October 20, 2015 |

Jeff Bezos unveils Amazon's smartphone. (Ken Lambert/Seattle Times/MCT)

Jeff Bezos unveils Amazon’s smartphone. (Ken Lambert/Seattle Times/MCT)

For the second time in a year, Amazon has been hit with a Fair Credit Reporting Act (FCRA) violation claim based on its hiring process.  This week, a New Jersey man sued Amazon in federal court for denying him a job in reliance on a background report without warning him or providing him with an opportunity to correct the record.  According to the compliant, Amazon made a contingent offer of employment to the man following an in-person interview, which he accepted.  Amazon allegedly withdrew the offer of employment at its New Jersey facility based on information obtained in a standardized background report conducted by a third-party company, without warning the man or providing him a copy of the report or the opportunity to dispute the results, all violations of the Fair Credit Reporting Act’s mandatory pre-adverse action notification requirement.
The FCRA permits employers to conduct background checks, which can include credit checks and criminal history.   However, under the FCRA, any company intending to take an adverse employment action based in whole or in part on information obtained from the consumer report must provide notice of that fact to the consumer, and must include with the notice a copy of the consumer report and a notice of the consumer’s rights to dispute the information contained within the report, prior to taking the adverse action.

The case against Amazon is a great reminder that although conducting background checks can be a best practice, if it is done without appropriate planning and training, a pre-employment investigation can be a potential source of liability.

Generally speaking, any time an employer uses an applicant or employee’s background information to make an employment decision, regardless of how the information is obtained, the employer must comply with federal and state laws that protect applicants and employees from discrimination. Additionally, if the background checks are run through a 3rd party company in the business of compiling background information, the employer must comply with the requirements of the FCRA as well as state and local laws regarding background reports.

The FTC and EEOC have released the following joint guidance for employers related to background checks: https://www.ftc.gov/tips-advice/business-center/guidance/background-checks-what-employers-need-know.  Below is a brief summary of the FCRA requirements related to background checks.

  1. Before obtaining the report, the employer must notify the applicant/employee that the employer may use the information in the report to make a decision related to employment, and receive the applicant/employee’s written permission to obtain the report.
  2. If the employer does not intend to hire, keep, or promote an applicant because of something in the report, they must give the employee or applicant a copy of the report and a “Summary of Rights” that tells the employee or applicant how to contact the company that provided the report in order to dispute the information.
  3. If the employer does not hire an applicant or promote an employee because of information in the employee/applicant’s criminal history or other public records, the employer must notify the employee/applicant orally, in writing, or electronically of the following:
    1. the name, address, and phone number of the company that supplied the criminal history or public records report;
    2. that the company that provided the information didn’t make the decision to take the adverse action and can’t give the employee/applicant specific reasons for it; and
    3. that the employee/applicant has the right to:
      1. dispute the accuracy and completeness of any information in the report; and
      2. to an additional free report from the company that supplied it, if the employee/applicant asks for it within 60 days of the employer’s decision not to hire or retain the employee/applicant.
    4. If an employer decides not to hire, keep, or promote an employee/applicant based on financial information in a background report, the employer must:
      1. provide the name, address, and phone number of the company that supplied the credit report or background information;
      2. provide a statement that the company that supplied the information didn’t make the decision to take the adverse action and can’t give you any specific reasons for it; and
      3. provide notice of the right to:
        1. dispute the accuracy or completeness of any information in the report; and
        2. to get an additional free report from the company that supplied the credit or other background information if you ask for it within 60 days.

FCRA Best Practices

Amazon is not the first, and won’t be the last company faced with allegations of FCRA violations.  Class action suits against employers alleging violations of the FCRA when using background checks have more than tripled in the last few years. FCRA complaints range from assertions that the applicant authorization was buried in unrelated materials rather than a separate documents to contentions that the applicant or employee did not have a reasonable time to dispute the report prior to the adverse action.

Background Check Best Practices

To reduce exposure to FCRA complaints, employers should consider the following steps.

  1. Use a separate FCRA compliant authorization for background checks. If the employer intends to use information contained in the background check post-hire, notice should be included in the authorization.
  2. The statute of limitation for an FCRA violation is 5 years from the violation, so retain records for five years.
  3. When taking an adverse action based on the results of a background check, take a minimum of 5-7 days between giving notice of a contemplated adverse action and providing the notice of adverse action, to give the applicant or employee a reasonable opportunity to dispute the report.

Employers should also remember that the FCRA is not the only law that regulates background checks, and avoid treating pre-employment investigations as an off-the-record investigation into an applicant’s background. Instead, when conducting pre-employment investigations, consider the following general guidelines:

  • Employers should use pre-employment investigation tools that are reasonable, appropriate, and relevant to the position for which the applicant is applying.
  • Pre-employment investigations should be consistently implemented with all candidates, regardless of class or position.
  • Pre-employment investigations should be conducted by persons with special training, such as a reputable investigative service.
  • All information must be evaluated in compliance with the Fair Credit Reporting Act (FCRA), the Americans with Disabilities Act (ADA), Title VII of the Civil Rights Act, state and federal “Ban-the-Box” legislation and any other applicable state and federal law.

With these guidelines in mind, employers should consider which background checks are appropriate given the nature and scope of the position sought by the applicant.



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