This story is hypothetical, but it underscores the importance of compliance with Fair Credit Reporting Act pre-adverse and adverse action laws.

 Say you’re the HR Director of a mid-sized software development firm. The company needs a new full stack engineer, so you start the normal process of recruiting, screening, and interviewing candidates, per company practices. Settling on the most qualified and impressive of the applicants, you make a conditional offer of employment, subject to a background investigation, which the candidate accepts.

What you expected to be routine ends up troubling. The candidate’s background comes back with a conviction for the cybercrime theft of intellectual property. With this information in hand, you dismiss the lead candidate’s offer and run your second choice through the background. When it comes back clean, the second candidate’s hiring is finalized. You breathe a sigh of relief.

Except for one thing: You never notified the first candidate of your intent to dismiss their conditional offer via a pre-adverse action letter. Even though their issuance is required by federal law under FCRA, your company has not adopted a policy of integrating pre-adverse/adverse action letters as part of the HR process. And that is a problem, because the first candidate is very aware of the requirement.

If you had given the first applicant the opportunity to dispute the adverse information found in the background report, he could have furnished documentation showing that the criminal record entered was a clerical error made by the court. Since he wasn’t given the opportunity to dispute the background screening report, your former candidate has retained counsel and is bringing suit against your firm for FCRA violations.

Of course, there are attorneys who specialize in representing clients for these types of FCRA violation cases. For negligent noncompliance, a court can award amounts for the actual damages plus attorney fees if it is determined that reasonable practices were already in place—that is, in essence, if a mistake was made. However, for willful noncompliance—meaning you or your subordinates in the department ignored the law—awards can be ordered for punitive damages and attorney fees. What makes this so attractive to attorneys is that, according to the FCRA, there is no cap on damages exposure.

Even if your firm is convicted of the lesser, negligent noncompliance charge, actual damages can be compounded and extensive. Imagine a scenario where rescinding a candidate’s job offer extends what has already been a lengthy period of unemployment. Soon she is unable to make car payments and her vehicle is repossessed. Without a vehicle, her job options are severely limited. Being able to afford the rent or mortgage is now at risk. A savvy attorney can tie their client’s unemployment, and any unfortunate events that follow, directly to not being given the opportunity to dispute the erroneous criminal background report lawfully. Even in a negligent noncompliance case, the actual damages awarded can be extraordinary, not to mention the disruption to your business.

Making matters worse for the employer, the courts can make awards per FCRA violation and without cap on damages exposure. This means if it can be established that your company has made numerous violations, perhaps hundreds or even thousands back to the inception of the firm, awards can be made for each and every proven instance. Awards resulting from FCRA negligence, therefore, can be severe and damaging to a business—and that’s not hypothetical.

While we always recommend consulting your attorney in employment law, to include FCRA compliance, the TruView Team is expert in the pre-adverse/adverse action process. Our TRU365 background screening platform has automated the Pre-Adverse and Adverse Action delivery process through electronic notices. Clients can use our best-practices pre-adverse/adverse action letters or use their own forms, uploaded to our platform. To ensure security and compliance, the electronic notice requires the applicant to confirm receipt (via applicant-specific identifiers) and captures IP address and a date-and-time stamp when read. The process includes an automatic tracking system for hard-copy notices as well, if preferred by the applicant. TruView can also perform pre-adverse and adverse action letter services, meeting all FCRA requirements, on behalf of our clients.

Please contact us to discuss how TruView can help you meet your regulatory compliance obligations.