The Fair Credit Reporting Act (“FCRA”) has been a fertile area for lawsuits against employers.  Recently, the Third Circuit Court of Appeals provided yet another warning for employers regarding compliance with the FCRA.  In Long v. SEPTA, the court held that an employer violates the FCRA when it fails to provide a copy of the applicable consumer report to prospective employees before taking an adverse employment action.  This decision serves as an important reminder of employer obligations under the FCRA and also provides clear and direct guidance on the steps an employer must take before it rejects an applicant on the basis of information contained in a consumer report or background check.

In Long v. SEPTA, SEPTA denied employment to three applicants who had been convicted of drug offenses.  Prior to making that decision, however, SEPTA did not send the plaintiffs copies of their background checks, nor did it send them notices of their rights under the FCRA.  The plaintiffs, in turn, filed a class action lawsuit, alleging that SEPTA violated the FCRA by taking an adverse employment action against them without providing copies of their background check reports or notices of their rights under the FCRA.

SEPTA argued that it made no difference whether the plaintiffs’ consumer reports were provided before or after its decision not to hire them because the reports were accurate.  Therefore, according to the employer, the plaintiffs suffered no legal injury under the FCRA.

The court rejected the employer’s argument and instead interpreted the statute based on its plain language as establishing two fundamental requirements: (1) that an employer must provide a consumer report and FCRA rights disclosure; and (2) that it must do so before it takes any adverse action.  The court explained that doing so “allows [the prospective employee] to ensure that the report is true, and may also enable him to advocate for it to be used fairly—such as by explaining why true but negative information is irrelevant to his fitness for the job.”  The court went on to note that the “required pre-adverse-action notice of FCRA rights provides the individual with information about what the law requires with regard to consumer reports….It helps ensure that reports are properly used and relevant for the purposes for which they are used.”

Accordingly, a prospective employee has the right to receive their consumer report and a description of their rights under the FCRA before an employer takes any form of an adverse action against them on the basis of information discovered in the report—regardless of how accurate the background check may be.  The court has made it explicitly clear that prospective employees have the right to know of and respond to such information prior to an employer’s adverse action.

If you have any questions regarding FCRA compliance, please contact any member of our Labor and Employment Practice Group.