When it comes to running criminal background checks on potential new hires, employers must remember that small mistakes can lead to serious consequences. This was recently brought to light by the putative class action lawsuit of Ratliff v. Celadon Trucking Services. The plaintiff in the case, a job applicant who was denied employment based on the results of his background check, alleged injury-in-fact for the failure to receive required disclosures. Although the suit was eventually dismissed, the details of the case should serve as a warning to other employers.
Employer Requirements Under the Fair Credit Reporting Act
Section 1681b(b)(3) of the Fair Credit Reporting Act ("FCRA") sets forth compliance requirements for employers who choose to run background checks on potential employees. Before running a background check, employers must inform the applicant that they are doing so and that the results could impact the employment decision. This notice must be in writing, cannot be a part of any other document, and must be clear and conspicuous. If additional information is included in the notice, such as details about the type of report that will be run, it must not interfere with the clear and concise format. Employers must also receive written consent from the applicant prior to running the check.
If the information contained in the background report leads to adverse action, such as rescinding the offer for employment, employers must meet additional requirements. Before taking any action based on the report, the applicant must receive a notice which includes a copy of the report and a copy of A Summary of Your Rights Under the Fair Credit Reporting Act. The purpose of this requirement is to give the applicant the opportunity to review the report for accuracy and provide his or her side of the story.
Alleged Failure to Provide Information
Ratliff claims that the notices he received prior to the check contained extraneous information and did not meet the "clear and conspicuous" requirements. When the information contained in the background check led to the denial of his employment, he did not receive a copy of the report or the required summary of rights. He argued that the failure to receive the information and tell his side of the story led to the denial of employment, causing an "informational injury."
No Article III Injury
Upon review of the case, the courts concluded that Ratliff did not meet the "injury in-fact" requirements set forth under Article III. They went on to further explain that the purpose of the requirement is to protect employees from losing opportunities based on misinformation.
Ratliff never argued that the information in his report was inaccurate. Assuming there were no corrections needed, it's possible that the information in the report would have led to the adverse action even if Ratliff had received the notice prior to the decision. Based on this, it was determined that although there was a procedural statutory violation there was no Article III injury and the case was dismissed. It was later brought up on appeal, but the decision was upheld.
Employers who run background checks must closely follow FCRA regulations or risk finding themselves at the center of a lawsuit. Creating clear company policies and procedures will help you ensure the protocol is followed consistently.
The results of this case also show that employers who are accused of violations can sometimes prevail. In this circumstance, prompt consultation with a qualified attorney is the smartest course of action.