Third Circuit Affirms That Employers Must Provide Background Check Reports to Applicants Before Relying on Them to Deny Employment

On September 10, 2018, the United States Court of Appeals for the Third Circuit affirmed that job applicants could sue a prospective employer under the Fair Credit Reporting Act (FCRA) for failure to provide background check reports (referred to consumer reports under FCRA) before revoking offers of employment on the basis of information contained in those reports.

In Long v. SEPTA, No. 17-1889, 2018 U.S. App. LEXIS 25560, the defendant offered employment to three job applicants contingent upon their passing background checks. The background checks for each applicant revealed past drug convictions, so the defendant notified each applicant that they would not be hired as a result.

Under FCRA, employers who deny employment to a job applicants based upon a background check reports must provide the applicant with a copy of the report and a copy of the applicant’s FCRA rights before denying employment. The three applicants in Long v. SEPTA asserted a class action claim alleging that the defendant violated these two FCRA requirements.

The defendant sought to have the lawsuit dismissed on the grounds that the applicants suffered no actual harm because (1) they did not deny the accuracy of the background check reports, and (2) they were not prejudiced by the lack of notice since they timely filed suit. The Third Circuit found in favor of the plaintiffs on the first issue and in favor of the defendant on the second issue.

With respect to the alleged failure to provide the applicants with copies of their background check reports, the Third Circuit observed that FCRA confers on an applicant a right to receive, before adverse action is taken, a copy of his or her background check report (regardless of its accuracy). “This permits individuals to know beforehand when their consumer reports might be used against them, and creates the possibility for the consumer to respond to inaccurate or negative information – either in the current job application process, or going forward in another job application.” Given this statutory obligation, the court concluded that “taking an adverse employment action without providing the required consumer report is the very harm Congress sought to prevent….”

With respect to the defendant’s alleged failure to provide copies of the notice describing the applicants’ FCRA rights, the Third Circuit found that the plaintiffs lacked standing to bring that claim. The court concluded that, because they independently learned of their rights and timely filed suit, they did not suffer the type harm the requirement was intended to avoid.

The FCRA provides plaintiffs with the ability to recover actual or statutory damages, plus potential punitive damages, attorney’s fees, and costs for willful violations. Therefore this case stands as a reminder that employers who use background checks should ensure that they provide all required notices.