What Every Texas Employer Should Know About Their Duties Under FCRA

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Many Austin employers choose to conduct background investigations on potential job applicants. These investigations must be conducted in accordance with the Fair Credit Reporting Act (FCRA), which was created to promote fairness and accuracy in credit reporting. Under the FCRA, the definition of a credit report is very broad, and includes even a spoken report of information that does not necessarily reference credit. Both employers and the investigators they use for background checks have responsibilities under the FCRA regarding proper assimilation, evaluation, and use of information relating to potential employees. If the investigator gathers and provides information that serves as a factor in determining eligibility for employment and includes information relating to credit, character, general reputation, personal characteristics, or mode of living, duties arise for the employer in their use of this information. 15 U.S.C. § 1681a(d)(1).

Both the investigator and the employer have duties under the FCRA that include ensuring that the employee has consented in writing to a background check. They each must also make sure that the employee receives a copy of the resulting report, as well as a document outlining the employee’s rights under the FCRA if the employee is denied employment based upon the contents of the report. A background investigator or employer who does not act in accordance with the FCRA faces legal liability for non-compliance.

Employers must vet investigators carefully.

Employers should carefully vet potential background investigators to ensure that the investigator is aware of their duties under the FCRA. Ask questions and be wary of investigators who do not know their reporting duties off-hand. There are statutory penalties for both investigators and employers who fail to conduct investigations and pre-employment screenings in compliance with the law. An employer who obtains a consumer report on someone under false pretenses or for an impermissible purpose could be liable for the greater of actual damages or $1,000. And, an investigator must not include inaccurate information in their report, fail to conduct a reasonable investigation into disputed information, or otherwise willfully fail to comply with the requirements of the FCRA, or they, too, will face civil penalties.

If a background investigator is sued under the FCRA for negligence, they may be able to avoid liability for an inaccurate report by showing that they maintained and followed reasonable procedures to ensure correct information, even though the resulting report did ultimately contain inaccurate information. “Reasonableness” is a jury question in most cases. Guimond v. Trans Union Credit Inf. Co., 45 F.3d 1329, 1333 (9th Cir. 1995) ("The reasonableness of the procedures and whether the agency followed them will be jury questions in the overwhelming majority of cases.")

Both the employer and the background investigator must ensure that the subject of an investigation or report receives certain notices and information.

The FCRA allows an investigator to provide a consumer report to a client for employment purposes only if certain conditions are met. It’s the employer’s duty to provide a clear and conspicuous disclosure in writing to the employee prior to ordering the report, and to obtain the employee’s authorization in writing. However, if an employer fails to do this and the investigator fails to confirm it, the investigator also faces liability.

A background investigator must provide certain notices and information to the employer.

The FCRA requires an investigator to provide their client, which in this situation will be the employer, with certain notices and information regarding the employer’s own duties under the FCRA. According to the Federal Trade Commission, investigators should provide every client with a copy of the Notice to Users of Consumer Reports, which informs the clients of their responsibilities under the FCRA, as well as a copy of A Summary of Your Rights Under the Fair Credit Reporting Act, which contains a summary of consumer rights. Make sure that any investigator you hire has provided you with the proper notices of your rights and duties.

 

Cite this article: Lynch, N. (2017). Pre-Employment Background Investigations: What Every Employer Should Know About Their Duties Under FCRA. Available: https://www.lynchlf.com/blog/what-every-texas-employer-should-know-about-their-duties-under-fcra/


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