Court Holds that Receiving an Updated Background Report May Require a Second Pre-Adverse Action Notice

by Seyfarth Shaw LLP
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[co-author: Jennifer Mora]

Seyfarth Synopsis: In the last three years, employers have seen a sharp increase in the number of employment class actions under the Fair Credit Reporting Act (FCRA). Most of the reported cases involve challenges to the employer’s procedures before ordering a background report. More recently, however, we are seeing more cases against employers alleging a failure to follow the FCRA’s adverse action requirements, which must be followed any time an employer intends to take “adverse action” (revoking a job offer or terminating employment) against a job applicant or a current employee based, in whole or in part, on information contained in their background report.

A recent federal court decision demonstrates the importance of employers following these highly technical requirements when using background reports for hiring and other employment decisions. In Wright v. Lincoln Prop. Co., a judge in the Eastern District of Pennsylvania considered how an employer can comply with the adverse action process if it relies on an initial background report before revoking a job offer, but then receives a subsequent, corrected report. In Wright, the plaintiff received an employment offer that was contingent upon successful completion of a background check. The first background report, dated June 6, was a partial, in-progress report that revealed a misdemeanor conviction for driving under the influence and two separate drug-related felony convictions. A week later, on June 13, a more comprehensive, final report was provided to the employer, but it included the same substantive criminal information. The employer sent the partial June 6 report to the plaintiff but did not send the final, completed June 13 report.

Both parties moved for summary judgment. In alleging the employer violated the FCRA, the plaintiff raised two arguments. First, he argued he never “received” a copy of the June 6 report. The court summarily rejected this argument, concluding the FCRA does not explicitly require an employer “to ensure that the consumer to whom the report relates actually received the notice.” Instead, the FCRA merely requires the employer to “provide” a copy of the report. Thus, the court concluded that a jury had to decide whether the employer satisfied its obligations under the FCRA based on its evidence that it did, in fact, “provide” him with a copy of the report.

The plaintiff then argued the June 6 report did not satisfy the FCRA because it did “not contain the required information, including a summary of rights and advance notice of [the employer’s] intention to withdraw its job offer based on the report.” He also argued the employer relied on the June 13 report (which was never provided to him) and, thus, sending the June 6 report did not satisfy the FCRA. On the other hand, the employer argued in its motion that dismissal of the claim was appropriate because (a) it provided the plaintiff with a copy of the report and the FCRA summary of rights and (2) the convictions, which were listed in both reports, were not erroneous and, in fact, the plaintiff to admitted to them.

The court concluded that a jury should resolve the dispute. In so doing, the court noted that the employer revoked the offer because of the convictions listed in both reports and that while there were no material differences between the criminal history included in the two reports, the final, June 13 report “contain[ed] a more thorough summary of other types of searches run by [the background check company], such as credit report” and the plaintiff “remained unable to contest the full information upon which [the employer] relied even if he indeed received the June 6th transmittal, given that it only included his criminal history.” Because a copy of the final report was not sent to the plaintiff, the court denied the employer’s motion for summary judgment.

The court’s ruling does not equate to a blanket requirement that an employer provide all copies of background reports to rejected job applicants or terminated employees. It is possible the jury will find that, under these facts, a second pre-adverse action notice was not required. That said, employers that receive corrected or more comprehensive reports after sending the initial report should assess the new report to determine whether to send a subsequent pre-adverse action notice. As this case reflects, that both reports contained the same conviction information that caused the employer to revoke the offer did not spare the employer from the expense and burden of a jury trial.

Now more than ever, employers that conduct background checks, whether pre-hire or during employment, should consider taking steps to ensure they are complying with the FCRA’s notice requirements, including a privileged review of their background check process documents and notices and the procedures used when ordering background reports and relying on them when making employment decisions. Employers also should be mindful of other laws impacting their use of criminal history information, including the “ban-the-box” laws sweeping the nation and the Equal Employment Opportunity Commission’s interest in background screening policies that may have a disparate impact on minority workers.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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