If you don t love your current background screening partner, call me! Toll free: or me at coffey@imperativeinfo.com.

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3 I m not a lawyer and I m especially not YOUR lawyer! Really, work with your lawyer and your background screening company to make sure that you are compliant with all the state and federal requirements surrounding background checks. If you don t love your current background screening partner, call me! Toll free: or me at coffey@imperativeinfo.com.

4 The FCRA was enacted in 1970 and was primarily focused on credit reporting. Over the years, Congress, regulators, and courts have come to include non-credit-related items procured by employers. The FCRA was significantly amended in 1996, 2003, and The FCRA covers all employment-related background checks (called consumer reports) purchased by employers from background screening firms (called consumer reporting agencies) not just those involving credit. Information collected directly by an employer (such as reference calls directly to previous employers) does not constitute a consumer report. 4

5 School bus contractor First Student and sister company First Transit, both operated by FirstGroup North America, recently settled a class action suit brought by applicants and employees on whom the company ran background checks without first obtaining the FCRA-required authorizations. The $5.9 million settlement included payouts even for applicants or employees against whom the company took no adverse employment action. Cincinnati-based FirstGroup also owns the Greyhound Bus Company, which was not involved in these lawsuits. 5

6 Domino s Pizza settled a federal class action suit from applicants and employees who claim that Domino s disclosure document did not comply with the FCRA. In an order denying Domino s Motion for Dismissal, the court stated that Domino s inclusion of a release of liability statement on the disclosure form was likely out of compliance with the FCRA. The settlement is for $2.5 million. Other recent settlements include: Kmart - $3 million Talecris - $130,000 US Xpress $2.75 million 6

7 603(d) Consumer Report defined In the employment context, this would be an applicant or current employee. 7

8 603(d) Consumer Report defined In addition to background screening companies like Imperative Information Group and credit bureaus, this definition would include HR consultants who check references on behalf of employers, privatelymaintained online criminal records database companies, employment verification services like The Work Number, and education verification companies such as The National Student Clearinghouse. 8

9 603(d) Consumer Report defined In other words, a background check, a criminal history check, employment verification, education verification, driving record, etc. constitutes a consumer report when the employer gets the information from a source other than the original source of the information. 9

10 603(h) Employment purposes defined The Federal Trade Commission has defined this very broadly to include contract or 1099 employees, agents, and volunteers. I agree with them except for volunteers. There is no litigation history on this and it seems a stretch to consider volunteers as employees. At the same time, the cost of compliance may be minor in comparison to the risk of a lawsuit from a volunteer. 10

11 603(e) Investigative Consumer Report defined The key word is interview. When the CRA is simply verifying employment dates, title, salary, eligibility for rehire, and other black and white information from previous employers, the information constitutes a consumer report. However, as soon as the CRA asks about whether the individual would be recommended for hire or inquires about his attendance, work behaviors or skill sets, interpersonal relationships, or other information, that inquiry has crossed over to an investigative consumer report. For employers, the primary issue is that this distinction affects the information disclosed to the consumer prior to requesting the consumer report. 11

12 603(d)(2) Exclusions ("transactions or experiences") In other words, when the prospective employer calls previous employers or schools, the info is not a consumer report. When the background screening company calls or the information comes through any third party (The Work Number or National Student Clearinghouse, for instance), then it is a consumer report. When the consumer calls the background screening company, any report to the employer of the conversation with the consumer is not a consumer report. 12

13 603 (y) Exclusion of Certain Communications for Employee Investigations 13

14 603 (y) Exclusion of Certain Communications for Employee Investigations 14

15 604. Permissible purposes of consumer reports 604. (b) (1) Certification from user (f) Certain use or obtaining of information prohibited. These certifications are normally included in the agreement with the CRA. 15

16 606. Disclosure of investigative consumer reports These certifications are normally included in the agreement with the CRA. 16

17 The disclosure must be made on a separate page used exclusively for that purpose. The applicant/employee must also given written authorization. There is specific language necessary for the disclosure and authorization. 17

18 604(b)(2) Disclosure to Consumer for Employment 18

19 606 Disclosure of investigative consumer reports These certifications are normally included in the agreement with the CRA. 19

20 606 Disclosure of investigative consumer reports These certifications are normally included in the agreement with the CRA. 20

21 606 Disclosure of investigative consumer reports Some employers have decided to err on the side of caution and provide the 3-page Summary of Your Rights Under the Fair Credit Reporting Act to all applicants. Many employers, and Imperative s model language, instead simply include language informing the consumer of his right to request both the 21

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23 604(b)(2) Disclosure to (and Authorization from) Consumer for Employment 23

24 The disclosure must be made on a separate page used exclusively for that purpose. The applicant/employee must also given written authorization. There is specific language necessary for the disclosure and authorization. 24

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26 604(b)(3) Conditions on use for adverse actions. [pre-adverse action] The pre-adverse action information includes a copy of the report and the consumer s rights under the FCRA, which are laid out in a document prescribed by the Consumer Financial Protection Bureau. Though not strictly required, Imperative Information Group encourages clients to also provide the applicant/employee with information on how to contact us in order to discuss their report. Under the FCRA, we have 30 days to investigate any consumer disputes of our information but we normally finish the disputes in a matter of hours. The majority of calls we get from consumers are along the lines of my lawyer said this wasn t going to be on my record, which usually aren t really disputes of the accuracy of the information. 26

27 CRAs have 30 days to reinvestigate any disputed information. If the disputed information cannot be verified as accurate, the CRA must remove it from the report. Good CRAs resolve most disputes in hours whenever possible. Great CRAs have extremely few disputes. There is no requirement that the employer forestall the adverse action decision until the reinvestigation is completed. However, we recommend that if a change in the information would result in a different employment decision, employers should consider waiting for the completion of the reinvestigation rather than risk missing an opportunity to hire a qualified applicant. 27

28 This information includes the action taken and the contact information for the consumer reporting agency (background screening firm) Requirements on users of consumer reports (includes CFPA changes re: credit score; also post-adverse action req) 28

29 This information includes the action taken and the contact information for the consumer reporting agency (background screening firm) Requirements on users of consumer reports (includes CFPA changes re: credit score; also post-adverse action req) 29

30 For more information about employers responsibilities under the the Fair Credit Reporting Act, sign up for our The Fair Credit Reporting Act s Requirements for Employers webinar at 30

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33 Several states have consumer reporting laws that limit what can be included in a consumer report. However, several states laws were prempted by FACTA in

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35 The key phrase in the new Massachusetts law seems to be initial written application. It appears to allow employers to make this inquiry later in the selection process but only after conducting an interview. 35

36 This slide just makes me giggle. 36

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38 At least ten states (Illinois, Oregon, Washington, Connecticut, Hawaii, Colorado, California, Maryland, Nevada, and Vermont) restrict the use of credit reports in making employment decisions. Some of these restrictions simply require that the review be job related while others prohibit or delay until late in the hiring process the use of credit reports. The use of credit reports as a predictor of theft or dishonesty has not be validated. In fact, the few studies on the topic suggest that there is no correlation between poor credit and dishonesty or poor job performance. Imperative recommends that credit reports be limited to roles where an individual will be making financial decisions on behalf of the employer or clients, using the credit report as a means of measuring how they manage their own business as a predictor of how they will manage the employer s business. 38

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