April 22, 2014
by Kristen E. Smith
The number of employers that conduct background checks as part of the hiring process has steadily increased. Background checks can help uncover misconduct or dishonest behavior at previous jobs and determine whether applicants possess the positive traits employers desire.
They can also help avoid negligent hiring claims if things go wrong with a new hire. However, a recently filed lawsuit demonstrates that the decision to use background checks should be carefully considered and implemented.
The Fair Credit Reporting Act (FCRA) requires employers to provide applicants with a stand-alone disclosure and authorization form before conducting background checks. The disclosure and authorization form must be separate from the employment application and cannot include language that releases the employer from liability associated with conducting a background check.
Unfortunately, many employers fail to comply with the FCRA by relying on disclosures in employment applications to inform applicants that they will be subject to a background check or by including additional language in the disclosure.
A proposed class action lawsuit against Whole Foods Market California reminds employers to review their disclosure and authorization forms to make sure they comply with the FCRA. The lawsuit accuses Whole Foods of using an invalid form to obtain applicants’ consent to conduct background checks during the application process.
Specifically, the suit alleges that (1) the employer relied on a consent form in an online application that contained other consent forms and (2) the consent form included a release of claims for obtaining a background check.
If Whole Foods is found to have used an invalid form, the consequences will be significant. They may include invalidation of the consent form, statutory damages of up to $1,000 for each applicant, costs and attorneys’ fees, and punitive damages.
Steps to take
First, make sure you know the requirements of the federal FCRA and the New York Fair Credit Reporting Act (NYFCRA). Those statutes largely mirror each other, and they contain technical requirements for the collection and use of background check information.
However, in certain areas, the NYFCRA contains more restrictive requirements. For that reason, don’t assume that a background check vendor has all the requirements covered, especially if it is an out-of-state vendor.
Another common mistake is assuming the FCRA and the NYFCRA apply only when an employer seeks credit information. Even though the titles of both laws contain the term “Fair Credit Reporting,” they cover several types of reports. For example, if a criminal background check is performed by an outside agency instead of the employer, it is considered a “consumer report” and is covered by both laws.
Also, many employers make the mistake of relying on an employment application to inform applicants that they will be subject to a background check. Again, the FCRA requires employers to provide applicants with a stand-alone authorization form.
Those are just a few mistakes employers make when conducting background checks. There are many more pitfalls. The bottom line is, if you conduct background checks, make sure you are fully versed on the details of the FCRA and the NYFCRA.
Also, be aware of Article 23-A of the New York Correction Law. Most employers understand that it is unlawful to refuse to hire an applicant simply because of a previous criminal conviction (except in certain circumstances). However, many employers may not know that under a February 2009 amendment to the NYFCRA, employers must provide applicants with a copy of Article 23-A when obtaining an investigative consumer report (a narrow subset of background checks) or a criminal background check.
The amendment includes a posting requirement. New York state’s Labor Law Section 201-f now requires all employers — not just those that conduct background checks — to post a copy of Article 23-A in the workplace.
Finally, be sure to apply your background check policy consistently. Cherry- picking applicants for background checks or skipping the process for some applicants can expose your company to discrimination or negligent hiring claims.
Strategies going forward
The lawsuit against Whole Foods is a reminder that complying with the FCRA makes good business sense. Periodically review your application and hiring forms and processes to ensure strict compliance. In this area, a little care will go a long way.