Litigation Update: FCRA Claim Against Paramount is Thrown Out

Background Checks

Paramount Gets FCRA Claim Thrown Out

Finally, a voice of reason. Employers got some good news from a judge in the Northern District of California last week, when the court granted Paramount Picture’s motion to dismiss a class action claim for alleged Fair Credit Reporting Act (FCRA) violations. The case was one of the many class actions that have been flooding the federal courts, disputing the validity of the disclosure form used for running a background check. This wave of litigation has erupted over the past twelve months, putting employers on the defensive against FCRA claims seeking millions in statutory and punitive damages.  The judge’s decision to dismiss the case against Paramount is a welcome development, and may be a turning point for employers facing FCRA class actions of this type.

The plaintiff alleged that Paramount violated the FCRA’s requirements for disclosure of consumer reports. The specific code section, 15 U.S.C. § 1681b, provides that before conducting a background check, an employer must make a “clear and conspicuous disclosure”, “in a document that consists solely of the disclosure” (emphasis added). The plaintiff alleges that Paramount violated the above provision of the FCRA by including some extraneous information in its disclosure form—namely a certification that the information provided by the plaintiff was true and correct.

If this sounds like splitting hairs to you, suffice it to say that the court agreed. Citing a 1997 opinion[i] letter from the FTC, the court maintained that the one-sentence certification Paramount included in its disclosure form, while not technically part of the statutorily permitted authorization, was close enough. The court found that while Paramount may not have followed the exact letter of the law, its actions certainly did not rise to the level of willful disregard of the statute.  The court reasoned that the additional sentence served to “focus the consumer’s attention on the disclosure.”

[E]ven if inclusion of the certification in Paramount’s disclosure form did not comply with a strict reading of § 1681b(b)(2)(A)’s requirement that the document consist solely of the disclosure and the authorization, it is not plausible that Paramount acted in reckless disregard of the requirements of the FCRA by using this language.

The icing on the cake was the judge’s determination that there was nothing the Plaintiffs could do to amend the claim to refile or salvage their case.  Let’s hope that other courts hearing dozens of similar cases will follow Judge Chhabria’s lead.

Case Name: MICHAEL PEIKOFF, Plaintiff, v. PARAMOUNT PICTURES CORPORATION, Defendant Case No. 15-cv-00068-VC, U.S. District Ct. for the Northern District of California.

Case File Date: February 19, 2015

Dismissal Date: March 25, 2015

Cause of Action: Class Action, Fair Credit Reporting Act 15 USC 1681

Bottom Line: Finally a voice of reason from California’s Northern District. The court threw out an FCRA class action claim for alleged disclosure violations, finding that the additional language in the document did not constitute a willful violation of the statute and did not rise to the level of a violation. This is welcome news for employers facing similar claims for their background screening process.

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[i] See Letter from William Haynes, Attorney, Div. of Credit Practices, Fed. Trade Comm’n, to Harold Hawkey, Emp’rs Assoc. of N.J. (Dec. 18, 1997), 1997 WL 33791224.

 

5 Things I’ve Learned About Background Checks

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 I’ve been knee-deep in the online employment space for almost 20 years. But when EmployeeScreenIQ offered me a full time job last year, among other things, I thought it would be a great opportunity to stay in the industry while viewing the world through a very different perspective.

One example: Not every job opening needs a Help Wanted sign on the Internet but every hire needs a background check – even if every employer doesn’t do one on every candidate.

Needless to say, I’ve learned a lot about screening job candidates and the companies who do so in the past year. There’s much that goes into what makes this engine purr.

Here’s a breakdown of what opened my eyes the most:

  • Background checks are pretty much a commodity. Everything in a background check is publicly accessible. An arrest record in Any County, USA can be seen by anyone who knows what they’re looking for. Differentiation in this industry is achieved by having talent on the ground checking said information that’s better than the competition. That means constant attention to detail and efficiencies. It also means customer service truly makes a difference. User experience from the technology side is important too.
  • Companies are scared to death. No one wants to recruit an employee who ends up being a bad seed and does something criminal. Not only is doing so a litigious nightmare, but it’s also a social media disaster waiting to happen.
  • Candidates are scared to death. Lying on resumes and stretching the truth is out of control. Desperation leads to deception. Diploma mills are big business as a result, awarding PhDs and MBAs to anyone with a few hundred dollars to spend. Our own President and COO has a wall full of bought diplomas, showing just how easy it is to be something you’re not.
  • Government keeps everyone guessing (and pulling out handfuls of hair). When the GOP won control of congress last year, it increased speculation that EEOC regulations might be eased and litigation defused. Additionally, the wave of marijuana legalization means employers have to stay alert to what’s going on with all levels of government.
  • Background checks aren’t going away. You can argue that job postings might one day be unnecessary, thanks to sourcing or social media or robots or something, but as long as people behave badly – and they always will – then there will be a need to screen them before hiring them.

There are others, and nuances happen almost weekly. But this is a good overview of what I’ve discovered the past year. Never a dull moment, and the roller coaster is always more fun than the merry-go-round.

Government Study on Background Checks Addresses Incomplete FBI Criminal Records

Missing Data

The Government Accountability Office (GAO) has been busy. At the request of Congress, it’s been looking into criminal background checks. Last week the GAO released a report of findings from a two year study titled “CRIMINAL HISTORY RECORDS: Additional Actions Could Enhance the Completeness of Records Used for Employment-Related Background Checks.” The report lives up to that lengthy title–it is the most comprehensive accounting of the current state of FBI background checks, criminal record databases, and practices since 2006. It reveals when and why states conduct FBI record checks, and looks at whether states have improved upon reporting complete records into the FBI database. It also looks at the practices of private companies that conduct criminal record checks.

Congress has good reason to be concerned. Every year, more state and federal agencies are turning to statewide databases and the FBI records to screen employees for safety and security reasons. The number one concern is this: incomplete records.

Back in 2006, the Attorney General reported that the FBI criminal background check system was woefully inadequate, consisting of a patchwork of state and federal laws. It found inconsistencies in access to FBI criminal record checks across states and industries, concluding that records were incomplete and were not reported consistently. Since then, little has changed.

State Reporting and the FBI

The FBI database relies on the states to supply complete and accurate records. The GAO reports that while some states have made improvements, more progress is needed. More records now contain both the arrest and final disposition (e.g., a conviction), but there are still gaps. According to the report, twenty states reported that more than 75 percent of their arrest records had dispositions in 2012. That means around 25 percent of those state’s records did not have dispositions. That’s a pretty big gap. Those of us in the private sector know from experience that incomplete records can’t be relied upon for hiring decisions; they lead to delays in hiring, rejection of qualified candidates, and lawsuits.

The report notes that the FBI’s Advisory Policy Board, which includes representatives from federal, state, and local criminal justice agencies, created a Disposition Task Force in 2009 to address this very problem. But the Task Force has no current plans or time frames in place to do what’s needed—to make improvements in national standards for collecting and reporting disposition information.

Private Background Companies

Given the state of affairs with state reporting and FBI sources, it’s no wonder that employers, including government agencies, have turned to private screening companies. The report notes that the use of private companies to conduct criminal history record checks appears to be increasing because of employer demand:

“(P)rivate background check companies can offer benefits that government agencies are not always able to provide, including collecting and consolidating criminal justice information from multiple sources, achieving faster response times than Management officials from state agencies, and creating reports that include non-criminal-justice information.”

Private companies are able to return results faster because they don’t rely on the FBI database or state-reported records. They conduct name-based searches on a wider variety of sources, going directly to the courts for the most current and up-to-date information. The report points out challenges to the private model as well, like false positives—which can occur when a person with a common name is associated with another person’s records—and false negatives, which can occur when a search misses a record because of errors in the record. However, private background check companies mitigate these errors by using additional identifiers—such as date of birth and address— when conducting checks. Moreover, regulators like the FTC are actively enforcing consumer protection laws like the Fair Credit Reporting Act, to keep private companies in line.

Conclusions

After conducting a nationwide survey of 47 states and the District of Columbia, interviewing officials that manage checks from the FBI and 4 states, speaking to stakeholders like private background companies and trade associations for background screeners, and regulators like the Federal Trade Commission, the GAO concluded that one thing is clear. Criminal background checks are here to stay. Employers and government agencies are increasingly using criminal history records for employment, volunteers, and licensing. And to do that well, they need accurate and complete criminal records— including the final disposition of any criminal charges.

What the GAO Recommends

The report concludes with these specific recommendations:

  • To improve disposition reporting that would help states update and complete criminal history records, we recommend that the Director of the FBI task the FBI Advisory Policy Board to establish a plan with time frames and milestones for achieving its Disposition Task Force’s stated goals.
  • To potentially help states enhance the completeness of their criminal history records, we recommend that the Director of the FBI and the Director of the Office of Personnel Management clarify what disposition information OPM will provide to the FBI and formally agree on how OPM will provide it. This would enable the FBI to forward the information to states and allow each state to determine if the information can be used to update their criminal history records.
  • To better equip states to meet the regulatory requirement to notify individuals of their rights to challenge and update information in their criminal history records, and to ensure that audit findings are resolved, we recommend that the Director of the FBI—in coordination with the Compact Council—determine why states do not comply with the requirement to notify applicants and use this information to revise its state educational programs accordingly.

It will be interesting to see the kind of follow up that ensues. One thing conspicuously absent from the recommendations is any follow up with private industry, which has an active stake in the process. Ironically, the private background screening industry is miles ahead of the states and other government employers when it comes to ensuring the accuracy of records and protecting the rights of consumers in the screening process.

Criminal Background Checks

3 Background Screening Practices to Prevent Casino Employee Theft

Casino employee theft

Is your business being sabotaged by its own employees?

For many employers in the gaming industry, the answer to this question may be a surprising one. Research shows that almost half of all losses in casinos is due to employee theft. In casinos, theft can happen in many different places, from the cashier cage to the vault rooms to the casino floor.

Material theft isn’t the only kind of theft that employees can commit. Time theft, when employees are supposed to be working but are loitering or doing personal things without anyone knowing, is another serious problem in the workplace. In the United States, it is estimated that employee time theft costs employers almost six full weeks of an average employee’s salary every year.

Completely preventing theft is nearly impossible. Even an employer who takes every precaution may still get burned by theft, especially in the field of gaming where money flows so openly throughout the business. Fortunately for casino owners and operators, there are background screening best practices that can help minimize the chance of employee theft.

Perform Criminal Background Checks

A job candidate’s criminal background doesn’t have to govern his or her future, but it can give you some insight into their character or any potential risks a past record might cause. An employee with several violations relating to theft or other crimes that involve dishonesty may not be the right fit for a casino environment. It’s imperative that you find a background screening provider that can provide an accurate and comprehensive look at a candidate’s criminal background. Many employers have been swindled by an employee for money or other assets, only to discover later that the employee had a criminal record with this kind of activity—and that record was never identified during the background screening process.

Verify Past Employment

Another key background screening practice that might help determine if a candidate would be a good fit is employment verification. By confirming the information on a candidate’s resume you can determine:

1. If they have the experience you’re looking for.

2. If they are honest.

Knowing if a candidate was transparent about their qualifications on their resume may be telling of their personality and character. If a resume verification reveals that they were prone to lying about their employment or even education, they might not be the most trustworthy employee.

Pre-Employment Credit Check

Casinos are unique in that there aren’t many other workplaces where employees are so frequently around thousands of dollars in cash. In a business where money is handled often, employers must be sure that they check out an employee’s financial history. A pre-employment credit report is not used in most employment background checks, but it might be useful to ensure that prospective hires don’t have a large amount of outstanding debt. A bad financial picture can be a warning sign that an employee could be at risk for committing theft.

At the end of the day, it’s essential that you ensure you have a screening provider that conducts comprehensive employment background checks, allowing you to make smarter hiring decisions. When you make better hiring decisions, you will help the gaming industry remain successful armed with the right employees and also protect your business from unnecessary risk.

 

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Is Ban the Box Legislation Out of Control?

BTB

It’s no secret that ban the box legislation is on the rise in cities, counties, and states across the United States. Just in case you haven’t heard much about this movement yet, here’s a brief explanation. When a particular location “bans the box” this means that employers are unable to include the check box on applications which asks whether or not an applicant has been convicted of a crime—at least not until later in the hiring process.

While these laws are well-intentioned, they’ve often become confusing for employers. While they protect job candidates from discrimination, laws are inconsistent, which exposes employers to an increased risk of breaking the law if they are unaware of the facts. Continue reading Is Ban the Box Legislation Out of Control?

3/12/2015 EmployeeScreenIQ and DirectEmployers Association Announce Strategic Partnership

Direct Employers Association

This release was distributed via PRNewswire by EmployeeScreenIQ on Thursday, March 12, 2015.

CLEVELAND, March 12, 2015 — EmployeeScreenIQ, an industry-leading background screening provider, and DirectEmployers Association, an employer-owned association focusing on OFCCP compliance and recruitment marketing, are proud to announce a strategic partnership to provide association members with a pre-employment background screening solution accompanied by exclusive discounts and savings.

“DirectEmployers Association has been serving its members with market-leading services for a very long time,” said Joel Cheesman, Director of Strategic Alliances for EmployeeScreenIQ. “Their members trust them, and I’m excited to work closely with the team at DirectEmployers to provide best-of-class employee background checks and compliance education.”

As part of the agreement, in addition to exclusive savings, both parties will co-market each others products and services via mediums like Facebook and Twitter. EmployeeScreenIQ will also be sponsoring DirectEmployers 2015 Annual Meeting & Conference (DEAM15) in Indianapolis, May 13-15 at the Sheraton Indianapolis City Centre Hotel.

Other co-marketing activities include the following:

  • Guest blog posts
  • Outbound email messages
  • Social media promotion
  • Conferences and trade shows
  • Webinars

“The synergies between our two organizations – most noticeably in regards to personnel and business objectives – were obvious,” said Shannon Offord, Manager of Strategic Partnerships at DirectEmployers. “I’m really looking forward to working with the EmployeeScreenIQ team and providing more education to our members that will improve their employment screening strategies.”

“DirectEmployers’ brand in our industry is an undeniable heavyweight,” said Nick Fishman, EmployeeScreenIQ’s Chief Marketing Officer and Executive Vice President. “We’re really happy to be partnered with them and their team.”

About EmployeeScreenIQ
EmployeeScreenIQ helps employers make smart hiring decisions. We do this through a comprehensive suite of employment background screening services including the industry’s most thorough and accurate criminal background checks, resume verification services and substance abuse screening. EmployeeScreenIQ is accredited by the National Association of Professional Background Screeners (NAPBS), a distinction earned by less than two percent of all employment screening companies. For more information, visithttp://www.EmployeeScreen.com.

About DirectEmployers Association
DirectEmployers is an employer-owned association focusing on talent acquisition and OFCCP compliance that utilizes its technology and thought leadership to amplify job visibility and employment brand, facilitate partnerships to meet EEO/AA goals and provide proof of job delivery. For more information, visit http://www.directemployers.org.

Media Contact:

Joel Cheesman, Director of Strategic Alliances, EmployeeScreenIQ, (800) 235-3954 x490, jcheesman@employeescreen.com

Big Reforms Announced by Big 3 Credit Bureaus

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Later today, the big three credit bureaus, Experian, Equifax and TransUnion are expected to announce major new reforms on how they will report adverse information on a consumer’s credit report and the steps they will take when a consumer wishes to dispute the information.

What’s The Difference

According to the Wall Street Journal, the credit bureaus have agreed to wait 180 days before adding any medical debt information. During this time, consumers will have the opportunity to clear up the debt. When an insurance company pays off medical debt, they will quickly be removed from report (as opposed to other negative information which can stay on a report for up to seven years). Continue reading Big Reforms Announced by Big 3 Credit Bureaus

3/5/2015 Courts Throughout the U.S. Closed Due to Winter Storm

Background Check Delays Due to Snow

Please note that the following states are reporting court closures today, March 5, 2015 due to inclement weather.

  • New Jersey
  • Mississippi
  • Indiana
  • West Virginia
  • Tennessee
  • Kentucky
  • Washington DC
  • Alabama
  • Pennsylvania

All those conducting employment background checks in the affected areas will experience delays until the courts reopen.