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Warning to Employers: [Get Your Background Checks In Order]

January 10, 2018


January 10, 2018

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Employers have always lived under the threat of litigation when using background checks for screening applicants. This is nothing new. What is new is that, over the last few years, a particular aspect of using background checks has become a leading source of class action lawsuits. This aspect his the disclosure and authorization of background checks.

The number of employers sued over the violation of disclosure and authorization guidelines has skyrocketed over the last few years. Some of the companies have already parted with millions of dollars to settle the lawsuits. Others are still tussling it out in court.

The worrying thing for employers is that courts don’t seem to have a proper position on these violations. A case in point is, at the end of January 2017, when two courts reached two opposite verdicts as what injury is required if a plaintiff is to have a proper legal standing in these cases. Such rulings, of course, leave employers in a quagmire: what should an employer do in order to avoid falling victim to such litigation?

Well, the first step is to understand what the law actually says. The legislation which governs the use of background checks in making employment decisions is the Fair Credit Reporting Act (FCRA). Among the core guidelines of the FCRA is what it terms as “authorization and disclosures”.

In summary, the FCRA spells out three conditions which must be met before an employer’s background checks can be termed to fully comply with its guidance on authorization and disclosures:

  1. An employer is barred from undertaking any background checks until the applicant or employee has been informed of the intention to carry out the background check
  2. The applicant or employee should be informed in writing and should assent by signing a document authorizing the employer to undertake the background check
  3. The authorization and disclosure forms should be given as a “stand-alone document” i.e. not embedded within other documents e.g. application forms.

On the surface, this seems clear enough. However, over the last few years, numerous employers have tripped over this guideline. Whether knowingly or unknowingly, they have violated the guidelines and ended up in court (often having to pay millions in settlements). There are two major mistakes which have tripped employers.

Liability Waivers

The first is forcing applicants or employees to sign liability waivers as part of the disclosure and authorization forms. In this respect, an employer would basically make an applicant to sign a document protecting the employer from any legal liability arising from the background checks process.

According to the FCRA, this in itself is a violation. The reason for this is that the Act guarantees applicants some rights – among these, the right to seek legal redress in situations where their background checks information has been improperly used. So, including a waiver is a direct contravention of the applicant’s rights.

A number of employers have faced class action lawsuits for including waivers among their disclosure and consent forms. The most prominent ones sued over the last few years are Whole Food Mkt. Gp. Inc (aka Whole Foods), Dollar Tree Stores Inc, and Uber Technologies Inc.

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Whole Foods actually ended up paying $803,000 to settle the class lawsuit arising from the inclusion of a waiver among the consent forms.

Stand Alone Forms

The second cause of disclosure and authorization lawsuits is the “stand-alone” requirement stipulated in the FCRA. The law explicitly states that background check consent forms should be stand-alone documents. In other words, they shouldn’t be embedded within other documents to the point of them being indistinguishable.

The purpose of the stand-alone requirement is to avoid crafty employers from tricking applicants into consenting for background checks by fusing them with other documents e.g. application forms. Basically, an applicant should be able to clearly tell that they are consenting to background checks.

A number of employers have already been sued over failing to provide stand-alone disclosure and authorization forms. In 2014, Publix Supermarkets paid $6.8 million to settle an FCRA class action lawsuit brought over failing to provide stand-alone disclosures.

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In 2014, Publix Supermarkets paid $6.8 million to settle an FCRA class action lawsuit brought over failing to provide stand-alone disclosures.

And as recently as January 20, 2017, the Ninth Circuit denied the defendant’s motion to a class action alleging a violation of the FCRA stand-alone disclosure requirement against M-I, LLC.

The sticking point for employers as regards the stand-alone requirement arises for online applications. For print documents, the idea of a stand-alone document is clear enough. But what about online applications? What counts as a stand-alone document?

Unfortunately, the FCRA does not explicitly articulate this issues. In fact, web-pages aren’t even mentioned in the disclosure and authorization requirements. However, the broad consensus among legal experts is that “stand-alone” in the context of a webpage means “separate from other web content”. This means that the disclosure and authorization forms should either be on their own webpage, or on a visibly separate part of a webpage.

Take Home for Employers

The take home for employers is that, when it comes to background checks, the issue of authorization and disclosure is a potential legal tripwire. The potential for violating the legal requirements is quite high. As such, employers need to take measures to avoid such violations. Here are a few tips employers can use:

    1. Never conduct a background check before getting consent from applicants or employees
    2. Ensure that all disclosure and authorization forms are issued as stand-alone documents
    3. Never include any waiver together with the background check consent forms
    4. For online applications, always include the disclosure and authorization forms in their own separate webpage.
    5. Always consult a lawyer who specializes in employment law to vet your background checking processes for legal compliance.

The last piece of advice is perhaps the most important of all. An attorney who specializes in labor and employment law is the one who is best placed to offer an employer the best advice on compliance with background checks laws.

In fact, when it comes to background check compliance, the smartest option is to consult an experienced attorney. Therefore, if you are an employer who is determined to avoid violating FCRA disclosure and authorization requirements, you need to find an attorney who can advise you on how to best comply.


The contents of this article are intended for information and education purposes only. They do not constitute legal advice. The author does not in any way or form assume to offer legal advice, counsel or guidance of any sort. For a more informed application of any laws or statutes cited, as well as legal advice on the issues raised, the reader is advised to consult a lawyer or any other legal expert.

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