both the FCRA and EEOC guidance when conducting employment-related background checks.  In addition, there are state consumer protection statutes that employers should be aware of.  All of which can be successfully navigated if using the services of a reputable background screening company and working with experienced counsel.  At Arnall Golden Gregory we are happy to assist with such.


Join me for a webinar on April 8th related to background screening, during which I will be speaking with others on legal issues related to background screening.  The title of this free webinar is, “Background Checks and the Fair Credit Reporting Act: Key Issues for North American Employers” and is sponsored by the Employment Law Alliance.  Click here to read more about the webinar and to register.   The webinar is geared toward in-house counsel, human resources professionals and corporate executives and business owners.