Employer Obligations Under the Fair Credit Reporting Act:  Timing is Everything

Employer Obligations Under the Fair Credit Reporting Act: Timing is Everything

October 15, 2015


A Pennsylvania federal court recently ruled in favor of an employer sued by an unsuccessful job applicant for alleged violations of the Fair Credit Reporting Act (FCRA). (See Ramos v. Genesis Healthcare, LLC (E.D. Pa, October 1, 2015).  The employer had denied the applicant employment based upon information contained in a consumer report indicating multiple felony convictions.  The plaintiff asserted the employer failed to give her an opportunity to challenge alleged inaccuracies in the report prior to denying employment.  The employer had in fact made an initial determination that the plaintiff did not meet its hiring standards prior to notifying her of the adverse information in the consumer report upon which it relied.


Employer obligations under the FCRA are triggered where a consumer report is obtained by the employer from a third party (as opposed to internally conducted background checks).  In such instance, the employer is required to obtain a signed “consumer authorization” from the applicant giving express consent to obtaining a consumer report containing such information as employment history, credit report, criminal records and education.  In the authorization form or a separate “stand alone” document, the applicant must be notified that that information in the consumer report may be used in making the hiring decision.  The employer must also certify in writing to the organization providing the consumer report that it has met the foregoing obligations and will not discriminate against the applicant or misuse the information obtained from the consumer report.  Before denying employment based upon a consumer report, the employer must give the applicant: 1) a copy of the report ; and 2) a copy of the A Summary of Your Rights Under the Fair Credit Reporting Act, a document that is supposed to be furnished by the company that provides the report.


If employment is ultimately denied based on information in a consumer report, the applicant must be given notice of that fact – orally, in writing, or electronically. The notice must include: 1) the name, address, and phone number of the consumer reporting company that supplied the report; 2) a statement that the company that supplied the report did not make the decision to take the unfavorable action and cannot give specific reasons for it; and 3) a notice of the person’s right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get an additional free report from the company if the person asks for it within 60 days.


Note that consumer reports can be used by employers for other personnel decisions such as promotions and terminations, though the authorization obtained from the applicant/employee must expressly state that a consumer report may be obtained for purposes of such personnel decisions made during employment.  Also, the FCRA has additional requirements pertaining to third party “investigative consumer reports” which are compiled based upon more expansive background checks.


In Ramos, the Court ultimately determined that the FCRA did not preclude the employer from making a “preliminary” hiring determination based upon the contents of the background report where the actual denial of employment only followed consideration of the applicant’s explanation.  The Court made a sound ruling given that the initial notice requirement under the FCRA following receipt of the consumer report is triggered by an employer’s “intent to take an adverse action (in this case, denial of employment).”  In other words, a manifest inclination to deny employment would have been necessary before notification of the applicant even became an issue. Employers are best advised to be sure that their expressed “intent” to deny employment based upon the results of a background check is just that-  an intent, and to provide the applicant an actual opportunity to contest purported inaccurate information prior to the final decision.  Of course, the process should be accurately documented to dispel any misconception that the denial of employment was prematurely determined.