Liability abounds in the background screening industry — with plenty of grey areas, pitfalls, and consequences awaiting those companies unlucky enough to be unprepared when the time comes. Both Consumer Reporting Agencies (CRAs) and their clients are vulnerable to scrutiny.

Case in point: as detailed in this story by the WBFO, two retail companies, Big Lots and Marshalls, both suffered sizeable financial losses for failing to remove Ban the Box-related criminal history questions from their pre-employment applications.

There are three basic outcomes when a company fails to carry out a FCRA compliant background check, especially with regards to class-action lawsuit:

  1. The consumer reporting agency (aka CRA, which is a formal title for screening companies) is fined.
  2. The client is fined.
  3. Both the client and the CRA are fined.

Related: 5 Ways Everybody Loses in Employment Discrimination Cases

1) The CRA Is Fined

While this outcome is less common, allegations of wrongdoing can still be leveled directly at CRAs by applicants. The same rules apply for everyone: once a candidate demonstrates an explicit violation of their FCRA rights to the Equal Employment Opportunity Commission (EEOC) and/or the Federal Trade Commission (FTC), the litigation process unfolds rapidly.

One of the main factors in this situation is the level of expertise expected from background screening companies: screeners must strictly follow a litany of steps on a daily basis to remain fully compliant. Organizations like the National Association of Professional Background Screeners (NAPBS) are a fantastic resource for screeners and employers to help keep track of changes in hiring legislation.

2) The Company Is Fined

When a company is the only defendant in an employee screening-related case, prosecutors often uncover elements of the hiring process that are outdated, faulty, and/or outright illegal. Regrettably, screening vendors in general have no direct influence on these types of internal decisions: of course, any background screening company worth their salt will do their best to keep their clients apprised of changes in hiring/screening legislation. But this, unfortunately, is not an explicit requirement in client-screener partnerships.

3) Both the Client and the CRA are Fined

This is the most common, most destructive occurrence in FCRA-related proceedings. Typically, these aren’t just guilt-by-association situations: there needs to be direct evidence of lapses in the hiring or screening policy by both parties. There are many examples of these types of cases available online, and they just keep rolling in. Top Class Actions is a great website for keeping an eye on class action lawsuits across the board, and click here for more examples of specific screening-related lawsuits.

Related: 5 Action Steps You Can Take Today to Protect Your Business from Discrimination Lawsuits

In 2016, the Supreme Court provided a landmark decision, in the Spokeo v. Robins case, that protects companies from frivolous lawsuits based on supposed FCRA violations. Essentially, the ruling prevents people from trying to catch companies in inconsequential violations just so they could sue. In the 6-2 decision, the Court clearly defined what sort of damages actually warrant a lawsuit under FCRA regulations.

That’s great news for businesses, as it brings FCRA compliance out of the Wild Wild West stage. But, it doesn’t mean companies can let their guard down when it comes to maintaining compliance and staying off the EEOC’s hit list for FCRA violations.

Click here for a regularly updated Ban the Box guide by NELP (the National Employment Law Project).

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