BUSINESS WATCH

FTC Revises Rights Summary Form for Employee Background Checks By Robert T. Cannella

 

 

Development: Employers who obtain “consumer reports” on current or prospective employees are required to notify those individuals of their legal rights regarding such reports. The Federal Trade Commission (FTC) recently revised the form required to be used in giving that notice.

 

Discussion: There are many types of reports – such as credit reports, criminal history reports and other “background checks” – that vendors will provide for a fee to employers regarding current and potential employees. Many of those reports and background checks fall within the definition of “consumer reports” under the federal Fair Credit Reporting Act and thus trigger requirements that employers must meet before and after obtaining and using those reports.

 

A “consumer” under the Act is defined simply as “an individual.” A “consumer reporting agency” (CRA) includes, among others, any person or entity that, for compensation or a fee or on a cooperative nonprofit basis, regularly assembles or evaluates information on individuals for the purpose of providing reports to third parties (such as employers and lenders). A “consumer report” according to one federal appeals court is thus “virtually any information communicated by a consumer reporting agency for any one of the purposes enumerated in the [the law], including but not limited to” employment purposes. Employment purposes include evaluating an individual for employment, promotion, reassignment or retention as an employee.

The precise requirements that employers must meet when seeking and using consumer reports for employment purposes are too extensive and detailed to permit adequate summary of them in this short article. However, those requirements generally include:

 

·          Before procuring the report, clearly and conspicuously disclosing to the individual in writing that a consumer report may be procured and obtaining the written authorization of the individual;

 

·          Before denying employment or making any other decision for employment purposes that adversely affects the individual (“adverse action”), providing a copy of the report and of the FTC-prescribed summary of the individual’s rights under the law to the individual. (This rights summary is the form that the FTC recently revised, to be effective January 31, 2005);

 

·          After taking any adverse action based wholly or partly on the report, providing to the individual orally or in writing or electronically (1) notice of the adverse action, (2) the name, address and telephone number of the CRA that furnished the report; (3) a statement that the CRA did not make the decision to take the adverse action and is unable to provide the specific reasons why the action was taken, and (4) notice of the individual’s right to obtain a free copy of the report from the CRA within a sixty day statutory time period and to dispute with the CRA the accuracy or completeness of information in the report.

 

The new FTC form to be used in providing the summary of rights of individuals under the law may be found at Appendix F at the FTC website location, which is:

 

       http://www.access.gpo.gov/su_docs/fedreg/a041130c.html

(Please copy this URL and paste into your browser address line to access.)

Appendix H at the same location includes a more detailed summary of the legal obligations and responsibilities the Act imposes on employers who obtain consumer reports. We will also be pleased to assist our clients on request in complying with the requirements of the Act.

 

 

 

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