TMCnet Feature
July 11, 2019

Turned down that winning candidate because of a failed background check? You could be facing a lawsuit.

The U.S. Federal Reserve defines “full employment” as an unemployment rate of between 3.75 percent and 4.5 percent. With today’s jobless rate hovering at 3.6 percent, one would think that employers in a competitive scramble for qualified workers wouldn’t bother with background checks. It’s time to think again. 

When HireRight surveyed employers about their screening processes, the results were startling. Fully 84 percent of companies reported conducting criminal or other public record searches and 73 percent checked previous employment history or references. Two out of three verified a candidate’s identity, and half said that they checked education and driving records. Close to a third delved into a person’s credit history, and 14 percent checked out their social media presence. 

What does that mean for applicants? According to employment lawyer Sergei Lemberg, it means that job seekers are at risk for being denied work based on faulty information. “Background checks are only as reliable as the data they’re based on,” he said. “All too often, reporting errors creep in.” Lemberg says, for example, that documents can contain typographical errors or that records from people with similar names can get jumbled. In worst-case scenarios, it takes a background check to reveal that an applicant is a victim of identity theft. 

The primary protection for job seekers who are sidelined for failing a background check is the Fair Credit Reporting Act (FCRA). The legislation, which was signed into law in 1970, regulates how credit bureaus, creditors, courts, and others handle and report consumer information. It also outlines the process employers must use if they are going to access an applicant’s credit history. “A prospective employer must get your written permission to view your credit report,” Lemberg said. “Before they use the information to deny you a job, they’re required to send you a copy of your credit report and give you the chance to correct inaccurate information.”

To the chagrin of applicants, they’re the ones tasked with correcting mistakes about their own credit histories, criminal records, civil liabilities, and education. Once they’ve cleared up the errors, Lemberg says that it’s time to circle back to the potential employer. “Deliver the updated information to the background screening company and the company considering your job application and demand reconsideration,” he advised. 

If a prospective employer violates the process outlined in the Fair Credit Reporting Act, they could be on the hook for substantial penalties. Lemberg notes that an individual can sue a company for FCRA violations and receive up to $1,000. “If the company willfully flouted the law, then the applicant can also be awarded punitive damages.” In previous actions, Postmates settled an FCRA class action lawsuit for $2.5 million, Uber settled for $7.5 million, and JPMorgan settled for $1.25 million.

“The law is in place to protect consumers,” said Lemberg. “When it comes to employment background checks, it’s up to job applicants to stand up for their rights.”

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