The Importance of Disclosure and Authorization
THE IMPORTANCE OF DISCLOSURE AND AUTHORIZATION: WHAT EVERY BUSINESS OWNER NEEDS TO KNOW
Criminal background checks are a common practice in today’s business world and can be a useful tool that allows an employer to determine that prospective employees meet specific standards which he or she has deemed acceptable for the business. As a business owner, the last thing you want to endure is a long, drawn-out lawsuit as a result of failing to properly meet the Disclosure and Authorization (D&A) requirements outlined by the Fair Credit Reporting Act (FCRA). The D&A requirements involve disclosing the “Summary of Consumer Rights under the FCRA” to applicants and receiving a signed authorization form (that uses a specific set of pre-determined language) from those applicants before running a background check.
These steps are crucial and were specifically designed to protect the rights of the applicant. Employers who neglect to properly meet these requirements before running a criminal background check face having to pay big, big bucks in class action lawsuits and irreparable damage to their image.
In an article entitled, “FCRA Class Action Lawsuits: The Sharks Are Circling,” attorney Craig Bertschi suggests that the background screening industry has become a new target for class action lawsuits, which can be extremely lucrative for plaintiffs’ and their lawyers and financially disastrous for business owners. He notes that the FCRA is the perfect target for class actions for a number of reasons. First, Consumer Reporting Agencies (CRAs) and employers usually follow routine procedures in processing background checks and screening applicants, and if those procedures are not in compliance with the FCRA, then it is likely that many people have been affected (potentially thousands of applicants). Second, in FCRA class action lawsuits, the plaintiff can recover statutory damages, as opposed to having to provide proof of actual damages. Third, unlike other consumer protection statutes, the FCRA has no limits on damages or the amount of damages that can be awarded against a defendant in class action litigation.
One recent class action lawsuit involving non-compliance ended with a school bus transportation company having to pay $5.9 million in damages for failing to meet the FCRA’s guidelines. That settlement was the largest settlement ever that involved employment-related FCRA claims.
It is cases like this that are prompting business owners to reevaluate their own procedures and policies to ensure that they are compliant with the FCRA’s guidelines. If you are a business owner who has not yet reexamined your own policies, now is the time! You may end up saving yourself a major headache and a huge sum of money, all while protecting your business and the rights of your future applicants.
D&A is just one of four steps required for a business to remain in compliance with the federal legislation that was designed to protect the rights of an applicant during the background screening process. The complete list of steps includes: Permissible Purpose; Disclosure and Authorization; Pre-Adverse Action Notification; and Adverse Action Notification.