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Background checks can be a valuable tool for employers.  A thorough background check can shield an employer from future liability.  However, both federal and state law place limits on what the employer can lawfully do regarding background checks.  One such federal law is the Fair Credit Reporting Act (“FCRA”).

An employer who wishes to know a job applicant’s credit history could request a consumer report from a consumer reporting agency under the FCRA.  However, to lawfully obtain and make an employment decision based on a consumer report, employers must follow certain procedures under the FCRA.

Before requesting a consumer report for a job applicant or employee, the employer must (1) certify to the consumer reporting agency that the employer will comply with the FCRA and applicable state law; (2) disclose in writing to the job applicant/employee that the employer will seek a consumer report; and (3) secure the applicant/employee’s authorization in writing.  The employer’s written disclosure to the applicant must be in a document that consists of only the disclosure and the applicant’s written authorization.

A consumer report could contain information including the employee/applicant’s credit worthiness or criminal record.  Information in the consumer report might dissuade the employer from hiring an applicant or might encourage the employer to fire or not promote a current employee.  Any employment decision that adversely affects an applicant/employee is considered “adverse action” under the FCRA.  Before taking adverse action based in whole or in part on consumer reports, the FCRA requires that employers take certain steps.

Before taking any adverse action, the employer must provide the applicant/employee with a copy of the report and a written description of the applicant/employee’s rights under the FCRA.  After the employer gives the applicant/employee a copy of the consumer report and the summary of rights, the employer should give the applicant/employee some time to dispute the accuracy of the report before taking any adverse action.  Failure to do so could result in liability.  Beverly v. Wal-Mart Stores, Inc., 2008 U.S. Dist. LEXIS 2266, at *11-12 (E.D. Va. Jan. 11, 2008) (“Simultaneous provision of a consumer report with a notice of adverse action fails to satisfy the §1681b(b)(3)(A) requirement”).

When the employer takes adverse action, the employer must also provide to the applicant/employee oral, written, or electronic (1) notice of the adverse action; (2) notice of the name, address, and telephone number of the consumer reporting agency; (3) statement that the consumer reporting agency did not make the decision to take adverse action and is unable to provide the specific reason why the adverse action was taken; (4) notice of the applicant/employee’s right to obtain a free copy of a consumer report; and (5) notice of the applicant/employee’s right to dispute the accuracy or completeness of the consumer report.  Additionally, the employer must provide to the applicant/employee written or electronic disclosure of the applicant/employee’s credit score, the range of possible credit scores, all the key factors that adversely affected the credit score, the date on which the credit score was created, and the name of the person or entity that provided the credit score.  Failure to abide by the FCRA’s requirement could expose the employer to liability for the applicant/employee’s actual damages, punitive damages, and attorney’s fees.

The above requirements generally apply only when an employer is seeking a consumer report for “employment purposes.”  In other words, the FCRA’s notice requirements apply only when the employer is seeking a current or prospective employee’s consumer report and not an independent contractor’s consumer report.  Lamson v. EMS Energy Mktg. Serv., 868 F. Supp. 2d 804, 810 (E.D. Wis. 2012) (finding that the FCRA’s notice requirements do not apply to independent contractors).  However, as many employers have found through litigation, it is not always clear whether a hired individual is an employee or an independent contractor.  For that reason, the best practice for employers can sometimes be to abide by the FCRA’s notice requirement every time a consumer report is requested, whether in connection with an employee or independent contractor.  Furthermore, cautious employers also may wish to abide by the FCRA’s notice requirements every time they take adverse action following a request for a consumer report, even when the adverse action was not based on information contained within the consumer report.

Peter T. Mavrick has successfully represented many employers in labor and employment matters.  This article is not a substitute for legal advice tailored to a particular situation.  Peter T. Mavrick can be reached at: Website:; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311; Email:

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