Hiring Decisions Can Be Costly In More Than One Way
Two companies recently were fined a total of $77,000 by the Federal Trade Commission for failing to follow the disclosure requirements of the Fair Credit Reporting Act (FCRA) when making employment decisions about job applicants and employees based on background checks.
Employers may use consumer reports, such as credit reports, criminal histories, and driving records, in making decisions about employee hiring and job retention, however, under the FCRA, before taking an adverse action against an employee or job applicant, an employer must provide the employee or applicant with copies of the report upon which the employment decision is based and a "Summary of Consumer Rights Under the FCRA," a document prescribed by the Federal Trade Commission. Furthermore, if an adverse action is to be taken, the employer must notify the applicant or employee of such action and include with this notice:
The name, address, and telephone number of the credit reporting agency that supplied the report;
A statement that the credit reporting agency that supplied the report did not decide to take the adverse action and cannot give specific reasons for it; and
A notice of the individual's right to dispute the accuracy or completeness of any information the agency furnished, and his or her right to an additional free consumer report from the agency upon request within 60 days.
In this particular case, Quality Terminal Services, LLC and Rail Terminal Services, LLC contracted with a credit reporting agency to conduct background checks, which included a review of criminal records for employees and job applicants. The companies then made employment decisions based on those reports without ever complying with the before and after disclosure requirements. They received civil penalties of $53,000 and $24,000 respectively.
In today's environment few prospective employees and some employers are not aware of the requirement for disclosure under FCRA. These recent fines should serve to alert those involved in employment to be mindful of the credit reporting laws which govern. this area.
Employers may use consumer reports, such as credit reports, criminal histories, and driving records, in making decisions about employee hiring and job retention, however, under the FCRA, before taking an adverse action against an employee or job applicant, an employer must provide the employee or applicant with copies of the report upon which the employment decision is based and a "Summary of Consumer Rights Under the FCRA," a document prescribed by the Federal Trade Commission. Furthermore, if an adverse action is to be taken, the employer must notify the applicant or employee of such action and include with this notice:
The name, address, and telephone number of the credit reporting agency that supplied the report;
A statement that the credit reporting agency that supplied the report did not decide to take the adverse action and cannot give specific reasons for it; and
A notice of the individual's right to dispute the accuracy or completeness of any information the agency furnished, and his or her right to an additional free consumer report from the agency upon request within 60 days.
In this particular case, Quality Terminal Services, LLC and Rail Terminal Services, LLC contracted with a credit reporting agency to conduct background checks, which included a review of criminal records for employees and job applicants. The companies then made employment decisions based on those reports without ever complying with the before and after disclosure requirements. They received civil penalties of $53,000 and $24,000 respectively.
In today's environment few prospective employees and some employers are not aware of the requirement for disclosure under FCRA. These recent fines should serve to alert those involved in employment to be mindful of the credit reporting laws which govern. this area.
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