Court Allows Leeway to Employers Under Fair Credit Reporting Act

A recent decision from the 8^th Circuit U.S. Court of Appeals granted employers some modest flexibility in conducting and relying on background checks for potential new hires covered by the Fair Credit Reporting Act (“FCRA”).

The court made two key rulings:

1. Employers have no obligation under the FCRA to provide job applicants with the opportunity to explain negative but accurate background check results.
2. A job applicant cannot bring legal action against the employer based on a “technical” violation under the FCRA that does not result in concrete harm to the applicant.

The Case

The case involved a plaintiff who applied for a job and signed a form consenting to the procurement of a criminal background check. When the company received the results, it rescinded the applicant’s job offer. She sued the company for violation of the FCRA.

In her job application, she answered that she had never been convicted of a felony. She went on to explain that she had been arrested at age 17, but was ultimately found not guilty.

Public records told a different story, revealing that not only had the applicant been tried as an adult in a murder case involving a drug deal, but she was also convicted and sentenced to 25 years in state prison and released after serving 12 years. The applicant herself authored a book in the late 1990s detailing her criminal conviction experience. Upon discovery of this information, the company immediately rescinded her offer of employment.

It is worth noting that the defendant’s actions were not fully compliant with the detailed requirements of the FCRA:

• The employer took adverse action without first providing the consumer report and advance notice of potential adverse action to the applicant, and giving her an opportunity to dispute the report.
• The disclosure form provided to the applicant in six-point font was not ideal for meeting the FCRA’s “clear and conspicuous” requirement.
• The disclosure form was not provided as a separate and distinct document, but included a myriad of other provisions.
• The authorization was technically non-conforming because it did not explicitly contain the words “consumer report” or specify that the report would be obtained for consumer purposes.

Court’s Analysis

The applicant in this case was not disputing the accuracy of the background check results, but rather was claiming that she was entitled to the opportunity to explain the accurate results to the employer.

The 8^th Circuit disagreed and dismissed the claims, stating that the FCRA does not provide applicants with the right to explain negative but accurate information prior to the employer taking an adverse employment action. The Court also stated that technical FCRA violations that do not cause concrete injury or harm to the applicant are not actionable in court. Since the applicant had knowingly consented to a criminal background check and the results relied on by the employer were accurate, there was no substantial injury.

The court noted, however, that there are other federal circuits that have reached different conclusions about 1) how stringently employers must adhere to FCRA and 2) what types of claims will be permitted. So, in other circuits, technical violations may not be so readily dismissed. The 8th Circuit covers Arkansas, Iowa, Minnesota, Missouri, Nebraska, and North and South Dakota.

It is important to note that the 8^th Circuit’s decision was limited to issues raised under the FCRA. The U.S. Equal Employment Opportunity Commission and state law may impact how an employer must handle the results of criminal background checks.

Practical Takeaways for Employers

So, what does this court holding mean for employers? Although the claims were dismissed in this case, it was only after extensive litigation and appeals.

In order to reduce the likelihood of such claims, employers should undertake a careful policy and form review to ensure strict compliance with the FCRA’s detailed requirements. In addition, employers should provide applicants with appropriate advance notice prior to taking any adverse employment actions based on background check information.

If you have any questions, please contact:

• Mark Sabey at (303) 801-3538 or marksabey@wp.hallrender.com; or
• Your primary Hall Render contact.

Special thanks to Paige Robinson, Summer Associate, for her contributions to this article.

Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer an individual’s questions that may constitute legal advice.