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Employment Blog

Inaccurate Background Checks Lead to $2.6 Million Reality Check for One Company

Authored by Russell W. Wilson
Posted on January 12, 2013
Filed under Employment

Wow, the second largest civil penalty obtained by the Federal Trade Commission against a private company for violations of the Fair Credit Reporting Act caused me to take notice. Recently, the FTC for the first time charged an employment background screening firm with violating the federal Fair Credit Reporting Act (the federal law that governs "consumer reports" and "investigative consumer reports" generically referred to as "background checks"). According to the FTC's allegations, HireRight Solutions, Inc. committed "multiple violations" of the FCRA by: (1) failing to use reasonable procedures to assure the maximum possible accuracy of the information it provided; (2) failing to give consumers copies of their reports; and (3) failing to reinvestigate consumer disputes.

According to the FTC's allegations, HireRight, in many cases, furnished reports to employers about prospective employees that were not current reports that allegedly did not contain information such as the expungement of criminal records. In other words, according to the FTC, HireRight generated reports that erroneously listed criminal convictions for certain applicants, or that included the records of the wrong person. According to the FTC, HireRight's mistakes caused applicants to be denied employment or other employment-related benefits. The U.S. Department of Justice filed suit against HireRight (in federal court in D.C.), on the FTC's behalf, on August 8, 2012 the case was settled shortly thereafter (the settlement/consent decree is subject to the court's approval).

Not that employers need another "gut check" (sorry, I couldn't resist), but the HireRight consent decree is further evidence of the FTC's increased enforcement activity. Like consumer reporting agencies, employers also have obligations under the FCRA which are often misunderstood. I have personally observed many unintended, common employer missteps in this area (e.g., forms that go too far). With the FTC scrutinizing Fair Credit Reporting Act compliance, employers have every reason to be alarmed and should think about revisiting existing documents and procedures.