THE NEW FAIR CREDIT REPORTING ACT

Transcription

1 THE NEW FAIR CREDIT REPORTING ACT ONE OF THE BEST KEPT SECRETS IN EMPLOYMENT LAW (AND IT APPLIES TO YOU!) uuuuu William S. Waldo PAUL, HASTINGS, JANOFSKY & WALKER LLP 555 South Flower Street, 23rd Floor Los Angeles, CA (213) THE LABOR LETTER 1

2 THE NEW FAIR CREDIT REPORTING ACT -- ONE OF THE BEST KEPT SECRETS IN EMPLOYMENT LAW (AND IT APPLIES TO YOU!) by William S. Waldo, Esq., George W. Abele, Esq. and Sabina L. Skulsky, Esq.* I. INTRODUCTION A. The Fair Credit Reporting Act ( FCRA or Act ), 15 U.S.C u (1982 & Supp. 1997), applies to the use of a consumer reporting agency to provide certain information regarding job applicants or current employees. The Act is employment law s best kept secret because, although its title implies that its application is limited to traditional credit reports, the Act defines its terms broadly. It also could apply to information not traditionally considered a credit report and to an individual or entity not traditionally considered a credit reporting agency. The title of the Act -- the Fair Credit Reporting Act -- thus can be misleading. B. When employers must comply: Employers must comply with the Act: 1. When they request certain information regarding individuals, such as criminal background information or credit history information. 2. When they use such reports to take an adverse action against that individual. C. Recent amendments: As part of the Omnibus Appropriations Act of 1997, Congress created new obligations for employers under the FCRA. These new amendments became effective on September 30, II. DEFINITIONS UNDER THE FCRA A. Person : any individual, partnership, corporation, trust, estate, cooperative, association, government, or government subdivision or agency, or other entity. 15 U.S.C. 1681a(b). B. Consumer : any individual. 15 U.S.C. 1681a(c). C. Consumer report : any written, oral or other communication of any in- * George Abele and Sabina Skulsky are associates with the law firm of Paul, Hastings, Janofsky & Walker LLP. THE LABOR LETTER 2

3 formation by a consumer reporting agency bearing on a consumer s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer s eligibility for... (2) employment purposes.... The term does not include (A) any report containing information solely as to transactions or experiences between the consumer and the person making the report U.S.C. 1681a(c) (emphasis added). 1. Includes criminal background reports: The FCRA applies to an employer s use of criminal background checks in all phases of the employment relationship. Although the legislative history of the Act does not specifically address its application to criminal background checks, the language of the Act implies that the drafters contemplated such an application, and courts have agreed. a. By definition: The definition of consumer report is not limited to a traditional credit report. A consumer report includes information on the individual s character, general reputation, and personal characteristics. Criminal background information most likely would fall within one or more of these categories. b. By other language in the Act: Language contained elsewhere in the Act directly addresses the use of criminal background information. The obsolete information provision of the Act protects against the use of stale information in a consumer report. A consumer reporting agency may not include [r]ecords of arrest, indictment, or conviction of crime which, from date of disposition, release, or parole, antedate the report by more than seven years. 15 U.S.C. 1681c(a)(5). 1/ c. Case law: Courts have found that criminal background checks are the proper subject of a claim under the Act. Wiggins v. District Cablevision, Inc., 853 F. Supp. 484, (D.D.C. 1994). An employer requested a criminal background check on a Mr. James Russell Wiggins. A consumer reporting agency obtained records from the superior court criminal records division that a Mr. James Ray Wiggins had a prior cocaine conviction. The plaintiff alleged that this misidentification and the defendant s failure to hire him constituted a violation under the Act. The court denied the defendant s motion to dismiss as to some of plaintiff s claims under the FCRA. 2. May include motor vehicle records: Many employers who employ THE LABOR LETTER 3

4 a professional driving force routinely request information regarding a job applicant s or a current employee s driving history. Many such employers obtain this information from non-governmental third party sources. Unlike criminal background checks, no authority exists as to whether the Act applies to an employer s request for motor vehicle reports from a consumer reporting agency. a. Definition appears to extend to motor vehicle records: For the Act to apply to motor vehicle reports, the motor vehicle report would have to be construed as a type of consumer report. The Act defines a consumer report as information provided by a consumer reporting agency which bears on an individual s personal characteristics, which could conceivably include information contained in a driving record. b. Employers must weigh cost of compliance with potential losses from violating the Act: As no authority exists on whether the Act applies to an employer s use of a consumer reporting agency to obtain a job applicant s or a current employee s driving record, no definitive statements can be made regarding the Act s application in this area. Employers must weigh the costs of conforming with the Act s procedural requirements with the potential losses from violating the Act. If the employer uses a consumer reporting agency to check driving histories as well as either criminal backgrounds and credit histories, the employer may find no added cost in complying with the Act s procedural obligations in this unsettled area of motor vehicle reports. 3. Exception: The Act does not apply to reports containing only information on transactions between the consumer and the person making the report. Hodge v. Texaco, Inc., 975 F.2d 1093, (5 th Cir. 1992). Testing laboratory s report to employer regarding drug test results performed on employee s urine was not covered by the Act, since it fell under the exclusion for transactions between the employee and the person making the report. Although the laboratory did not collect the urine sample, the report comprised its first-hand experience in testing the sample, not information gathered from outside sources. 4. Consumer report may be obtained on employees only. Zamora v. Valley Federal Sav. & Loan Ass n of Grand Junction, 811 F.2d 1368, 1370 (10 th Cir. 1987). Even where the intended purpose and actual use of a credit report on the spouse of an employee being considered for a security-sensitive position is to evaluate the employee s own trustworthiness for the employment position, the THE LABOR LETTER 4

5 employer still may not obtain a credit report on an employee s spouse. D. Investigative consumer report : a consumer report or portion thereof in which information on a consumer s character, general reputation, personal characteristics, or mode of living is obtained through personal interviews with neighbors, friends, or associates of the consumer reported on or with others with whom he is acquainted or who may have knowledge concerning any such items of information. However, such information shall not include specific factual information on a consumer s credit record obtained directly from a creditor of the consumer or from a consumer reporting agency when such information was obtained directly from a creditor of the consumer or from the consumer. 15 U.S.C. 1681a(e) (emphasis added). 1. Information obtained through interviews performed by outside agency: In investigative consumer reports, information is obtained through interviews with neighbors, friends, or associates of the current or potential employee, as opposed to traditional consumer reports where information is obtained from databases and other printed records. The common employer practice of checking references could constitute an investigative consumer report if the employer uses an outside agency to perform the reference check. 2. Act likely not to apply to reference checking performed by employer: If an employer personally checks references of job applicants or current employees, the Act likely would not apply. The Act only applies to the use of a consumer reporting agency. Employers may check references themselves, but potential problems could arise if an employer uses an outside agency to check references. If a consumer reporting agency is used to perform such a function, the employer should consider following the required procedures when requesting an investigative consumer report. (See Section III. B., below.) 3. Act does not apply unless investigation is actually done: If an investigation is requested but never performed, the Act is not activated. Kates v. Crocker National Bank, 776 F.2d 1396, 1398 (9 th Cir. 1985). Where a bank notified a customer that an investigation might be made, but the investigation was never actually performed, even though the bank failed to respond to the customer s written request for disclosure of the nature and scope of the investigation, the bank did not violate the Act. 4. Disclosure may be placed in the employee s application form. THE LABOR LETTER 5

6 Drury v. TNT Holland Motor Express, Inc., 885 F. Supp. 161, 165 (W.D. MI. 1994). Employer who informed employee, via his employment application, that it was going to perform an investigation of his background, complied with the requirement to clearly disclose that an investigative consumer report might be made. However, as the employer neglected to inform the employee of his right to request additional information about the investigation and to supply the name and address of the agency making the report, the disclosure was insufficient. E. Consumer reporting agency : any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purposes of furnishing consumer reports to third parties U.S.C. 1681a(f) (emphasis added). 1. Non-governmental agencies only: The Act does not apply to an employer s direct use of a governmental agency to obtain public records. Ollestad v. Kelley, 573 F.2d 1109, 1111 (9 th Cir. 1978). The Act does not apply to records held by federal agencies and does not provide a basis for compelling the Federal Bureau of Investigation to amend records containing allegedly false information about a former Bureau employee. Edmond v. U.S. Postal Service, 727 F. Supp. 7, 11, 1989 U.S. Dist. LEXIS Plaintiff was arrested and taken by postal inspectors to be fingerprinted and photographed, and one postal inspector obtained a copy of Plaintiff s credit report without notice or consent. The court held that the Act did apply where the federal agent is the user of the information who receives, but does not release, the report. 2. May include individuals: As the Act defines a consumer reporting agency as a person, the Act conceivably could apply to an employer s use of any private outside agent regardless of the size of the agency. Even an individual could be construed as a consumer reporting agency. 3. Must regularly engage in practice of assembling or evaluating information: An agency under the Act must regularly assemble or evaluate consumer information, rather than doing so on a one-time or rare basis. Hodge v. Texaco, 975 F.2d at A drug rehabilitation counselor who prepared a report for an employer on the results of a drug test on the employee as part of a one-time referral was not a consumer THE LABOR LETTER 6

7 reporting agency under the Act. 4. Must actually distribute consumer reports: An agency under the Act cannot merely assemble information; it must actually furnish consumer reports to third parties. Williams v. Amity Bank, 703 F. Supp. 223, 226 (D. Conn. 1988). A bank that did not furnish reports containing consumer information to third parties was not a consumer reporting agency under the Act. F. Employment purposes : evaluating a consumer for employment, promotion, reassignment, or retention as an employee. 15 U.S.C. 1681a(h) (emphasis added). Comeaux v. Brown & Williamson Tobacco Co., 915 F.2d 1264, 1274 (9 th Cir. 1990). Where the employer leads the agency to believe, either through direct statement or through omission, that the report is to be used for an employment purpose, the report is a consumer report under the Act, regardless of the ultimate purpose for which the report is actually used. III. EMPLOYER S DUTIES UNDER THE FCRA -- THE REASONABLE PROCEDURES DEFENSE A. Obligations for users of consumer reports: Employers may avoid liability under the Act by adopting the reasonable procedures outlined in the Act for the users of consumer reports. The Act provides: No person shall be held liable for any violation of this section if he shows by a preponderance of the evidence that at the time of the alleged violation he maintained reasonable procedures to assure compliance with the provisions of this section. 15 U.S.C. 1681m. This reasonable procedures defense could immunize the user of information contained in a consumer report from liability, if the following procedures are adopted: 1. Provide clear, conspicuous written disclosure to employee: The employer must provide a clear and conspicuous disclosure in writing to the consumer at any time before the report is procured or caused to be procured, that a consumer report may be obtained for employment purposes. The disclosure should be set forth in a document that is separate from the consent form and that consists solely of the disclosure. 15 U.S.C. 1681b(b)(2)(A). 2/ 2. Obtain prior written authorization from employee: Second, the THE LABOR LETTER 7

8 employer must get prior authorization in writing from the current or potential employee to procure the report. 15 U.S.C. 1681b(b)(2)(B). 3/ 3. Provide certification of compliance to agency: Third, before obtaining the report, the employer must certify to the consumer reporting agency that the above steps have been followed, that the information being obtained will not be used in violation of any federal or state equal opportunity law or regulation, and that, if any adverse action is taken based on the consumer report, a copy of the report and a summary of the consumer s rights will be provided to the consumer. 15 U.S.C. 1681b(b)(1). 4/ 4. Provide written explanation to employee: Fourth, before using the report to take any adverse action (decisions regarding the employment, promotion, reassignment, or retention of an employee) against a current or potential employee, the employer must provide to that employee: a. A copy of the report; and b. A description in writing of the individual s rights under the FCRA. 6/ 15 U.S.C. 1681b(b)(3)(A) & (B). The Act requires that the above information be provided before using the report to make an adverse employment decision. Conceptually, this implies that the above information should be provided to the applicant or employee before a final decision regarding the adverse employment action is made, giving the employee a chance to explain any information contained in the report. The Act imposes no obligations on an employer to actually consider any explanations in the ultimate employment decision. 5. Provide written explanation to employee: Fifth, if a user of a consumer report decides to take an adverse action based on information contained in the consumer report, the user must provide: a. Oral, written, or electronic notice of the adverse action to the consumer; b. The name, address, and telephone number of the consumer reporting agency (including a toll-free number, if the consumer reporting agency is a nationwide consumer reporting agency) that provided the report; Carroll v. Exxon Co., 434 F. Supp. 557, 560 (E.D. La. 1977). THE LABOR LETTER 8

9 The employer must disclose the name and address of the agency contemporaneously upon notification of the adverse action. Here, where the defendant maintained a procedure whereby it furnished specific reasons for denial of credit to an applicant only upon receipt of request for such information, this failed to meet the requirements of the reasonable procedures defense: There is no requirement in the FCRA that the consumer first request the name of such agency before disclosure by a user need be made. c. A statement that the consumer reporting agency did not take the adverse action and is not able to explain why the decision was made; d. A statement setting forth the consumer s rights to obtain free disclosure of the consumer s file from the consumer reporting agency if the consumer requests the report within sixty (60) days; and e. A statement setting forth the consumer s right to dispute directly with the consumer reporting agency the accuracy or completeness of any information provided by the consumer reporting agency. 15 U.S.C. 1681m(a). 6/ 6. Guidance on when written explanation is needed: The fourth and fifth steps need only be performed if the employer s adverse action is at least partially due to information provided by the consumer reporting agency. If an adverse action is taken and the consumer report did not influence the employment decision, the employer does not have to provide the information required by these steps. However, the employer must ensure that it gives the employee no reason to believe that the consumer report influenced the decision. It cannot rely on the defense that the decision was not based on the information in the report if its actions suggest that the decision was influenced by the report. Carroll v. Exxon Co., 434 F. Supp. at 559. The defendant could not rely on a defense that its denial of credit to the consumer was not based on the consumer report, where it sent a letter to the consumer stating that a credit bureau that it contacted could furnish little or no information on the consumer s credit: Reliance upon such a defense is tenuous, at best. A mere cursory reading of [defendant s] undated letter to the plaintiff reveals that the credit denial was, in fact, based on the report. B. Obligations for users of investigative consumer reports : If the THE LABOR LETTER 9

10 employer s actions did constitute procuring an investigative consumer report, the employer would have to perform certain additional obligations. 15 U.S.C. 1681d. To avoid liability, an employer must show by a preponderance of the evidence that at the time of the violation it maintained reasonable procedures to assure compliance with this subsection. 15 U.S.C. 1681d(c). 7/ 1. Provide written disclosure and statement of rights to employee: First, the employer must disclose to the potential or current employee that an investigative consumer report may be obtained. This must be done in a written disclosure that is mailed, or otherwise delivered, to the consumer not later than three days after the date on which the report was first requested. The disclosure may be in the employee s application form. The disclosure must include a statement informing the consumer of their right to request additional disclosures of the nature and scope of the investigation, and must include a Summary of Rights promulgated by the Federal Trade Commission. 15 U.S.C. 1681d(a)(1). 2. Provide certification to agency: Second, the employer must certify to the consumer reporting agency that the above disclosures have been made to the potential or current employee. 15 U.S.C. 1681d(a)(2). 3. Provide complete disclosure to employee upon written request: Finally, upon the written request of the potential or current employee made within a reasonable period of time of the required written disclosures, the employer must make a complete disclosure of the nature and scope of the investigation that was requested. This information must be made in a written statement that is mailed, or otherwise delivered, to the potential or current employee no later than five days after the date on which the request was received from the potential or current employee or the report was first requested, whichever is later in time. 15 U.S.C. 1681d(b). C. Additional safety catch obligations: Simply adopting the above procedures may not fully insulate the employer from liability under the Act. At a minimum, the employer also must implement a mechanism to prevent failures by its agents to follow the procedures. 1. Truth in Lending Act provides guidance as to safety catch: The reasonable procedures defense is similar to the defense provided to creditors under the Truth in Lending Act, 15 U.S.C. 1640(c) (1982 & Supp. 1997). Carroll v. Exxon Company, U.S.A., 434 F. Supp. at 560. The court noted that the FCRA is a subdivision of the Truth in Lending Act, which provides that a creditor is not liable for bona fide errors if it THE LABOR LETTER 10

11 can show maintenance of procedures reasonably adapted to avoid any such errors. 2. Safety catch requires re-checking: Maintaining procedures designed to comply is not enough; employers must also institute checking mechanisms. Carroll v. Exxon Company, U.S.A., 434 F. Supp. at 560. The court found willful noncompliance with the FCRA and granted summary judgment for the plaintiff on her FCRA claim, where the defendant would not furnish its reasons for an adverse decision to an applicant unless the latter requested this information. Despite the defendant s asserted reasonable procedures defense, the court found that defendant has produced no evidence to show that its compliance procedures, although probably designed to provide the proper information, contained any type of preventative mechanism for catching errors. Mirabal v. General Motors Acceptance Corp., 537 F.2d 871, (7 th Cir. 1976). Plaintiffs financed a car through defendant, who understated the percentage rate on the transaction and then attempted to collect the amount understated. The court found that the defendant, under the Truth in Lending Act, had to prove that (1) the error was bona fide, i.e. unintentional and in good faith; (2) procedures were maintained to provide proper disclosure and (3) rechecking mechanisms were instituted to prevent errors which might slip through procedures aimed at good faith compliance. Where defendant did maintain procedures to correctly calculate the figures but did not show that these procedures were maintained consistently or show a preventative mechanism for catching disclosure errors, it was liable for the inaccurate disclosure. 3. No requirement for employers to reinvestigate facts: The checking required of employers does not include a duty to reinvestigate the facts and figures in the consumer report; employers checking duty applies to the reasonable procedures outlined in Parts A and B above. Wiggins v. District Cablevision, Inc., 853 F. Supp. at 492. It is the consumer reporting agency, not the employer, who bears the duty under 15 U.S.C. 1681i to reinvestigate the facts provided in a consumer report in cases of disputed accuracy. D. State laws left intact: Employers should note that the FCRA amendments leave intact all state laws imposing greater restrictions. For example, California law requires that the written notice provided to employees before a report is requested include the source of the report and contain a box that the employee or applicant may check off to receive a free copy of the report. If the employee or applicant does check this box, the employer must request THE LABOR LETTER 11

12 that a copy be provided to that individual when the employer requests its own copy from the consumer reporting agency. Cal. Civ. Code (a). 8/ IV. CONSUMER REPORTS CONTAINING MEDICAL INFORMATION A. Special requirements under new amendment to Act: If the employer seeks medical information in a consumer report, the employer now has special obligations. B. Employee must explicitly consent to release: A consumer reporting agency may no longer provide consumer reports that contain medical information for employment purposes unless the current or potential employee explicitly consents to the release of the medical information in addition to authorizing the obtaining of a consumer report generally. 15 U.S.C. 1681b(g). V. PENALTIES UNDER THE FCRA A. Civil liability: The Act contains two provisions imposing civil liability for violations. 1. Willful noncompliance: Section 1681n of the Act provides that, for a willful violation, a plaintiff potentially could recover nominal damages (up to one thousand dollars if no actual damages exist), actual damages, punitive damages, and attorney s fees and costs: a. In general: Any person who willfully fails to comply with any requirement imposed under this subchapter with respect to any consumer is liable to that consumer in an amount equal to the sum of -- (1) (A) any actual damages sustained by the consumer as a result of the failure or damages of not less than $100 and not more than $1,000. (B) in the case of liability of a natural person for obtaining a consumer report under false pretenses or knowingly without a permissible purpose, actual damages sustained by the consumer as a result of the failure or $1,000, whichever is greater, and (2) such amount of punitive damages as the court may allow; and (3) in the case of any successful action to enforce any li- THE LABOR LETTER 12

13 ability under this section, the costs of the action together with reasonable attorney s fees as determined by the court. Carroll v. Exxon Co., 434 F. Supp. at 561. Where the employer would not provide its reasons for denying credit without the applicant first specifically requesting such information, and the employer failed to identify the consumer reporting agency in its letter to the plaintiff denying her credit application, the employer was willfully noncompliant with Section 1681n. Wiggins v. District Cablevision, Inc., 853 F. Supp. at 490 (citation omitted). Where the employer fired the plaintiff based on information in the consumer report and made no disclosure of the name and address of the consumer reporting agency, the court denied the employer s motion to dismiss, and held that willfulness did not require a showing of malice or evil motive, but did require a showing of knowingly and intentionally committing an act in conscious disregard for the rights of others. 2. Negligent noncompliance: Section 1681o of the Act provides that, for a negligent violation of the Act, a plaintiff potentially could recover actual damages and attorney s fees and costs: a. In general: Any person who is negligent in failing to comply with any requirement imposed under this subchapter with respect to any consumer is liable to that consumer in an amount equal to the sum of -- (1) any actual damages sustained by the consumer as a result of the failure; (2) in the case of any successful action to enforce any liability under this section, the costs of the action together with reasonable attorney s fees as determined by the court. Actual damages could include many elements including outof-pocket expenses, back pay, front pay, future damages, or mental distress. B. Criminal liability: The Act also imposes criminal liability on any person who knowingly and wilfully obtains information on a consumer from a consumer reporting agency under false pretenses. 15 U.S.C. 1681q. 1. Punishable by fine: Such knowing and willful procurement of information under false pretenses is punishable by a fine under Title 18 of the United States Code, imprisonment for not more than two THE LABOR LETTER 13

14 years, or both. Id. 2. Must have legitimate employment purpose to avoid liability: False pretenses are generally determined by whether the consumer report was obtained for a permissible purpose as defined under 15 U.S.C. 1681b. An employment purpose is generally considered a permissible purpose for obtaining a consumer report. However, if the information in the consumer report was used in violation of any applicable federal or state equal employment opportunity law or regulation, the criminal penalties section conceivably could apply. THE LABOR LETTER 14

15 ENDNOTES 1 This provision does not apply to any consumer report to be used in connection with the employment of any individual at an annual salary which equals, or which may reasonably be expected to equal $75,000 or more. 15 U.S.C. 1681c(b)(3). Therefore, a consumer reporting agency may include only recent criminal history for an employment decision regarding lower- paying positions. 2 Proposed disclosure forms for requesting either a consumer report or both a consumer report and an investigative consumer report are attached. 3 A proposed consent form is attached. 4 If not provided by the consumer reporting agency, a Fair Credit Reporting Act Customer Certification form should be requested from the consumer reporting agency whenever requesting a consumer report. 5 The Summary of Rights promulgated by the Federal Trade Commission pursuant to the provisions of 15 U.S.C. 1681g(c)(3) is attached. 6 Although only oral notice is required, a written record should be established that the information was provided. A proposed letter is attached. 7 As an investigative consumer report is just a type of consumer report the following obligations must be performed in addition to those procedural obligations outlined above. 8 The attached forms are intended to comply with the federal law and therefore should be modified when used in California. THE LABOR LETTER 15

16 FAIR CREDIT REPORTING ACT DISCLOSURE AND AUTHORIZATION Disclosure [Employer], when considering your application for employment, when making a decision whether to offer you employment, when deciding whether to continue your employment (if you are hired), and when making other employment related decisions directly affecting you, may wish to obtain and use a consumer report from a consumer reporting agency. These terms are defined in the Fair Credit Reporting Act ( FCRA ), which applies to you. As an applicant for employment or employee of [Employer], you are a consumer with rights under the FCRA. A consumer reporting agency is a person or business that, for monetary fees, dues or on a cooperative nonprofit basis, regularly assembles or evaluates consumer credit information or other information on consumers for the purpose of furnishing consumer reports to others, such as [Employer]. A consumer report is any written, oral or other communication of any information by a consumer reporting agency bearing on a consumer s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living which is used or collected for the purpose of serving as a factor in establishing the consumer s eligibility for employment purposes. If [Employer] obtains a consumer report about you, and if [Employer] considers any information in the consumer report when making an employment related decision that directly and adversely affects you, you will be provided with a copy of the consumer report before the decision is finalized. You also may contact the Federal Trade Commission about your rights under the FCRA as a consumer with regard to consumer reports and consumer reporting agencies. Please sign and date below to signify receipt of the foregoing disclosure. Signature Date THE LABOR LETTER 16

17 Authorization By signing below, I, hereby voluntarily authorize [Employer] to obtain consumer reports about me from a consumer reporting agency and to consider the consumer reports when making decisions regarding my employment at [Employer]. I understand that I have rights under the FCRA, including the rights discussed in the separate disclosure statement provided to me. Signature Date THE LABOR LETTER 17

18 CONSUMER REPORT AND INVESTIGATIVE CONSUMER REPORT DISCLOSURE Disclosure [Employer], when considering your application for employment, when making a decision whether to offer you employment, when deciding whether to continue your employment (if you are hired), and when making other employment related decisions directly affecting you, may wish to obtain and use a consumer report and/or investigative consumer report from a consumer reporting agency. These terms are defined in the Fair Credit Reporting Act ( FCRA ), which applies to you. As an applicant for employment or employee of [Employer], you are a consumer with rights under the FCRA. A consumer reporting agency is a person or business that, for monetary fees, dues or on a cooperative nonprofit basis, regularly assembles or evaluates consumer credit information or other information on consumers for the purpose of furnishing consumer reports to others, such as [Employer]. A consumer report is any written, oral or other communication of any information by a consumer reporting agency bearing on a consumer s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living which is used or collected for the purpose of serving as a factor in establishing the consumer s eligibility for employment purposes. An investigative consumer report is a consumer report or portion thereof in which information on a consumer s character, general reputation, personal characteristics, or mode of living is obtained through personal interviews with neighbors, friends, or associates of the consumer reported on or with others with whom he is acquainted or who may have knowledge concerning any such items of information. The Fair Credit Reporting Act provides you with the right to request, in writing within a reasonable amount of time, a disclosure of the nature and scope of the investigation requested. You are also entitled to a written summary of your rights under the Fair Credit Reporting Act as prepared by the Federal Trade Commission. If [Employer] obtains a consumer report or investigative consumer report about you, and if [Employer] considers any information in the consumer report or investigative consumer report when making an employment related decision that directly and adversely affects you, you will be provided with a copy of the consumer report before the decision is finalized. You also may contact the Federal Trade Commission about your rights under the FCRA as a consumer with regard to consumer reports, investigative consumer reports and consumer reporting agencies. Please sign and date below to signify receipt of the foregoing disclosure. Signature Date THE LABOR LETTER 18

19 Authorization By signing below, I, hereby voluntarily authorize [Employer] to obtain consumer reports and investigative consumer reports about me from a consumer reporting agency and to consider these reports when making decisions regarding my employment at [Employer]. I understand that I have rights under the FCRA, including the rights discussed in the separate disclosure statement provided to me. Signature Date THE LABOR LETTER 19

20 Pre-Application Information Releases * JOB SITE: EMPLOYER: Name: SS#: Address: City: State: Zip: Social Security Number: - - Driver s License#: State: ** Position Applied For: Contact Phone #: Release of Criminal Information I hereby authorize [company name] to request, obtain and examine any and all records that may relate to my arrest, conviction and/or imprisonment at any time prior to this date, for any felony or misdemeanor and I expressly release and hold harmless any party providing the aforementioned criminal information requested by [company name]. Signature: Date: Release of Credit Report I hereby authorize [company name] to make inquiry into, investigate, and examine any and all records that may relate to my current or past credit worthiness; such information to include (but not be limited to) a retail credit report provided by any of the commercial retail credit reporting companies. I release and hold harmless each and every person, company or other party that may provide the aforementioned credit information to [company name]. Signature: Date: * Each employer should tailor the type of release or releases requested to that employer s own individual needs. This exhibit is provided to illustrate possible choices. * An individual s drivers license number should not be requested unless the employer plans to obtain a motor vehicle report. THE LABOR LETTER 20

21 Release for Investigative Consumer Report I hereby authorize [company name] to request an investigative consumer report as provided in the Fair Credit Reporting Act. I release and hold harmless each and every person, company or other party that may provide the aforementioned information to [company name]. Signature: Date: Release of Motor Vehicle Records I hereby authorize [company name] to acquire and examine a copy of my current Motor Vehicle Record and do release and hold harmless any party providing such information to [company name]. Signature: Date: Release of Medical Information * I hereby authorize [company name] to make inquiry into, investigate, and examine any and all records that may relate to my current or past medical history. I release and hold harmless any party providing such information to [company name]. Signature: Date: * Because of possible conflicts with the Americans with Disabilities Act, questions regarding past or current medical history are not suggested for pre-offer employment candidates unless necessitated by a compelling business reason. THE LABOR LETTER 21

22 A Summary of Your Rights Under the Fair Credit Reporting Act The federal Fair Credit Reporting Act (FCRA) is designed to promote accuracy, fairness, and privacy of information in the files of every consumer reporting agency (CRA). Most CRAs are credit bureaus that gather and sell information about you such as if you pay your bills on time or have filed bankruptcy-- to creditors, employers, landlords, and other businesses. You can find the complete text of the FCRA, 15 U.S.C u, at the Federal Trade Commission s web site ( The FCRA gives you specific rights, as outlined below. You may have additional rights under state law. You may contact a state or local consumer protection agency or a state attorney general to learn those rights. You must be told if information in your file has been used against you. Anyone who uses information from a CRA to take action against you-- such as denying an application for credit, insurance, or employment -- must tell you, and give you the name, address, and phone number of the CRA that provided the consumer report. You can find out what is in your file. At your request, a CRA must give you the information in your file, and a list of everyone who has requested it recently. There is no charge for the report if a person has taken action against you because of information supplied by the CRA, if you request the report within 60 days of receiving notice of the action. You also are entitled to one free report every twelve months upon request if you certify that (1) you are unemployed and plan to seek employment within 60 days, (2) you are on welfare, or (3) your report is inaccurate due to fraud. Otherwise, a CRA may charge you up to eight dollars. You can dispute inaccurate information with the CRA. If you tell a CRA that your file contains inaccurate information, the CRA must investigate the items (usually within 30 days) by presenting to its information source all relevant evidence you submit, unless your dispute is frivolous. The source must review your evidence and report its findings to the CRA. (The source also must advise national CRAs-- to which it has provided the data of any error.) The CRA must give you a written report of the investigation, and a copy of your report if the investigation results in any change. If the CRA s investigation does not resolve the dispute, you may add a brief statement to your file. The CRA must normally include a summary of your statement in future reports. If an item is deleted or a dispute statement is filed, you may ask that anyone who has recently received your report be notified of the change. Inaccurate information must be corrected or deleted. A CRA must remove or correct inaccurate or unverified information from its files, usually within 30 days after you dispute it. However, the CRA is not required to remove accurate data from your file unless it is outdated (as described below) or cannot be verified. If your dispute results in any change to your report, the CRA cannot reinsert into your file a disputed item unless the information source verifies its accuracy and completeness. ln addition, the CRA must give you a written notice telling you it has reinserted the item. The notice must include the name, address and phone number of the information source. THE LABOR LETTER 22

23 You can dispute inaccurate items with the source of the information. If you tell anyone -- such as a creditor who reports to a CRA -- that you dispute an item, they may not then report the information to a CRA without including a notice of your dispute. In addition, once you ve notified the source of the error in writing, it may not continue to report the information if it is, in fact, an error. Outdated information may not be reported. In most cases, a CRA may not report negative information that is more than seven years old; ten years for bankruptcies. Access to your file is limited. A CRA may provide information about you only to people with a need recognized by the FCRA -- usually to consider an application with a creditor, insurer, employer, landlord, or other business. Your consent is required for reports that are provided to employers, or reports that contain medical information. A CRA may not give out information about you to your employer, or prospective employer, without your written consent. A CRA may not report medical information about you to creditors, insurers, or employers without your permission. You may choose to exclude your name from CRA lists for unsolicited credit and insurance offers. Creditors and insurers may use file information as the basis for sending you unsolicited offers of credit or insurance. Such offers must include a toll free phone number for you to call if you want your name and address removed from future lists. If you call, you must be kept off the lists for two years. If you request, complete, and return the CRA form provided for this purpose, you must be taken off the lists indefinitely. You may seek damages from violators. If a CRA, a user or (in some cases) a provider of CRA data, violates the FCRA, you may sue them in state or federal court. THE LABOR LETTER 23

24 The FCRA gives several different federal agencies authority to enforce the FCRA: FOR QUESTIONS OR CONCERNS REGARDING: CRA s, creditors and others not listed below PLEASE CONTACT: Federal Trade Commission Consumer Response Center - FCRA Washington, DC * National banks, federal branches/agencies of Office of the Comptroller of the Currency foreign banks (word National or initials N.A. Compliance Management, Mail Stop 6-6 appear in or after bank s name) Washington, DC * Federal Reserve System member banks (except Federal Reserve Board national banks, and federal branches/agencies of Division of Consumer & Community Affairs foreign banks) Washington, DC * Savings associations and federally chartered Office of Thrift Supervision savings banks (words Federal or initial F.S.B. Consumer Programs appear in federal institution s name) Washington, DC * Federal credit unions (words Federal or initials F.S.B. appear in federal institution s name) State charted banks that are not members of the Federal Reserve System National Credit Union Administration 1775 Duke Street Alexandria, VA * Federal Deposit Insurance Corporation Division of Compliance & Consumer Affairs Washington, DC * FDIC Air, surface, or rail common carriers regulated by Department of Transportation former Civil Aeronautics Board or Interstate Office of Financial Management Commerce Commission Washington, DC * Activities subject to the Packers and Stockyards Act, 1921 Department of Agriculture Office of Deputy Administrator - GIPSA Washington, DC * Fed. Reg (1997) (to be codified at 16 C.F.R. pt. 601). THE LABOR LETTER 24

25 Date Dear Applicant, This letter is to notify you that we have [describe adverse action]. This decision was based either wholly or in part on information received from [identify consumer reporting agency and provide address, telephone number, and toll-free number if national consumer reporting agency]. [consumer reporting agency] did not make this employment decision and will be unable to explain why the decision was made. You have the right to dispute the accuracy or completeness of any information contained in your report by contacting [consumer reporting agency]. You also have the right to obtain free disclosure of your file from [consumer reporting agency] if you request a report within sixty (60) days of [describe adverse action]. You will be asked to provide your full name, mailing address, social number, and a photocopy of your driver s license and social security card for identification purposes. I have already provided you with a copy of your report and a statement of your rights under the Fair Credit Reporting Act. If you have any further questions, please feel free to contact me. Sincerely, Human Resources Director THE LABOR LETTER 25