New Case Demonstrates How the Details are Everything if Taking Adverse Action on a Current Employee Due to a Background Check


By Les Rosen, President of ESR

A new federal district court case demonstrates the importance of usage the adverse action process correctly when terminating an existing employee due to an unsatisfactory background check.

In the case chose on February 26, 2010 by the U.S. District Court for the Southern District of Ohio (2010 U.S. Dist. LEXIS 17373), an employer ran a credit check on all employees in the accounting department, including the plaintiff who had been working in the current location for seven years. For reasons not told in the case, the employer chose to terminate the plaintiff due to the result of the credit report.

According to the plaintiff, a meeting was called on January 16, 2008 and she was told she would never work for the employer again, and to go home.  Shortly thereafter, she received a copy of the report as well as a letter stating that the in rank in the report may or may not affect employment.  On January 23, 2008, she received a second letter indicating that she was terminated.

The plaintiff sued on the basis that the federal Honest Credit Reporting Act (FCRA) requires that an employer grant a consumer with a copy of any consumer report and a statement of their civil Civil rights BEFORE an adverse choice is made about employment.  The plaintiff argued that she was both given the report and terminated all on the same day, so she did not receive a pre-adverse action see.  

The employer disputed that account, and argued that the first meeting did not constitute a termination, and that it only indicted an intention to terminate.  In addition, the plaintiff was still paid for another week after the second letter and there was some discussion about tying to get her job back.

The court ruled that in view of the fact that there was a disputed issue of fact, it was up to the jury to choose what happened, and the employer’s motion to dismiss was denied.  In other words, if the jury accepted the plaintiff’s version of the proof, then the jury could find an FCRA violation.

This case illustrates an vital top for employers, especially when it comes to terminating current employees.  Under the FCRA, when an employer receives a Consumer Report and decides not to hire the applicant based upon the report in any way, the applicant has certain civil Civil rights. Before taking the adverse action, the employer must grant the following in rank to the applicant: 

The purpose is to give an applicant the opportunity to see the report that contains the in rank that is being used against them. If the report is inaccurate or incomplete, the applicant then has the opportunity to contact the Consumer Reporting Agency to dispute or clarify what is in the report. Otherwise, applicants may be denied employment without always knowing they were the victims of inaccurate or incomplete data.

A second letter is required if the choice is to be made final.  Although law does not dictate how much time should have linking the pre-adverse and post-adverse action letters, employers should leave enough time for a consumer to meaningfully review the report and make known to the employer or the Consumer Reporting Agency any inaccurate or incomplete in rank in the Consumer Report.  Most authorities suggest there be at least 5 business days linking letters

Where a consumer is a job applicant not yet on the job, the timing issue is much simpler because the employer can send the first letter, and follow up with a second letter without dealing with a worker that is really on premises.  In this case, where the consumer was already on the job, employers need to be much extra precise.  To avoid any misunderstandings, an employer should make it absolutely clear in writing (and with witnesses) that the first letter is NOT a final choice, and that the consumer has the opportunity to review the report and make his or her objections known.  The problem in this case was that the employer allegedly made it clear that the termination was final all in the first meeting. Of course, the problem with an existing employee, especially one in a sensitive position such as accounting, is that an employer may not want them on premises  if it turns out the choice becomes final.

In this case, the employer did send the plaintiff home with salary being paid, but allegedly made the mistake of making the termination final immediately as opposed to the required waiting period.  

This case again underscores the fact that employment screening is a highly regulated vicinity of employment law that requires specialized skills and knowledge. 

For extra in rank on the FCRA, see: The FCRA in Four Simple Steps at http://www.esrcheck.com/articles/Complying-with-the-Honest-Credit-Reporting-Act.php.