COMPLYING WITH THE FAIR CREDIT REPORTING ACT

Many employers obtain applicant or employee background checks in the hiring process and sometimes during employment. Employers should be aware of recent amendments to the Fair Credit Reporting Act ("FCRA") which have increased the rights of applicants and employees to receive disclosures and the ability to decide authorize certain background reports. Consumer reports include a wide variety of reports from a consumer reporting agency that contain any information "bearing on a consumer's credit worthiness, credit rating, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living." Reports such as driving records, criminal records, and credit reports are considered consumer reports if they are obtained from a third party, consumer reporting agency, insurance company, or investigative firm. In comparison, an investigative consumer report also contains information by a consumer reporting agency through personal interviews with neighbors, friends, associates, acquaintances, or others. Investigative consumer reports have additional disclosure requirements.

Employer who wishes to use consumer reports must comply with the following: (1) employer must provide prior written disclosure to the applicant/employee; 2. employer must obtain a signed authorization from the applicant/employee; (3) employer must certify to the consumer reporting agency that it has followed proper procedures and uses the reports only for employment purposes; (4) employer must give written notice to the employee/applicant before taking adverse action and must provide the applicant/ employee with a copy of the consumer or investigative report and a summary of the applicant/employee's rights under the FCRA; and (5) employer must given written notice to the employee after taking any adverse action together with specific information about the consumer reporting agency that provided the report.

For negligent failure to comply with the FCRA, the applicant/employee may recover actual damages, attorney fees and costs. Federal and state agencies are authorized to sue for such relief can recover up to $1,000 per violation in lieu of actual damages. For a willful failure to comply with the FCRA, employee/ applicant may also recover punitive damages and up to $1,000 in lieu of proving actual damages. The FTC may also bring an action seeking penalties up to $2,500 per violation in the event of a knowing violation involving a pattern or practice of non-compliance.