Criminal background checks obtained for employment purposes are under attack from various sources – the plaintiffs' bar via class and individual lawsuits lodged against employers and consumer reporting agencies, the U.S. Equal Employment Opportunity Commission, regulatory agencies, and the legislatures of states and municipalities.  On the other hand, even the U.S. Supreme Court has reaffirmed the potential value that background checks have for employers, noting that, "[r]easonable investigations of applicants and employees aid the Government in ensuring the security of its facilities and in employing a competent, reliable workforce." Likewise, governments continue to pass laws requiring specified employers, such as those in the healthcare, financial, security, and child care industries, to conduct criminal background checks, with the explicit or implicit rationale of protecting the public from risks associated with employing certain ex-offenders.

The contrast between employers' continuing legitimate interests in conducting thorough criminal background checks and the concurrent elevated risks of non-compliance with a varying and increased patchwork of legal requirements means that employers must use every tool available to demonstrate that their background check practices are lawful when challenged.  One such tool that has been underutilized to date is the subject of this Littler Report – a portion of the federal Fair Credit Reporting Act (FCRA) which was amended by the Fair and Accurate Credit Transactions Act of 2003 (FACTA). 

The FACTA provides that certain reports on employees related to employer "investigations" are exempt from most of the usual requirements that FCRA imposes on employers that obtain and use those reports from third-party consumer reporting agencies (CRAs) for employment purposes.  As such, depending on the circumstances, an employer who is subjected to individual or class action lawsuits based on an alleged failure to comply with the FCRA may have a complete defense available under the FACTA.  There are still many open questions about the applicability of the FACTA, but employers should remain aware of, and be certain to evaluate, this potential defense in any FCRA lawsuit lodged against them.

To read the Littler Report, please click here.