What Is FCRA? See Background Check Ruling for Job Applicants


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A three-judge court unanimously ruled that while the Fair Credit Reporting Act (FCRA) gives job seekers the right to explain the accuracy and context of background checks, it does not grant them the right to contest the reported convictions before they lose a job offer.

This means that, under certain conditions, employers are not required by federal law to give job seekers with a criminal record the opportunity to explain their background check before terminating a job offer.

What is Fair Credit Reporting Law?

Originally enacted in 1970, the Fair Credit Reporting Act was designed to give people the right to resolve any inaccuracies in their credit reports. In 1996, the FCRA was extended to other reports, including background checks for employment. Under FCRA compliance, an employer must disclose that it is obtaining background checks, receiving authorization, and then complying with certain protocols if the employer is considering an adverse action based on the consumer report.

What is a warning of adverse action?

According to the FCRA, if an employer is considering taking labor action regarding the results of the background check, it must follow a multi-step adverse action process.

They must notify the applicant that an adverse action is being considered, provide them with a copy of the report and inform them that they may challenge or give context to the criminal record. However, with the new rule, employers are not necessarily required to provide this notice or offer the applicant the opportunity to dispute the records before making an employment decision.

Related: Have you checked the background of your new hire?

Negative versus accurate statements

The court ruling comes in part because of a recent lawsuit in which an applicant sued the data processing company SC Data Center, alleging that it infringed the FCRA by terminating its job offer before giving -the opportunity to discuss the results of the background check with the potential employer.

The plaintiff stated in the application that she had never been convicted of a crime, but that “she was arrested once in 1996 at the age of 17 and then pleaded not guilty.”

This is where it gets complicated.

Although the employer technically infringed the FCRA’s compliance by failing to provide the applicant with the records prior to the decision, the results of the background check found that his record, in relation to the to reveal, was not only negative, but inaccurate with his original statement.

A background check revealed that she was convicted of murder and armed robbery in 1996, sentenced to 25 years in prison and released after serving 12 years.

“The act does not give applicants the right to explain negative but accurate information in a consumer report before the employer can make an adverse employment decision,” said Richard Millisor, a partner in the law firm Fisher Phillips .

Related: Do your homework yourself: Business background checks

What does this mean for job seekers and potential employers?

Although the court in this case ruled in favor of the employer, despite his FCRA violation, the decision depended on the accuracy of the report, not the negative connotation. When the applicant sued the data company, it did so on the grounds that it was not granted the right to view its file and the subsequent opportunity to dispute its report, but never argued against the accuracy of conviction records. Therefore, the employer terminated the offer due to convictions for crimes which it did not disclose.

In short, for applicants, be honest from the start. For employers, it is still prudent to respect the rights of consumers, as this case is based on small print and technical violations by the FCRA can lead to costly lawsuits.

“When a discrepancy arises in a situation involving your company, you should not automatically assume that the results of the underlying investigation are correct or that the candidate lied in the application. It is important not to draw conclusions but to follow the proper process. described by federal statute, “says Millisor.

Related: How should companies do background checks in the post-pandemic world?



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