Beware the Risks of Background Checks: Liability Waivers May Violate the Fair Credit Reporting Act
On November 21, 2017, an employee of L3 Technologies Inc., a government contractor, filed a putative class action in federal court in California alleging that the consent form the company provides to new hires and employees prior to conducting a background check runs afoul of the Fair Credit Reporting Act because it also includes a liability waiver. Although the plaintiff was hired and worked out of L3’s San Diego, California office, his complaint asserts a class action on behalf of all employees and applicants nationwide who completed L3’s “Background Investigation Consent” form within the past five years.
The FCRA makes it unlawful for an employer to procure a background check (or “consumer report”) on an employee or prospective employee unless it first provides in writing “a clear and conspicuous disclosure” in a document “that consists solely of the disclosure” and obtains the individual’s written authorization prior to procurement of the report. As such, although the disclosure and employee authorization may be combined in a single document, the Federal Trade Commission (the agency that enforces the FCRA) has issued guidance stating that the form should not include any other extraneous information. In the complaint filed against L3, the plaintiff alleges that the background check authorization form violated this rule by improperly including a waiver of liability regarding information obtained from the background check and any way in which it was used by L3.
FCRA claims have been on the rise in recent years, and L3 is just the latest large employer to be hit with a putative class action alleging that their background check authorization forms contain unlawfully extraneous information. Accordingly, employers who conduct background checks should review their application and new hire materials to ensure they include a stand-alone background check authorization form that does not contain a liability waiver or address any other subjects. Employers should also ensure that they retain signed consent forms for every employee or applicant for at least five years, the maximum statutory period in which plaintiffs may assert FCRA claims.
Arent Fox's Labor & Employment group will continue to monitor developments in this area. If you have any questions, please contact Linda Jackson, Alexandra Romero, or the Arent Fox professional who usually handles your matters.