A consistent pattern has appeared in consumer class action lawsuits filed against large employers over the last decade. The dispute is rarely about whether the background check itself was accurate, fair, or used appropriately. It is about the one-page document the applicant was asked to sign before the background check was even ordered.
The Fair Credit Reporting Act requires a written disclosure to the applicant that a consumer report will be obtained for employment purposes, and a written authorization from the applicant before the report is procured. Those two requirements are short, well-defined, and have not changed substantively since the FCRA was enacted in 1970. They have also been the source of many multi-million dollar settlements employers have paid in the FCRA space.
For HR and compliance teams, this is one of the parts of the screening program most worth reviewing with legal counsel. The cost of getting it wrong can be significant. The cost of getting it right is a careful read of the form and the workflow around it.
What the FCRA actually requires
Section 604(b) of the FCRA, found at 15 U.S.C. § 1681b(b), sets out the rules that apply to a consumer report used for employment purposes. Two requirements stand out:
The disclosure. Before procuring a consumer report on an applicant, an employer must provide a clear and conspicuous written disclosure that a consumer report may be obtained for employment purposes. The disclosure must be in a document that consists solely of the disclosure.
The authorization. The applicant must authorize, in writing, the procurement of the report. The authorization may appear on the same document as the disclosure, but it must be specific to the procurement of a consumer report for employment purposes.
Both requirements are short. Both are exact. The word “solely” in the disclosure requirement has been the subject of significant litigation. Courts have generally read it strictly. A document that consists solely of the disclosure cannot also include extraneous information.
State and local law may add further requirements on top of the federal text. Employers may want to review their forms with legal counsel to confirm that both federal and state expectations are addressed.
What often goes wrong
The errors that produce litigation tend to fall into a small number of patterns. None of them require bad intent. Most are caused by a well-meaning attempt to be thorough or to consolidate paperwork. They include:
Extraneous information in the disclosure. The 2017 Ninth Circuit decision in Syed v. M-I, LLC found that an employer’s FCRA disclosure that included a liability release did not satisfy the standalone requirement. The court read the FCRA’s “solely” language strictly. Later cases have looked at similar questions. Even informational additions, state-specific notices, or instructions may be evaluated against the boundary of a standalone disclosure depending on the circuit and the facts.
Combining the disclosure with the application. Some employers fold the FCRA disclosure into the broader employment application. The cost savings can be real. The legal exposure can also be real. A disclosure embedded in an application is by definition not in a standalone document, and employers may want to review that approach with legal counsel.
Combining the FCRA authorization with other consents. A general consent to background screening that also captures consent for drug testing, reference checking outside the FCRA, or other employer programs can blur the FCRA-specific authorization. The authorization must be specific to the consumer report.
Missing state-specific notices. California, New York, Minnesota, Oklahoma, and Washington each have additional or alternative notice requirements beyond the federal FCRA, and other jurisdictions may have their own. Some require a separate state-specific disclosure. Some require the applicant be given the option to request a copy of the report. Some impose additional restrictions on the use of credit information. An employer relying on a federal-only form may be missing required state language depending on the applicant’s location.
Stale authorization for ongoing screening. A single authorization signed at the time of hire may not cover an employment screening conducted years later for promotion, reassignment, or retention. Employers may want to review whether their existing authorization language supports future or ongoing screening, especially if they conduct checks after hire. Periodic re-authorization is one practice some employers adopt after consulting with counsel, depending on the screening program.
Pre-adverse action timing. Before taking an adverse action based on a consumer report, an employer must provide the applicant with a copy of the report and the CFPB’s Summary of Your Rights Under the FCRA. Employers must provide the applicant an opportunity to review and dispute the report before a final employment decision is made, and should review applicable federal, state, and local adverse action requirements to determine applicable timing requirements. In practice, the pre-adverse action notice is sometimes sent close to the final adverse action notice, which can raise questions about whether the applicant had a meaningful opportunity to respond.
Why this keeps generating class actions
Two structural features of the FCRA make disclosure and authorization defects an area of frequent focus for plaintiffs’ counsel. The first is statutory damages. The FCRA allows statutory damages of up to $1,000 per willful violation, plus attorney’s fees. Multiplied across a class of applicants who received the same form over a multi-year period, the math can reach the millions.
The second is that the defect is often on the form itself. In many of these cases, a plaintiff does not need to prove that an adverse hiring decision was made or that an underlying harm occurred. The form either satisfied the standalone requirement or it did not. Plaintiffs’ counsel have continued to file these cases, and outcomes vary.
Major retailers, restaurants, transportation companies, manufacturers, and hospitality groups have settled FCRA disclosure class actions in the multi-million dollar range over the last decade. The underlying issues have often resembled the patterns described above.
What employers can do this quarter
Employers can take a relatively short look at the parts of their FCRA program most often cited in litigation. The questions that may be worth raising with legal counsel include:
- Is the FCRA disclosure used at hire in a document that consists solely of the disclosure? Opening it on a clean page and reviewing what else appears there can be a useful first step.
- Is the authorization specific to the procurement of a consumer report for employment purposes, or is it bundled with other consents that broaden its scope?
- Are state-specific notices applied based on the applicant’s location, particularly for applicants in California, New York, Minnesota, Oklahoma, and Washington, or any other jurisdictions where the employer hires?
- For current employees who are subject to ongoing screening, is the original authorization still being relied upon, or has the program incorporated periodic re-authorization?
- Is the pre-adverse action notice sent with an opportunity for the applicant to review and dispute the report before any final decision, consistent with applicable federal, state, and local adverse action requirements?
- Are the certifications between the employer and the consumer reporting agency current, signed, and reflective of how the program operates today?
Most of these questions can be reviewed by reading the forms and the workflow with the FCRA text and current circuit law in mind. Many of them can be discussed with counsel as form revisions rather than program changes.
How CIC supports employment screening
Corporate Intelligence Consultants operates under the FCRA framework as a consumer reporting agency. CIC’s role in the employer’s FCRA program is the consumer reporting agency role. That includes providing sample disclosure language for employer review and use, supporting the authorization process, and supplying sample pre-adverse action and adverse action notice documents for employer review and use. CIC provides screening information for employer review, and the employer remains responsible for reviewing the report, applying its own policies, and making the hiring decision.
Where new state laws or new federal guidance affect form requirements, the CIC team communicates the changes to employer customers and supplies updated samples for employer review. Employers should review their forms and processes with legal counsel before adopting any sample provided by CIC.
A short FAQ
Does the disclosure have to be a separate piece of paper?
The FCRA requires the disclosure be in a document that consists solely of the disclosure. The authorization can appear on the same document, but other content cannot. Courts have generally read the standalone requirement strictly, particularly in the Ninth Circuit.
What if our applicants are in multiple states?
Several states have additional or alternative disclosure requirements. A federal-only form may be insufficient for applicants in California, New York, Minnesota, Oklahoma, and Washington, among others. The appropriate form set depends on where the applicant is located, and employers may want to review the question with counsel.
Can one authorization cover ongoing employment screening years later?
The FCRA covers consumer reports used for employment purposes, including for promotion, reassignment, and retention. Whether a single authorization is sufficient for screening conducted years after the original signing depends on the language of the authorization and the design of the screening program. Employers may want to review whether their existing authorization language supports future or ongoing screening with legal counsel.
Who is responsible if the disclosure form is non-compliant?
The employer procures the consumer report and is responsible for compliance with the disclosure and authorization requirements. The consumer reporting agency may supply sample documents and supporting materials, but the employer is the party that obtains the report and remains responsible for the program.
Closing thought
The FCRA disclosure and authorization requirements are short and specific. They have not changed in any material way in decades. The defects that have produced the largest settlements have often been small drafting choices, repeated across thousands of applicants, sustained over years.
A careful read of the form is one of the higher-leverage compliance activities an HR or compliance team can undertake in any given quarter. It is also one of the easiest to defer. This may be a good time to schedule it with internal compliance or outside counsel.
CIC partners with employers to provide structured screening information that supports consistent and defensible hiring decisions. To learn how CIC supports employment screening, explore CIC’s employment screening services or contact the CIC team.
This blog post is provided for informational and educational purposes only and does not constitute legal, regulatory, or compliance advice. The Fair Credit Reporting Act and related federal, state, and local laws are complex and continue to evolve. Corporate Intelligence Consultants is a consumer reporting agency and is not a law firm. Employers should review their own screening program, forms, and processes with their internal compliance team or legal counsel before relying on any information in this post.