Court Rules Job Applicants Don't Have Right to Explain Accurate Background Checks Under FCRA

​Employers covered under the 8th U.S. Circuit Court of Appeals are not necessarily required under federal law to provide job applicants with criminal convictions a chance to explain a negative background check report before rescinding a job offer.

A unanimous three-judge panel of the court ruled May 3 that while the Fair Credit Reporting Act (FCRA) does give job applicants the right to dispute the accuracy of background checks, it does not confer a right to argue accurately reported convictions before losing a job offer.

The court tossed out a lawsuit from an applicant who sued data-processing firm SC Data Center, based in Hannibal, Mo. The plaintiff alleged the data center violated the FCRA by rescinding her job offer before she had a chance to view her background check report and discuss it with the company.

"The job applicant didn't claim the background report was wrong. Instead, she argued that she should have been given a chance to explain the conviction before the offer was withdrawn," said Richard Millisor, a partner in the Cleveland office of Fisher Phillips. Millisor explained that the court ruled in favor of the employer even though it technically violated the FCRA for failing to provide the claimant with a copy of the background check report to review for accuracy before rescinding her offer.

That's because "the act doesn't give applicants the right to explain negative but accurate information in a consumer report before the employer can make an adverse employment decision," he said.

The plaintiff stated on the job application that she had never been convicted of a felony but added that she "was once arrested in 1996 at age 17 and then found not guilty."

A background investigation revealed that the plaintiff was convicted of murder and armed robbery in 1996, was sentenced to 25 years in prison, and released after serving 12 years. Based on this information, her job offer was rescinded before she had a chance to explain the results.

A federal judge in Missouri in 2019 denied SC Data's motion to dismiss the claim, stating that the FCRA's requirement that employers provide job candidates with copies of background checks would be meaningless if they did not have a right to discuss the results.

But the 8th Circuit said nothing in the text of the FCRA grants workers the right to provide context to employers about their criminal histories.

Complying with Notice Requirements

Millisor noted that while the court sided with the employer in this case, the outcome hinged on the accuracy of the felony conviction. "In this case, the job applicant did not dispute the accuracy of the report," he said. And "SC Data Center clearly wrote on the report that the offer was rescinded due to undisclosed felony convictions. But when a discrepancy arises in a situation involving your company, you shouldn't automatically assume that the results of the background investigation are correct or that the job candidate lied on the application. It's important not to jump to conclusions but instead follow the proper process outlined by the federal statute."

That includes complying with the FCRA's notice requirements. "You should create and follow a process to ensure employees receive required disclosures, provide appropriate authorization and receive all necessary notices from start to finish during the background investigation," Millisor said. "Because lawmakers didn't want employers making hiring decisions based on inaccurate information, FCRA requires employers to provide job applicants and employees with notice that they intend to make a decision based on a background report before making the decision, a copy of the report, a description of their FCRA rights, and a reasonable opportunity to respond to any information that may be incorrect."

Lack of Standing

Another issue in this case has to do with legal standing, or the right to bring a lawsuit to court in the first place.  

The 8th Circuit has reiterated that only FCRA plaintiffs who have suffered concrete harm and not plaintiffs who merely claim procedural violations have standing to assert FCRA claims.

But while the 8th Circuit—which hears cases in Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota and South Dakota—ruled that an employer's lack of notice failed to show concrete injury, other federal circuit courts have reached different results.

Additionally, not all state courts, which may also exercise jurisdiction over FCRA actions, require a concrete injury standing requirement, Millisor said.

And state laws on background checks vary and may involve more steps than what is required under the FCRA. "Claims for technical violations can turn into costly class-action lawsuits against employers," he said. "You should carefully review the rules in the locations where your employees are located and coordinate with your workplace law counsel to make sure you have appropriate steps in place to comply."