In this week’s continuing series on demystifying employment law, we focus on some of the most common and often confusing employment legalities. As we stressed yesterday, small businesses have it hard enough having to tackle the problems of the slow economic recovery and the uncertainty brought forth by the upcoming elections and looming fiscal cliff. However, the concerns don’t stop there for small business owners as they are constantly required to meet specific laws and compliance issues. There is nothing necessarily wrong with laws as many are to serve a beneficial purpose but the worst part is that there are so many employment laws to be concerned with, e.g. (ADA,  ADEA, COBRA,  FCRA,  FLSA,  FMLA,  GINA,  HIPAA,  NLRA,  OSHA,  Title VII,  USERRA,  WARN).

Today we will focus on the Fair Credit Reporting Act (FCRA). As a Yale paper defines the FCRA, it promotes the accuracy, fairness and privacy of information in the files of consumer reporting agencies. There are many types of consumer reporting agencies, including credit bureaus and specialty agencies (such as agencies that sell information about check writing histories, medical records, and rental history records). That may sound fairly straight forward but believe me there are many details and nuances that you can’t afford to get wrong. Luckily, Manpower has created a terrific cheat sheet for dealing with FCRA that we present below:

FCRA CHEAT SHEET

What does it do?

Imposes strict rules on an employer’s ordering and use of consumer reports for employment purposes

What employers are covered?

All employers who order consumer reports from a consumer reporting agency

What’s a “consumer report”?

A report of information relating to an individual’s credit, general reputation, criminal history or personal characteristics

What’s an “investigative consumer report”?

A report of background information on an individual obtained from personal interviews with friends, neighbors or associates of the individual

What’s a “consumer reporting agency”?

A business that assembles or evaluates consumer reports for third-party businesses

What steps must an employer take before obtaining a consumer report?

• Notify the employee or applicant in writing about your intent to obtain a report
• Obtain employee or applicant’s written permission prior to requesting report

What steps must an employer take before taking adverse action based on a consumer report?

• Provide the individual with a copy of the report
• Provide the individual with a copy of the Summery of FCRA Rights available at www.ftc.gov

What steps must an employer take after adverse action?

Provide written, oral or electronic notice of the adverse action to the individual.  The notice must include each of the following:

• The name, address and phone number of the consumer reporting agency that provided the report
• A statement that the consumer reporting agency did not make the decision to take the adverse action and will not be able to provide the individual with the specific reasons for the decision
• A statement that the individual has the right to dispute the accuracy or completeness of the information provided
• A statement that the individual can get an additional free consumer report from the consumer reporting agency used by the employer upon a request made within 60 days

What are the potential penalties?

• Actual damages
• Punitive damages
• Attorneys’ fees

Top FCRA tips

• Ensure that you have the proper permission from an employee or applicant before requesting a report
• Cannot request applicant to provide permission in an employment application
• Additional restrictions apply for employers intending to obtain and use investigative consumer reports