In December 2013, a United States District Court declared the ClosetMaid Corporation to be in willful noncompliance with the Fair Credit Reporting Act due to a technical due to a violation in its disclosure and authorization form. A detailed explanation of what occurred, in that case, can be found in a previous article titled “Atlas Be Warned.” In short, the Federal District Court ruled that the presence of release language in the Disclosure violated the FCRA; that ClosetMaid should have known that the presence of this language was in violation of the statute; and that therefore ClosetMaid was recklessly violating the law and was subject to statutory penalties ranging up to $1,000.00 per violation, along with punitive damages and attorney’s fees. As this case was a class-action, it did not take many class members to accumulate substantial damages.
Since the ClosetMaid case, nine class actions have been filed throughout the United States against large national businesses, including Panera Bread, Whole Foods, NineWest, and AMC. All of these class-action suits claim that the federally mandated Disclosures contained additional information allegedly not permitted by the FCRA. For example, some Disclosures were included with the Applications for Employment; other Disclosures contained terms and conditions of employment, such as the fact that all employment would be “at will;” and yet other Disclosures required the applicant to release and waive the employer from any liability for running the background check. A detailed explanation of three of these class actions can also be found in the “Atlas Be Warned” article.
As a value-added benefit to its clients, ESS provides a customizable, exemplar Disclosure and Authorization form. The FCRA does permit a Disclosure to contain an Authorization. ESS’s form contains just that, and no more; indeed, ESS’s current form contains none of the extraneous language complained of in these class action suits. It clearly and conspicuously communicates to the consumer that a background check may be performed and nothing else; however, in light of some extremely far-reaching and hyper-technical positions advanced in these class-action lawsuits, ESS is now recommending that going forward, its clients separate their Disclosures from their Authorizations. While this is not mandated by the FCRA, we believe it is appropriate to suggest this change. Unlike other provisions of the FCRA, for which the Federal Trade Commission has spelled out exactly what sort of disclosure must be made to consumers, the FTC has yet to articulate clearly what language can or cannot be used in a Disclosure and Authorization. In short, neither the FTC nor the Consumer Financial Protection Bureau has yet to provide clear safe harbor guidance on the content of Disclosure forms. A report recently authored by attorneys at the law firm of Littler Mendelson provides a good synopsis of why this uncertainty exists. See pages 5-6 of the report.
If you are an existing client of ESS, and if you are interested in seeing the new exemplar forms, email us at firstname.lastname@example.org for a copy of these customizable forms. Please give consideration to revising and updating your forms in a manner similar to what we are providing. As always, we encourage you to consult with your compliance officer or your legal counsel.
Please note: For those Clients who employ individuals in states that require their own Disclosures, we can provide exemplar state forms. Existing ESS clients can email ESS at email@example.com to request a copy of the state-related Disclosures.
Todd M. Higey, Esq. is General Counsel for Employment Screening Services, Inc. This article is provided only for educational purposes; it should not be relied upon as legal advice, and it should not be used, in whole or in part, as a basis for establishing employment practices or policies, nor should it be used for resolving disputes or managing risk. Every reader’s circumstances are unique and legal advice should be obtained only from a lawyer with whom the reader has established an attorney-client relationship. Copyright 2014 ©Employment Screening Services, Inc. All material contained within this publication is protected by copyright law and may not be reproduced without the express written consent of ESS.