Last month marked the beginning of fall. We have all been awaiting the arrival of cooler temperatures and, of course, pumpkin-spice-flavored everything. But not everything is cooling down. Some things are heating up, including lawsuits claiming violations of the Fair Credit Reporting Act (FCRA).
Haven’t heard of the FCRA? The FCRA was enacted in 1970 during President Nixon’s administration. Throughout employment history, claims under the FCRA have been scarce. Now, almost half a century later, FCRA lawsuits are spreading across the country like wildfire. These cases are so hot that one has recently made its way to the United States Supreme Court. See Robins v. Spokeo, Inc., 742 F.3d 409 (9th Cir. 2014), cert. granted.
So what is the FCRA? Among other things, the FCRA requires employers to take important compliance steps before obtaining and using consumer reports to make employment-related decisions such as hiring, promoting, demoting, and terminating.
What are “consumer reports?” No, not the magazine you consult to compare car features! They can include information from a variety of sources including criminal records, motor vehicle reports, credit checks, reference checks, education verification, employment verification, and professional license or certification verification.
Adding fuel to the fire, over the past few years, the United States Equal Employment Opportunity Commission has brought numerous lawsuits against employers claiming that their criminal background check and credit check policies disproportionately exclude certain protected class members. See e.g., EEOC v. BMW Mfg. Co., LLC, 2014 WL 5431118 (D.S.C. Dec. 2, 2014); EEOC v. Kaplan Higher Educ. Corp., 748 F.3d 749 (6th Cir. 2014); EEOC v. Freeman, 778 F.3d 463 (4th Cir. 2015).
If you are an employer, here is what you need to know to stay out of the heat. (Employers and prospective employers should also review applicable state laws related to consumer reports.) Prior to obtaining a consumer report, employers must provide notice to applicants and employees that they might use information in the report to make employment-related decisions. The notice must be in writing and in a stand-alone document. (The notice cannot be in an employment application. The notice should not contain any information that confuses or detracts from the notice.) Also before the employer can obtain a consumer report, the employee or applicant must provide written authorization. Before taking an adverse employment action based on a consumer report, employers must provide a copy of the consumer report and a written description of consumers’ rights under the FCRA to the applicant or employee.(Additional requirements apply if the only interaction with the employee or applicant is by mail, telephone, or computer.)
As referenced above, the United States Supreme Court will decide whether plaintiffs who suffer no concrete harm from FCRA violations have Article III standing to invoke the jurisdiction of federal courts. The decision will either extinguish the majority of FCRA lawsuits or spark further FCRA actions. Want whipped cream on that latte? Hope you checked out the oral arguments in this case, set for November 2.