New Jersey Court Clarifies Liability for Violations of Statute Governing Consumer Background Reports

Background checks enable employers to obtain a vast amount of information about prospective employees. In order to safeguard people’s privacy, the Fair Credit Reporting Act (FCRA) establishes limitations on the collection and use of people’s personal information during the hiring process. The law regulates both employers and consumer reporting agencies (CRAs), which collect consumer information and compile it into reports for employers and others. Both CRAs and employers are potentially liable to job applicants for violations of the FCRA, but liability generally arises under different circumstances. Two recent decisions from New Jersey federal courts clarify who is primarily liable to a job applicant for FCRA violations. Muir v. Early Warning Svcs., et al., No. 2:16-cv-00521, op. (D.N.J., Sep. 15, 2016); Geter v. ADP Screening & Selection Svcs., et al., No. 2:14-cv-03225, op. (D.N.J., Apr. 23, 2015).

The FCRA defines a “consumer report” as any collection of information about an individual with regard to factors like “credit worthiness,…character, general reputation, personal characteristics, or mode of living.” 15 U.S.C. § 1681a(d)(1). A consumer report may include financial information like delinquent accounts and bankruptcies, as well as arrests, criminal charges, convictions, and other legal information. The statute defines a CRA as any individual or business that routinely compiles consumer information into reports in exchange for financial compensation. Id. at § 1681a(f).

A CRA may not issue a consumer report to an employer until the employer certifies that it has complied and will continue to comply with its obligations under the FCRA. Id. at § 1681b(b)(1). An employer must obtain the job applicant’s written consent to obtain a consumer report, and it must provide the applicant with a written disclosure explaining that the employer may use the report in making a hiring decision. Id. at § 1681b(b)(2).

If the employer makes an adverse decision based on the applicant’s consumer report, it must give the applicant a copy of the report and a written statement of their rights under the FCRA. Id. at § 1681b(b)(3). It must also give the applicant a reasonable amount of time to review the report and request the correction of any inaccurate information.

The plaintiffs in Muir and Geter were rejected by prospective employers because of information in their consumer reports. They both claimed that they did not receive the disclosures required by the FCRA, nor were they given an opportunity to correct allegedly inaccurate information in their reports. In Muir, the report incorrectly stated that the plaintiff “had been terminated from her previous job…for internal fraud.” Muir, op. at 3. The plaintiff’s report in Geter included inaccurate criminal history. They each filed suit against the prospective employers and the CRAs that furnished the reports.

In both cases, the plaintiffs claimed violations of the FCRA’s disclosure requirements, including the obligation to provide a copy of the consumer report before making a final adverse decision. The CRA defendants moved for summary judgment, arguing that only the employers could be held liable for a failure to meet these particular obligations. Both courts agreed and granted the CRAs’ motions. The courts essentially held that, in the employment context, employers bear the liability for disclosures. The cases against the employers were able to proceed.

The Resnick Law Group’s employment attorneys can assist you with your employment dispute in New Jersey or New York. To schedule a confidential consultation with a member of our skilled and experienced team, contact us today online, at 973-781-1204, or at (646) 867-7997.

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