A lot of employers like to conduct background checks during the hiring process that include credit reports. They do this because they feel a credit report gives them a sense of how responsible the candidate is and whether they might pose a theft or embezzlement risk. But a recent Massachusetts case shows that employers can wind up in hot water if they don’t comply with all requirements of the federal Fair Credit Reporting Act, even the most hyper-technical ones.
In that case, when plaintiff Nicole Kenn applied for a position with a company called Eascare, she signed a disclosure form and authorization allowing Eascare to run a background check, including a look into her credit history. The disclosure form also included a waiver releasing Eascare from any liability resulting from the background check as well as other allegedly extraneous language.
Kenn left the company a year later, alleging her employer retaliated against her for complaining about sexual harassment. In addition to bringing discrimination and retaliation claims, she argued in court that the company violated the FCRA by including the liability waiver and other language on its disclosure form instead of having her fill out a standalone form as required by the act.
She also brought this claim as a class action, meaning she was suing on behalf of herself and other employees who were also subject to credit checks under the same conditions.
The employer argued that Kenn had no standing to bring the case in the first place because this technical violation of the FCRA did not constitute a concrete “injury-in-fact.”
But the Massachusetts Appeals Court disagreed, pointing out that the FCRA authorizes people to sue in state or federal court for any “liability” created by its provisions. Eascare’s willful failure to provide the type of disclosure required by the law, if proven, would create such liability.
Now the company faces potentially having to pay up to $1,000 in damages for each violation it committed. It could also be subject to punitive damages, which are unlimited, and be ordered to pay employees’ attorney fees.
The lesson for employers who plan on conducting any kind of background check is to consult with an attorney to review the disclosure, authorization, waiver language forms and language to make sure they’re not falling into a costly trap.