Employers who solicit consumer reporting agencies (CRAs) to conduct background checks on their prospective and current employees are subject to a growing patchwork of federal, state and local fair credit reporting acts (FCRAs). Among other things, these laws require that employers distribute an ever-multiplying number of forms to apprise the applicant/employee of his or her rights. This article intends to help employers navigate the labyrinth of obligations when having a third-party vendor run a background check and when taking adverse employment actions based on the results.
The first step in this process is for employers to provide the applicant or the employee with a disclosure statement, authorization form and summary of rights under the federal FCRA. The applicant or employee should acknowledge by signature that he or she has received these documents. It does not stop there if the employer does business in certain states and cities. For instance, when requesting records from the Massachusetts Department of Criminal Justice Information Services, employers are to provide the applicant or employee with a state-specific authorization form (based on a model form approved by the state). Moreover, New Jersey and Washington State require that employers furnish state-tailored summaries of rights.
In addition, New York State necessitates that applicants and employees receive a copy of Article 23-A of the New York Correction Law, which lists a number of factors that employers are to evaluate when making decisions based on criminal conviction records. The city of Newark also provides that employers include a copy of Ordinance #12-1630, which sets forth several restrictions on the use of criminal background checks. For each of these states and cities, employers may want to include a notice followed by a checkbox stating, “I have received the attached copy of the law/summary of rights.”
Furthermore, California, Minnesota and Oklahoma require that employers include a checkbox asking whether the applicant or employee would like to request a free copy of their consumer report. Finally, employers might consider providing additional notices to applicants and employees in the states and cities that have limited the use of credit history in hiring and personal decisions – the states of California, Maryland, Connecticut, Hawaii, Illinois, Washington, Oregon, Vermont, Colorado and Nevada and the city of Chicago. The notice could read that the employer “only will obtain credit history if the law permits it,” i.e., if the purpose of the credit check falls under one or more of the exceptions enumerated in the statute.
The second step in this process only takes place if the employer intends to take adverse action based on the results of the consumer report. In such a case, the employer is to notify the applicant or employee of this intent in writing. Together with this letter, the employer is to enclose a copy of the results of the background checks and a summary of rights under the federal FCRA. Moreover, if located in New Jersey or Washington State, employers again are to distribute the respective state summaries of rights. For New York State applicants and employees, the employer might want to furnish another copy of Article 23-A of the New York Correction Law (if the intended adverse action is based on criminal history).
In Massachusetts, the employer also is to include a criminal background check policy (based on a model form approved by the state), as well as “information concerning the process for correcting a criminal record form” (a model form also provided by the state). If located in the city of Newark, the employer is to fill out an applicant/employee record consideration form (if the intended adverse action is based on criminal history), which requires the employer to weigh several factors before making a determination.
The third and final step in the process only takes place if the applicant or employee has not provided the employer with additional mitigating information to explain the results of the background check and/or the employer has confirmed that the information received from the CRA disqualifies the person from employment. In such a case, the employer is to send the applicant or employee a notice of adverse action. Massachusetts provides a specific form (similar to the federal FCRA notice). And Newark appears to require that employers once more fill out the applicant/employee criminal record consideration form (if the adverse action is based on criminal history).
In sum, multi-state employers should stay current with this rapidly evolving landscape of FCRA requirements at the federal, state and local levels of government. The risk of non-compliance is great. Employers often face steep penalties for violating any number of consumer reporting laws, particularly where the statute provides for a private right of action with the promise of generous remedies. Given these stakes, employers should consider drafting a detailed and easy-to-follow checklist explaining the three-step process described above and covering all of the jurisdictions in which the employer operates.
Katharine H. Parker is a Partner in the Labor and Employment Law Department at Proskauer Rose and co-head of its employment law counseling practice group. Katharine has extensive experience litigating employment disputes of all types, including claims alleging race, age, disability, and sex discrimination, retaliation, sexual harassment, wrongful discharge, violations of wage and hour laws, and breach of contract. Daniel L. Saperstein is an Associate in the Labor & Employment Law Department at the firm's Newark office. He litigates on behalf of employers in a wide variety of employment-related disputes brought before state and federal courts; FINRA, AAA and other arbitration panels; administrative agencies such as the EEOC and its state counterparts; and in prelitigation negotiations.