If You Use Background Checks to Vet New Employees, Don’t do This….

While every employer engages in some due diligence when considering a new hire, if your company routinely, or even occasionally, obtains a “consumer report” as a way to vet candidates, it behooves you to understand the rules set out in the Fair Credit Reporting Act as to how you can and can’t do this. Indeed, as the defendant in Kenn v. Eascare, LLC recently learned, even a small and seemingly innocuous failure to follow the FRCA can lead to extremely harsh results.

According to the Complaint in Kenn, Eascare routinely conducted background checks when hiring, and in January 2018, Nicole Kenn applied for a position with the company. As part of that process, Eascare provided her with a disclosure and authorization form entitled “Consumer Report/Investigative Consumer Report Disclosure and Release of Information Authorization.” The front side of the form asked Kenn to acknowledge her understanding that Eascare would conduct a background check on her for employment purposes, and it noted that this might include obtaining a “consumer report” or an “investigative consumer report” as defined under FCRA. The back side of the form sought Kenn’s authorization for an entity named PT Research to provide such reports and granted a release in connection therewith.

After Kenn signed the form, Eascare obtained a consumer report related to her, and she eventually was hired. Less than a year later, however, Kenn resigned and filed suit, asserting various claims, including a class action for alleged violations of the FRCA. Among other things, Kenn alleged that Eascare had failed to comply with that portion of the FRCA mandating that a consumer report to vet an employee only can be obtained if the employee is provided with: “a clear and conspicuous disclosure” regarding the procurement of such a report “in a document that consists solely of the disclosure ….”

Eascare moved to dismiss Kenn’s claims grounded in the FRCA, arguing that Kenn had no standing, and the Superior Court agreed. The Massachusetts Appeals Court reversed that ruling, however, first noting that there was a violation of the FRCA because even though the front side of the document provided to Kenn by Eascare only contained the relevant disclosure, the back side of the document contained a release. Thus, Kenn “was not provided with ‘a document that consists solely of the disclosure.’” As far as standing was concerned, the Appeals Court held that:

Although the plaintiff may not be able to articulate concrete, actual damages arising from Eascare obtaining her consumer report by using a noncompliant disclosure form and requiring her to agree to a release of liability in addition to a background check, the FCRA liability provision recognizes that the injury to the consumer may not be measurable.  Thus, in an action for a willful violation, the statute provides for the option of the plaintiff recovering actual damages caused by the FCRA violation or, if the plaintiff cannot prove actual damages, nominal damages between $100 and $1,000.

Accordingly, the Appeals Court held that Kenn did have standing to sue, and Eascare now faces the prospect of having to litigate a class action where not only are there statutory damages, but the statute at issue also allows for the recovery of punitive damages, costs and reasonable attorneys’ fees.

So, if you use background checks when vetting employees, be sure you read the FCRA carefully and follow even its most minute requirements. Failing to do so could put you in the same, painful position in which Eascare now finds itself.

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