An Indiana company is facing a federal class-action lawsuit for failing to comply with a complex law related to hiring. Yet they could have avoided that lawsuit by following three remarkably simple steps. How do you keep your company from being the next target?
The law is the Fair Credit Reporting Act, but the lawsuit has nothing to do with granting credit. It’s all about how the company used background screening to make a decision about a candidate for employment.
The case involved an applicant for a home healthcare company. As anyone who has hired someone to provide care for a loved one would hope, the company is diligent about performing background checks on its potential employees. This applicant’s background check revealed multiple felonies, so the company refused to hire her.
Two problems. First, the applicant insists that the felonies never happened and that the background screening company made a mistake. Second, the home healthcare company failed to follow the three simple steps prescribed by the FCRA. Had they done so, they probably wouldn’t be preparing for litigation.
Step one is to provide a disclosure to applicants that your hiring decision may be based on a background check (and this must be separate from any other disclosures or forms). If the background check reveals something that would lead you to not hire the applicant, step two is to send them what’s known as a pre-adverse action letter, a copy of the background screening report, and a summary of their rights — including an opportunity to dispute any of the information in the report. After at least five days, you can take step three, which is to send the "adverse action letter" telling the applicant you’re not hiring them.
Had the home healthcare company followed this process, the applicant would have been made aware of the negative information in the background check. She then could have disputed it. If it turned out that the criminal information was incorrect, the company probably would have hired her. Had the information been accurate, they could have rejected her without worry of a legal action under the FCRA.
If your company is using background screenings as part of the employment process, you need to pay attention to cases like this — more and more of which are being filed nationwide — and make sure you’re taking the right steps. Why? Because the proverbial sharks are circling and they’re hungry.
When I started my company 14 years ago, we struggled to find attorneys who had a solid grasp of the FCRA from the employer’s perspective. We knew the law contained potential landmines, and we wanted to protect ourselves and our clients. Today, though, you can find plenty of FCRA-savvy law firms. Only problem is that they’re on the other side, looking for employers to sue. Refuse to hire someone without going through these steps, and in a few minutes of Google time, that person can find dozens of law firms that will be only too happy to handle his or her case. And while you might prevail, if you scan recent cases, you’ll see plenty of reasons to be pessimistic.
Do background screenings sometimes find incorrect information? Absolutely. In fact, it happens fairly frequently. Some background screening firms, particularly the ones that advertise low prices, simply pass the faulty information along to the employer. That means the employer is making a decision based on bad information.
Reputable background screening firms take a deeper look. For example, if we find criminal information on our initial search, we look deeper. We’ll actually verify the information with local, state, and federal courts. If we discover that something is wrong with the data, we’ll contact the applicant and guide them through the process of correcting it. We have an ethical obligation to protect our clients, but we feel that protecting the rights of the individuals we research is every bit as important.
A reputable background screening company should also help you comply with FCRA and other legal requirements. The software our clients access automatically reminds them of the steps and timing, and generates documents when needed.
As an interested observer, I watch cases like this very closely, and they frustrate me. I’m not frustrated because of the regulations, but because running afoul of those rules is so easy to avoid. Are you completely confident that your company isn’t making the same mistakes?
Mike McCarty is CEO of Danville-based Safe Hiring Solutions.