FCRA Compliance: Step 2
Disclosure And Authorization
Disclosure and authorization is one of the easiest Fair Credit Reporting Act (FCRA) provisions to observe. It is also one of the easiest to violate; and its violations can be extremely costly. In fact, over the last two years, the hottest topics in class action lawsuits against employers have resulted from FCRA disclosure and authorization violations.
The company was accused of violating the FCRA because of its lack of pre-adverse action procedures, and because their disclosure and authorization forms were not stand alone documents. The lawsuit claimed that the employer took action against employees without providing those employees with pre-adverse action notices, thereby negating their chances to dispute information in background check findings.
The employee brought a lawsuit against Delhaize America – Food Loin’s parent company – alleging violation of FCRA disclosure rules. She was soon joined by 59,000 other people who had applied to Delhaize-owned stores for the past two years. Realizing that it was in a no-win situation, Delhaize struck a deal with the plaintiff’s lawyers to pay a $3 million settlement. On 2nd March, 2015, the plaintiffs applied to the court to approve the settlement, and the court obliged.
The Delhaize case is by no means an isolated one. It is just the latest settlement in a recent spate of class action lawsuits involving FCRA background checks. Another popular example occurred in October 2014. In this case, Publix Super Markets Inc. paid out close to $6.8 million to settle a class action brought by 90,000 job applicants making claims about authorization and disclosure violations.
The bottom line is that FCRA disclosures and authorizations can be a potential can of worms for an employer carrying out background checks. Failing to follow those guidelines can open you up to expensive and reputation damaging lawsuits.
The good news is that FCRA guidelines on disclosures and authorizations are quite straightforward. Observing them is so easy that it takes almost no effort. Employers who violate them usually do so out of mere lack of knowledge rather than intent. To avoid falling in such a category, you first need to understand FCRA guidelines on disclosures and authorizations.
The essence of FCRA guidelines disclosures and authorizations is this: that no employee or applicant can have a background check carried out on them without their permission. Basically, although an employer has every right to carry out a background check, it is illegal to carry one out without getting authorization from the employee/applicant.
The FCRA provides a number of guidelines through which an employer can get permission from the employee or applicant. These guidelines are what make up the disclosures and authorizations.
They are summarized as follows:
There are three aspects of the FCRA guidelines which may need a little elaboration:
The first is the concept of a “stand alone disclosure. ” This basically means that any the disclosure has to be given to the employee or applicant in a separate document. It shouldn’t be embedded in any other document. The employee/applicant should be in position to easily identify the disclosure.
The reason for behind the “stand alone” nature is so that employers do not bury this information with the result that the applicant unintentionally authorizes a background check. This is why the disclosure is supposed to be separate from the employee/ applicant’s employment application.
In practice though, the disclosure and authorizations are often fused into a single document with two distinct parts. The first is a full disclosure detailing the intention to carry out the background checks. The second is the employee’s/applicant’s authorization (usually a declaration which they sign). The Federal Trade Commission (FTC) guidelines allow the disclosure and authorization to be in the same document.
The second is the right of the applicant/employee to obtain a copy of the background check. The FCRA guarantees this right. It offers them the right to request for a copy from the CRA (company carrying out the background check). As such, the disclosure is supposed to contain the name and contact details of the CRA.
The third is the timing of the disclosures and authorizations. The options are in relation to the request for a background check. The first (and most obvious) is before requesting a background check. Under this option, employers have to get disclosures or authorizations before requesting a background check.
In a nutshell, disclosure and authorization is among the easiest FCRA guidelines to comply with. It is also one of the easiest to violate. The consequences of violation – as evidenced with the recent spate of FCRA class actions – can be quite severe. Therefore, every employer needs to make sure that they are in compliance.
The best part is that compliance is quite simple.