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This is the first article in a two-part series. The next installment will examine how employers can improve the applicant screening experience and secure candidate data.
Organizations that conduct pre-employment background checks in 2018 will need to focus on compliance in the wake of increased class-action litigation and adapt to screening more workers in nontraditional employment relationships.
FCRA Class-Action Lawsuits Will Continue
Employers faced a wave of class-action lawsuits alleging technical violations under the Fair Credit Reporting Act (FCRA)—like failure to provide notice to applicants in a stand-alone format and getting written permission before running a background check—in 2017.
That's even after the 2016 U.S. Supreme Court ruling in Spokeo v. Robins holding that
plaintiffs must prove "concrete injury" in class-action lawsuits under the FCRA.
The Supreme Court stated in its opinion that plaintiffs could not allege procedural violations, "divorced from any concrete harm," which requires an injury to be "actual or imminent, not conjectural or hypothetical."
But instead of clearing up the issue, the court's decision to send the case back to the Ninth Circuit Court of Appeals to determine whether the plaintiff in the case suffered real harm has led to confusion among courts across the country.
"Lower courts have continued to allow plaintiffs access to federal courts with a simple allegation of a bare procedural violation or technical inaccuracy, resulting in forum-shopping by plaintiffs for the court most likely to rule in their favor," said Melissa Sorenson, executive director of the National Association of Professional Background Screeners (NAPBS).
[SHRM members-only toolkit: Conducting Background Investigations]
"The impact of these decisions, post
Spokeo, is the encouragement of FCRA, data breach and other privacy-related class-action litigation where no evident harm is yet suffered by plaintiffs," said Vu Do, vice president of compliance at PreCheck, a leading background screening provider for the health care industry.
There are numerous ways that an employer can be sued for technical violations, explained Robert Drusendahl, president of The Pre-Check Company, a screening firm in Westlake, Ohio. "For example, presenting an indemnification of liabilities at the same time as an applicant release can be construed as too confusing, leading to a claim. Or, just a statement by the job applicant that receipt of a post-adverse action letter preceded a pre-adverse action letter can lead to a claim," he said.
"It's important to understand that
Spokeo established a threshold, but not a barrier to litigation," said Henry Chalmers, co-chair of the litigation group at law firm Arnall Golden Gregory in Atlanta. "Even in a favorable interpretation of
Spokeo for employers, there are still situations in which plaintiffs could have a viable claim for violations of the FCRA based on disclosures and authorization forms. Pivot points seem to be whether the plaintiffs allege that they had a negative employment outcome as a result of the background check, or whether they would have acted differently if they had received what they would argue is a compliant disclosure form."
The Supreme Court will take the
Spokeo case up again later this year after the Ninth Circuit found that the plaintiff in the case did have standing to sue. But regardless of the ultimate decision, employers must remain vigilant in complying with even the finer points of the FCRA.
"In no way did the Supreme Court decision in the
Spokeo case mean employers could relax obligations for FCRA compliance and it did not mean employers had the right to ignore the technicalities of the FCRA," explained Les Rosen, an attorney and the CEO of Employment Screening Resources, a background screening firm based in the San Francisco area. "Employers will always need to
ensure that they are in compliance with their FCRA obligations and that they are working with a background check provider that understands the FCRA inside and out."
Screening of Contingent Workforce Will Grow
Employers will need to figure out how to adapt their screening processes to the fast-growing contingent workforce in 2018. Contingent workers—staff not on the employer's payroll—may be engaged for a particular project or time period and be self-employed or employed by a third party.
According to the Bureau of Labor Statistics, nearly four out of five employers use some form of nontraditional staffing such as hiring freelancers, temporary workers or independent contractors on an as-needed basis.
Yet many organizations do not realize they potentially face the same liability exposure from their contingent workforce as from their own employees. "Whether the individual is an employee, independent contractor or otherwise, the worker represents the employer's brand, therefore, background screening—particularly when access to people or sensitive material is involved—is a critical risk mitigation tool, regardless of the worker's classification," Sorenson said.
Clare Hart, CEO of global screening firm Sterling Talent Solutions in New York City, said more third-party employment agencies, such as for freelancers, are realizing they need to screen gig workers. "This recognition comes as a result of both expectation on behalf of their customers or users and from litigation which has held on-demand providers accountable for screening practices."
Employers should have contingent workers go through the same screening as regular employees to protect against allegations of disparate treatment and insisting in service contracts that contingent workers be subject to employment screens before they appear for work.
"Who will be doing the background screening, and what does the screening cover?" said Montserrat Miller, an attorney with Arnall Golden Gregory, based in Washington, D.C. "Depending on the sensitivity of the population or information the workers will be working with, I would want to clearly understand what type of screen is being performed."
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