Ignorance of the requirements of the Fair Credit Reporting Act (FCRA) is no excuse and can be costly. Just ask First Student Bus Company and its sister company First Transit. A federal judge recently gave a preliminary approval on a $5.9 million settlement agreement to resolve lawsuits alleging FCRA violations filed on behalf of workers and job applicants of the school bus contractor. The lawsuits claimed that the bus companies obtained criminal history background checks without obtaining written authorization, and used the reports to deny applicants jobs without providing a copy of the criminal history background check prior to taking adverse action. Two costly mistakes! The proposed settlement agreement would provide each of the subjects terminated on the basis of an unauthorized background check with between $2,000 and $4,000.

Under the Fair Credit Reporting Act, an employer must comply with several detailed requirements before it can obtain a background report (consumer report) on an applicant or employee and if it intends to take action in whole or in part based on information in a consumer report. Specifically, an employer must: (i) have a permissible purpose for procuring a report in the first place; (ii) certify to the background screening company that it will comply with applicable law and will not use any information in violation of Equal Employment Opportunity laws or regulations; (iii) provide a written disclosure to the applicant or employee indicating that specific background checks will be conducted by a third party and obtain authorization from that applicant or employee to conduct such checks; and (iv) follow the adverse action requirements including providing a copy of the report, a Summary of Rights, and a pre-adverse action notification letting a person know he or she could dispute inaccuracies in the report. Failure to abide by these requirements can result in lofty penalties, as seen in the example above.

These cases should be the impetus for employers to immediately evaluate their current policies and procedures relating to the use of background checks for employment purposes and seek the expert guidance needed to ensure compliance with the FCRA and similar state laws.