Prior to running any kind of background check, you must provide each and every candidate with the proper disclosure forms. While you may already have disclosure forms in place, many companies find that their forms are out of date, too inclusive, or confusing to applicants. If you don’t frequently review your forms, your company may soon be the subject of a lawsuit.

Companies that perform background checks frequently face lawsuits pertaining to their screening practices. Only about 20% of companies don’t conduct any kind of background check on potential employees, which means 80% of businesses may face class-action lawsuits if their background screening practices are illegal or out-of-date.

Violation of the Fair Credit Reporting Act’s (FCRA) federal rules has cost employers millions of dollars in settlements, which are usually cheaper than going to trial. Recent Equal Employment Opportunity Commission (EEOC) legal complaints allege that employer disclosure forms were not:

  1. Supplied prior to the background check with the necessary information;
  2. “Clear and conspicuous” enough to serve as a proper disclosure; and
  3. Provided as a stand-alone document.

Frequently updating your company’s disclosure forms can help you avoid costly litigation. More information on the EEOC’s guidelines for employers can be found here.

1: Don’t forget the disclosure basics.

Your disclosure form can be paper or electronic. If your company might obtain a consumer report, the disclosure must include your company’s intention in collecting the personal information for employment purposes. It must be signed and dated before any applicant background information is collected. Disclosure and authorization forms can be separate documents for added protection.

2: Be “clear and conspicuous.”

According to the rules laid out by the FCRA, the disclosure form should explain how a company plans to use background check information, i.e. for employment purposes only. That intention should be clearly stated on your disclosure form, which should not contain any other employment application information.

For example, Nine West is presently facing a complaint from a candidate that alleges the company’s application materials did not meet the FCRA’s standards. The complaint says the application never explicitly used the term “consumer report” to describe the type of candidate information it might collect.

This disclosure must be provided without any additional details that detract from the document’s purpose. For example, district courts have ruled that language releasing a company from liability cannot be included with the disclosure. Liability releases can be included in a document separate from the disclosure. Make sure your disclosures avoid extraneous details.

3: Provide your disclosure as a stand-alone document.

Chuck E. Cheese recently settled a class-action lawsuit against plaintiffs who alleged the company violated the FCRA’s stand-alone requirement by providing candidates a single, multi-page application document. According to the complaint, the combined application also included a background check authorization, a release of liability, and a background check and drug testing consent, among other forms. The company paid out $1.75 million to settle.

While combining authorization and disclosure forms has been a common practice, you should note that it may not be legal for long. Courts may decide that applicants will be better served by completely separate forms, so be ready to make the necessary changes if you haven’t already done so. Until then, the FCRA insists that the applicant disclosure and authorization be provided as a stand-alone document separate from other application materials.

The Importance of Updating Applicant Disclosures for FCRA Compliance

The EEOC has been cracking down on companies for failing to follow the FCRA, and that trend will likely continue. Companies are not keeping their application materials up-to-date, and this oversight is costing businesses millions of dollars nationwide. The baffling part is that compliance is easier than you think.

If you don’t have the time to personally review your application materials, you can hire a background screening professional or an outside consultant to help you update. Professional screeners like InfoMart are experienced with providing documents and running checks that comply with both the FCRA as well as state and municipal laws.

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