Pre-Employ Blog

Warning: "Ineligible" Is Now a Bad Word in Background Check Screening

Posted by Bob Mather on September 15, 2015

Unless you're a plaintiff's attorney, a reading of the Wells Fargo class action Lawsuit may make you scratch your head and wonder what else can "they" sue employers for. The latest is the word "ineligible" when it is said during the background screening process.

Perhaps it depends on the the meaning of the word "Ineligible" is (for those of you who remember this meme)!

Bill Clinton Meme

Former President Bill Clinton "It depends on what the meaning of the word 'is' is.  (https://youtu.be/j4XT-l-_3y0

Employers have a hard enough time following the Adverse Action Process,and now the words you use to start the process has to be closely watched as well.

In a class action lawsuit update recently,  Wells Fargo was DENIED a motion for summary judgment in a class action under the Fair Credit Reporting Act (“FCRA”), finding triable issues on whether the coding of applicants as "ineligible" was an adverse action under the statute and whether the inclusion of a release of liability in the authorization form completed by applicants was a willful violation of the Act. 

After reading his take in The National Law Review, we contacted attorney Timothy McConville of the law firm Odin, Feldman & Pittleman, P.C. and asked him if he had any advice for employers who order background checks on prospective employees

"An employer should avoid concluding or stating that an applicant or employee is ineligible until after the employer first has provided the pre-adverse action notice and opportunity for response and, second, has actually considered the individual’s response, if any. 

Many employers use the terms " Fail" "No Hire" or other sentences in order to begin the adverse action process. 

McConnel continues; While the pre-adverse action protocol is being carried out, the employer should indicate only that a decision is pending concerning the application or the employment." 

Wells Fargo Class Action Suit

The decision in Manuel v. Wells Fargo Bank, N.A. in the United States District Court for the Eastern District of Virginia underscored the significant risk that the FCRA imposes on employers that conduct background checks. 

The plaintiff in the case applied for a loan document specialist position at Wells Fargo and obtained an offer of employment conditioned upon the successful completion of a background check.  Pursuant to Wells Fargo's instructions, the plaintiff accessed the website of Wells Fargo's third-party background check vendor and completed a standard application and the "Wells Fargo Standard Consent."  The standard consent form contained provisions that advised the plaintiff that a background check may be obtained for employment purposes.  It also contained language purporting to release Wells Fargo, its vendor, and third parties from liability arising from retrieving and/or reporting information regarding the applicant and from using the report of employment purposes.  These documents initiated the background check process and resulted in the report of two convictions for petit larceny as well as a conviction for aggravated assault with serious bodily injury in the second degree. 

Upon receiving the report, Wells Fargo coded the plaintiff as "ineligible" in the background check vendor's system, which triggered the vendor's adverse action protocol.  Specifically, the plaintiff received a "Pre-Adverse Action Notice," a copy of the report, and a summary of rights under the FCRA.  The plaintiff disputed the report and appealed pursuant to Wells Fargo’s appeal process.  The vendor then generated a revised report that still contained the disputed convictions, and Wells Fargo sent an adverse action notice to the plaintiff advising him that Wells Fargo would not consider him further for the employment position. 

The plaintiff claimed that Wells Fargo violated the FCRA requirement of a clear and conspicuous disclosure in a document that consists solely of a disclosure that a background check may be obtained.  He also claimed that Wells Fargo’s coding of plaintiff as "ineligible" in the vendor's system, which triggered the adverse action protocol, violated the FCRA requirement that the pre-adverse action notice, a copy of the report, and summary of rights be provided to the individual before the adverse action.  Wells Fargo argued that the plaintiff had no standing to assert a claim for violation of the FCRA's initial disclosure requirement and that the "ineligible" coding was only a "preliminary" determination.

The court found that the plaintiff had standing to assert a claim based on the provision that the initial disclosure be in a document that consists solely of the disclosure and that a triable issue existed as to whether the "ineligible" coding was an adverse action under the FCRA.  The court emphasized that, under Wells Fargo's procedure, its use of the ineligibility code was the only communication that Wells Fargo made to its vendor about the applicant unless the applicant disputed the background check after he received the pre-adverse action notice.  The court held that a reasonable jury could find that Wells Fargo’s adverse hiring decision was final when it was first relayed to the vendor because Wells Fargo was comfortable adhering to that decision without reviewing it if the individual did not file a dispute.  The court also specifically rejected Wells Fargo’s argument that the FCRA did not apply because the statute excludes background checks in connection with an investigation of compliance with federal banking law restrictions on the type of individuals who may be employed at banking institutions. 

This lawsuit is another example of the perilous decisions a employer has to make. In this case, the use of the word ineligible was upheld by the courts as an adverse action, something we disagree with.

See for yourself:  

Download the Lawsuit

Here are some other posts you may find helpful:

"I Hate My Background Check Company, Yep I said it"

BMW to Pay $1.6 million, Rehire Black Workers : EEOC Background Check

 

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