District Court Holds That Background Check Adjudication by Consumer Reporting Agency Is Not Adverse Action Under the FCRA If There Is Real Opportunity For Dispute

District Court Holds That Background Check Adjudication by Consumer Reporting Agency Is Not Adverse Action Under the FCRA If There Is Real Opportunity For Dispute

 By David M. Gettings and Bryan M. Haynes 

Employers utilizing background checks in their applicant screening process often battle two competing forces – the need to screen and hire employees quickly and the requirement that they wait a reasonable time before taking adverse action under the Fair Credit Reporting Act. The District Court for the Eastern District of Pennsylvania recently issued a decision on this issue, clarifying when adverse action actually occurs.

In Moore v. Rite Aid, Rite Aid contracted with a consumer reporting agency to generate background checks on applicants, adjudicate those applicants’ background checks against a scoring matrix, send out FCRA pre-adverse notices and, if necessary, provide adverse action notices when denying employment backed on a background check [an enhanced version of this opinion is available to lexis.com subscribers]. The plaintiff argued that the consumer reporting agency’s initial adjudication constituted adverse action. Thus, according to the plaintiff, even though the consumer reporting agency sent out pre-adverse action notices after the initial adjudication, adverse action had already occurred.

According to the court, the pertinent question is whether the adjudication constituted an internal decision on Rite Aid’s behalf, which would not constitute adverse action, or whether the adjudication was actually a final employment decision. In making its decision, the court disregarded the language of the pre-adverse action notice, finding that Rite Aid’s practice, as opposed to the letter’s language, governed the analysis. The court, however, concluded that the plaintiff failed to allege an FCRA violation because she did not plead that she was not provided with a “real opportunity” to dispute the contents of her background check.

The Rite Aid decision provides important guidance for employers who use background checks. In order to comply with the FCRA, employers must ensure that they provide an applicant with a real opportunity to dispute the contents of his or her background check before making a final employment decision. This is consistent with recent FTC and EEOC guidance on the adverse action process, which we discussed here. Employers must also ensure that this real opportunity exists in practice, as opposed to merely on paper, because a court may disregard written policies if they are not implemented effectively.

 Read more at Consumer Financial Services Law Monitor by Troutman Sanders LLP. privacy

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