Fair Credit Reporting Act Protects Employees from Bogus Background Checks

Background checks by employers under the Fair Credit Reporting Act or FCRA

Background Reports are Commonly Used, and Commonly Wrong

Half of all employers now use background reports to help make hiring decisions.  These computer-generated reports are cheap and instantly available.  But they’re often riddled with errors, and cost many applicants a job.  One study found 79% of reports from one company contained at least one error serious enough to disqualify an applicant.

Employees are fighting back, fueling a sharp rise in lawsuits under a powerful federal law – the Fair Credit Reporting Act, or FCRA – against employers who use reports to reject applicants. It isn’t limited to credit reports.  Most any background report is covered, including those containing arrest, employment, loan, social media and reference histories.  The FCRA is a fierce weapon against erroneous reports.  It allows the recovery of unlimited actual losses, punitive damages, and attorneys’ fees.

Errors are common.  Data brokers slap together information bought from thousands of sources: financial-services companies, utilities, retail stores and public records. (You consented to the sale of this information in all that fine print you laughed about.)  Their software then links you to specific data  (e.g., “If rules X and Y are met, then the information is about Michael M. Smith of Jacksonville, Florida”).  It’s a matching game.  If you match enough criteria, then you are that person, you worked at that place, you failed to repay those loans, and you committed those crimes.

Even Minor Similarities in Name Alone Can Result in Report Errors

But what every first-grader knows from Googling their own name is that tens of thousands of people in the US (a) have the same first, middle and last name, (b) have relatives with the same name as other peoples’ relatives – how many Robert Smiths have fathers, brothers or cousins also named William Smith? – and (c) live in the same areas as other who have the same name, do business at the same bank, have a VISA card,  and shop online at Amazon.com?  There are 28 “Robert Smiths” listed today as inmates of the Florida Department of Corrections.  Seven are named “Robert L. Smith.” (That could be a problem if Robert L. Smith the shoplifter gets confused with Robert L. Smith the death-row inmate.)  Variations in spellings – Catherine/Kathryn, Sherri/Sherry – increase the risk of errors.   Just ask Darlene T. Ramirez, who a report linked to felony drug convictions of Darlene Foster Ramirez.  They only share a first name.  Or Andrew Darnell Campbell, a Pennsylvania resident fired because a report tied him to crimes committed by an Andrew Campbell in Louisiana.  Both were born January 22, 1985Or Kathleen Ann Casey,rejected for work after a report included background information for a Kathleen A. Casey.  Almost any similarity can lead the software to mix and match backgrounds.  Some employees go months without work before realizing a bad report is to blame. 

The data brokers know they’re peddling junk.  Here’s the industry-standard language from one of the country’s biggest data brokers:

The records contained in our reports are compiled from various databases that may only be updated infrequently, and therefore, may not have the most current information. . . . .Our reports are not intended to serve as recommendations of whether to hire the individuals investigated. Our reports are submitted in strict confidence. . . . .We neither warrant, vouch for, or authenticate the reliability of the information contained herein that the records are accurately reported. . . . .We shall not be liable for any losses or injuries now or in the future resulting from or relating to the information provided herein.

The brokers couldn’t be clearer: they have absolutely no idea if anything they’re reporting is true.  Employers pay no attention to that; if they did, they wouldn’t use it.  Imagine putting this disclaimer on your resume. But if the report plants a seed of doubt about you, you’re done.  Hiring officials don’t have time to sort this out.  It’s why they use these reports –as a shortcut.

Powerful Rights Against Employers Who Don’t Follow Strict Rules About the Use of Reports 

Congress stepped in for this reason.

The FCRA requires employers who plan to get a report to tell you first, so you can consent or object.  If you consent, the employer must tell you if it plans to reject your application because of the report.  These notice requirements give you a say before bad information costs you a job.  Judging from the sharp rise in FCRA lawsuits, many employers are skipping these steps.  They’re not telling applicants they plan to get reports, are not telling them what they learn, and are not disclosing that they used something in the report to reject the applicant. These are all violations of the FCRA.

If you learn a background check is being done, ask about it. This can be done in a way that does not set off alarm bells for the prospective employer. If you don’t get hired, ask why, and ask if the company used a background report. If you’re not sure, ask a lawyer experienced in employment matters. There are telltale signs that a background report was used.

If a potential employer violated your rights under the FCRA, you can recover unlimited actual losses, including the income you would have earned if you had been hired.  You may be entitled to compensation for benefits you would have had, such as health insurance. And you can recover punitive damages, which is a form of damage intended to punish a wrongdoer. Those can be sizable. Finally, the company can be ordered to pay your attorney’s fees.

If you’ve been denied a job and know or suspect a background report is to blame, act swiftly.  The law is in your favor.


Categories: Background Checks, Credit Checks by Employers, Criminal History Checks by Employers, Fair Credit Report Act

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