Employers who use pre-employment and post-hire background checks must consider various federal, state and local laws and regulations. One important law that must be considered is the federal Fair Credit Reporting Act (FCRA). The FCRA governs the collection, assembly, and use of certain consumer information. The FCRA provides specific rules for businesses making employment decisions based on consumer reports (for example, driving records, a criminal report, employment history, credit check) obtained from third parties. Surveys have shown that almost all employers are now using some form of background checks that likely implicate the FCRA.

Unfortunately, the FCRA can be overly technical. Technical errors, even those causing no actual damages, can become costly because the statute provides damages of $100 to $1,000 for each individual violation. Naturally, in a class action setting, the statutory provided damage amounts can quickly become significant, particularly because of the inherent repeat nature of the violations (e.g., the same incorrect form was used with every applicant). Indeed, large and sophisticated employers, including Amazon, Uber and Avis (just to name a few) in just the last year, have entered into multi‐million dollar settlements over alleged violations of the FCRA.

As such, it is crucial that employers understand how the law applies. It is helpful to view FCRA compliance as a three-step process:

Download "Burr Alert: Are You Fair Credit Reporting Act Compliant?" to read the full article written by Matthew T. Scully.