The Importance of Written Policies and Procedures

By Michael Klazema on 7/17/2015

A federal class action lawsuit was filed June 9, 2015, in the California Northern District Court which should serve as a reminder to employers of the importance of complying with the Fair Credit Report Act when conducting background screening for employment purposes.  The plaintiff’s attorneys in the case allege that a car rental company willfully violated the Fair Credit Reporting Act (FCRA) in the way it used background checks of job applicants. This case is important because it shows how proactive handling of applicants can violate the FCRA.

Using consumer reports is highly regulated. The FCRA places many requirements on those who furnish consumer reports and on those who use them. Whenever a consumer report is obtained for employment purposes, additional compliance measures are placed on the employer.

Employers must provide job applicants with a clear, conspicuous, written disclosure in a standalone document and get the applicant’s express written authorization before conducting a background check.  The FCRA also requires that, before taking adverse employment action (i.e., denying or revoking a job offer) based on a background check’s results, employers must provide the applicant with a copy of the consumer report and a summary of the applicant’s rights under the FCRA, and give the applicant a reasonable amount of time to respond or dispute the accuracy of the report. A minimum of five business days has been established as reasonable for notices delivered by mail.  Also, the FCRA requires that, after taking adverse employment action, the employer must provide notice of the adverse action to the applicant, provide the applicant with contact information for the consumer reporting agency that prepared the report, and provide the applicant with a summary of his or her rights under the FCRA.

In this case, the plaintiff’s attorneys allege that the employer violated the FCRA by:

  1. Failing to inform applicants in a clear, conspicuous, written document consisting only of the disclosure that it may procure a consumer report for employment purposes;
  2. Failing to obtain written authorization for the procurement of consumer reports; and
  3. Using consumer reports to make adverse employment decisions without first providing the applicant with sufficient and timely notification of its intent to take adverse action, a copy of the report, and a summary of the applicant’s rights under the FCRA.

The alleged facts of the last claim reveal a trap for proactive recruiting departments that value serving their applicants. As with many employers, the employer had allegedly retained the consumer reporting agency to mail a copy of the report to the applicant if the report might be adverse to the applicant. The plaintiff’s attorneys allege that the employer obtained a background check and that the applicant’s recruiter informed him that he failed the background check by phone very shortly after it was complete ― before the consumer reporting agency had an opportunity to send a copy of the report to the applicant.

This is a trap for any motivated, applicant-oriented recruiting department that believes in transparency and communication. The presumably well-meaning recruiter allegedly communicated the result of the background check in a manner that indicated finality, where the pre-adverse-action notice that allegedly went in the mail the next day would likely have invited a dispute of any inaccurate or incomplete information.

The bases for this lawsuit are for alleged failures that can be prevented by having written policies and procedures, and adhering to those policies and procedures. The case also highlights the importance of employers working closely with their consumer reporting agency to ensure compliance. Written policies and procedures can be used to show a court that the employer does not willfully violate the FCRA, but rather any alleged violation is out of the ordinary practice.

To address this particular case, an employer would need to adopt a policy ― and train on it ― that recruiters are not to communicate or take action on a background check until at least five business days from the date of the pre-adverse-action notice. Because such a policy is counter-intuitive for a motivated recruiting department, employers should consider disallowing line personnel from having access to reports until at least five business days after a pre-adverse-action notice is sent.

Given the recent wave of class action lawsuits involving alleged FCRA violations, and the substantial monetary assessments being awarded to plaintiffs, this is an issue that is not going away any time soon. Please contact client services if you have any questions or suggestions about our services, or for a review of your background screening policies and procedures.

What Employers Should Do:

  • Employers should review their policies and procedures about background checks annually to ensure compliance with the FCRA and state laws. This includes a policy that recruiters are not to communicate or take action on a background check until at least five business days from the date of the pre-adverse-action notice.
  • In combination with its policy reviews, employers should train their employees on compliance with its policies and procedures.
  • Employers should regularly follow-up with their field operations about how and when applicants are notified of their background check results.

For more details on the FCRA, EEOC Guidance, various state laws and much more, please visit’s compliance resources and compliance updates archives.

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