Pre-Employ Blog

Your Future Employee has a Criminal Record. Now What?

Posted by Bob Mather on May 02, 2018

Most employers utilize preemployment background screening checks as a standard part of their hiring procedures.

nevada-katie-reese-arrestedWhen a criminal record shows up in a potential hire's background check, the alarms sound off.

What should you do? How should you do it?

The answers are simple. Be careful, Be methodical, be fair and proceed.

Should information be uncovered which the company subsequently uses to deny employment or take other adverse employment-related action (reassignment, termination or promotions for example), Employers must follow "adverse action" protocals

Employers across the nation are being sued at a record pace for failing to follow adverse action Guidelines ( See FCRA Lawsuits Skyrocket:

At the outset, it is critical to understand that mistakes are common in the background screening industry. Practically every background check company has faced errors when conducting these screenings. The sheer volume of records that has to be searched—coupled with human error, antiquated court systems, and multiple people with the same names and dates of birth—invariably lead to potential problems.

Of particular importance is that employers are ultimately liable for lawsuits that claimed adverse action procedures were not followed. the background check company in most cases was not liable as they do not control the decision making process (Hire or no hire etc) 

Interested in this Topic? You May Like: "Adverse Action Notices Protocol" White Paper   

The Fair Credit Reporting Act (FCRA) specifies the exact steps employers must take to obtain a consumer report and before and/or after any adverse action is taken based on information in the report. 

What is an Adverse Action?

In its broadest context, an adverse action is any action that denies an individual or business employment, credit, insurance, or other benefits and is based on a criminal history or other negative information obtained from a background check. In the employment context, an adverse action arises when a company considers not hiring a particular applicant, withdrawing an offer of employment, failing to promote and existing employee, or denying any other benefit based on information obtained through a background check and/or consumer report, even if this information is only a small part of the decision.

We have summarized the rules below, but smart employers will talk with legal counsel to ensure compliance in their particular jurisdiction.

The FCRA’s Three-Step Adverse Action Process

To be compliant with the FCRA, a company taking any adverse action against a potential new hire or existing employee must adhere to a three-step process that consists of a pre-adverse action notification, a waiting period, and an adverse action notification. Failure to abide by any of these steps leaves the employer at risk for legal action.

  1. Pre-Adverse Action Notification

The FCRA specifies that any employer—prior to taking any adverse action—must first advise the applicant or employee that it is considering taking adverse action based in whole or in part on certain information obtained in the individual’s consumer report. Said information can be presented in writing or verbally. Along with this, the employer must provide the individual with the name of the particular consumer reporting agency from whom the information was obtained as well as a copy of his/her full background screening report.

Next, the employer must inform the applicant or employee that s/he has the right to dispute any incomplete and/or inaccurate information with either or both the consumer reporting agency or the potential employer. The employer must also provide the applicant or employee with a copy of the Summary of Your Rights Under the Fair Credit Reporting Act. In some states, cities, or other jurisdictions, additional procedures and information may be required.

  1. Waiting Period

After providing notice that an adverse action may ensue—and prior to actually taking any adverse action—the employer must wait a reasonable period of time, defined by the FTC as five business days. However, depending on how notification was given to the individual, this period may be extended.

The key point is to ensure that the applicant or employee has ample time to dispute any negative information before the employer disqualifies the applicant and, subsequently, hires someone else.

Again, some states or cities may have different rules governing this process. Some specify a certain waiting period following receipt by the applicant or employee of the pre-adverse action notification. It is ultimately the employer’s responsibility to familiarize him/herself with the applicable laws.

  1. Adverse Action Notification

Following expiration of the waiting period, the employer can then take adverse action. The applicant or employee must be notified in writing and the notification must detail what action is being taken and what information the decision was based upon such as a criminal history that was uncovered during the background check.

Any decision to start an adverse action may be based in whole or in part of information from the consumer report but said decision must come from the employer. It is imperative that the employer inform the applicant or employee that the decision to take adverse action was not made by the consumer reporting agency from where the information was obtained.

The applicant or employee has the right to dispute the information with the consumer reporting agency and to request a free copy of his/her report from the appropriate agency. Additionally, some states and cities have certain requirements to provide written assessments explaining why the adverse action is being considered, such as poor credit or criminal history.

If the applicant or employee disputes any information in the background screening report at any time during the process, then the adverse action process must be halted.

Adverse Action Lawsuit Examples—

Regardless of existing rules and regulations, companies continue to allegedly violate the FCRA’s adverse action policies, subjecting themselves to millions of dollars in class action lawsuit settlements.

Marcum v. Dolgencorp, Inc.

Dollar General recently settled a class action lawsuit filed in Virginia alleging it violated the FCRA. In this case, Dollar General allegedly made adverse employment decisions report before plaintiffs received a copy of their report and summary of their rights. Additionally, Dollar General allegedly distributed outdated summaries to their new-hire candidates.

The company was ultimately accused of willfully failing to comply with the FCRA before obtaining a consumer report and failing to adhere to FCRA rules and regulations and, consequently, had to pay $4.08 million in damages.

Knights v. Publix Super Markets, Inc.

In this case filed in the Middle District of Tennessee, plaintiffs alleged that Publix’s pre-employment disclosures contained a waiver of rights releasing Publix from any liability in any decisions made concerning applicants’ employment based on information obtained in consumer reports. Said language blatantly violates the FCRA. As a result, Publix agreed to pay $6.8 million to the more than 90,000 class members.

Hamilton v. Home Depot USA, Inc., Fernandez v. Home Depot USA, Inc.

In Hamilton, a Florida man who applied for employment with Home Depot sued the company alleging it violated the FCRA by failing to provide a mandatory, stand-alone disclosure regarding the use of background reports for employment purposes. The plaintiff argued that Home Depot’s FCRA disclosure contained “extraneous provisions” in violation of the FCRA’s mandate.

Similarly, in Fernandez, petitioners claimed Home Depot violated the FCRA by including releases of liability in their background and/or credit check disclosure forms. Home Depot ultimately settled for $1.8 million.

Protecting Your Organization

In order to protect your organization, it is imperative to ensure that disclosure forms do not contain any extraneous information and that they are signed before ordering a background check, and that all adverse action requirements are followed including adhering to the proper waiting time and including all proper notices. Taking the time to ensure compliance with the FCRA is a small step that can save significant legal damages and other headaches down the road.

For additional information about pre-adverse and adverse action notices, FCRA disclosure and notice requirements, state-specific requirements, timing considerations, and other recent legal cases, please download our “Adverse Action Notices Protocol” White Paper or contact us.