The FCRA Big Three Lawsuit Triggers
Hiring the right talent is critical but one overlooked detail in your background screening process can cost your company millions. Employers often assume background checks are routine, yet the legal landscape tells a different story. The majority of lawsuits tied to employment screening aren’t about discrimination or bad hires—they’re about technical compliance mistakes under the Fair Credit Reporting Act (FCRA). These errors are easy to make and expensive to fix.
Research shows that approximately 73% of FCRA-related lawsuits against employers stem from these three common mistakes:
- Non-compliant disclosure forms
- Missing or delayed pre-adverse action notices
- Inadequate authorization forms
The consequences can be significant: statutory damages of $100–$1,000 per violation, plus attorney fees, with settlements often reaching mid-six to seven figures.
Emerging Risk: Disparate Impact Discrimination
Background check policies and particularly those applying strict pass/fail criteria based on criminal history can unintentionally violate Title VII if they disproportionately impact protected groups. The EEOC has successfully challenged such blanket policies in litigation.
EEOC guidance emphasizes individualized assessments, considering:
- The nature of the offense
- Time elapsed since the offense
- Relevance to the job
Relying on generalized exclusions without job-specific review creates legal risk. Additionally, many state and local laws impose specific requirements for individualized assessments.
Best Practices to Reduce Lawsuit Risk
To minimize exposure from background screening:
- Use standalone, plain-language disclosure forms before any check.
- Obtain written authorization in a separate form, not embedded in applications.
- Follow the adverse action protocol: provide a pre-adverse notice with a copy of the report and summary of rights, and wait at least five business days before issuing the final notice.
- Allow candidates to dispute findings.
- Implement individualized assessments, especially for criminal record policies.
- Regularly audit processes and train HR staff on evolving regulations.
Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.
The Illusion of Instant Criminal Checks: Why a True National Criminal Database Still Doesn’t Exist
If you’ve ever been pitched a “national criminal database,” you’ve probably imagined a single, authoritative system that instantly returns every criminal record across the United States. That database doesn’t exist for non‑law‑enforcement users and relying on anything marketed that way can lead to missed records, inaccurate matches, and regulatory headaches.
What actually exists at the national level?
The FBI operates several national systems—NCIC, III, NGI, N‑DEx, and NICS—to support criminal justice operations. These are law‑enforcement systems, with access tightly constrained by federal law and regulation (including 28 C.F.R. § 20.33). Employers generally cannot query NCIC/III directly unless a statute authorizes fingerprint‑based checks for specific roles (e.g., child care, elder care, or other regulated positions) and the check is routed through the state repository per the Compact Council rules.
Even within law enforcement, these systems are indexes and exchanges that depend on state and local repositories to submit arrests and dispositions; coverage and timeliness vary. The DOJ/BJS surveys and FBI guidance repeatedly emphasize gaps and the critical need to report final court dispositions to keep records accurate.
So what are “national criminal databases” sold by private vendors?
Commercial “national” or multi‑jurisdictional files aggregate data from many sources (state repositories where available, departments of corrections, sex offender registries, selected county uploads, watchlists, etc.). They can be useful as a pointer or discovery tool, but they are not comprehensive and often not current enough to stand alone. Coverage varies by jurisdiction and update cadence; name‑match noise creates false positives/negatives, especially with common names.
Industry resources and compliance guidance are consistent on this point: use multi‑jurisdictional databases to broaden the net, then verify at the originating court or repository before reporting or taking action.
Why “database‑only” screening creates risk
- Incomplete coverage: Not all courts or states report; updates lag. Recent charges or local misdemeanors may be absent.
- Identity ambiguity: Limited identifiers can mis‑match results; aliases and data entry errors compound the problem.
- Stale or missing dispositions: Arrests without case outcomes mislead; expungements or dismissals may remain in bulk feeds.
- Fair Credit Reporting Act (FCRA) compliance exposure: The FCRA requires “reasonable procedures to assure maximum possible accuracy” and complete, up‑to‑date public record reporting. Database “hits” must be confirmed at the source, and consumers must be notified appropriately when adverse public records are reported for employment decisions.
Regulators have sharpened expectations. In 2024, the Consumer Financial Protection Bureau (CFPB) reiterated that consumer reporting agencies (CRAs) must prevent reporting of duplicate or expunged/sealed items and include disposition information where available. CRAs also must disclose the source(s), both original and any intermediaries, when consumers request their files.
Why this still matters
Despite modernization, data gaps persist—especially in disposition reporting and identity matching. The newest BJS/SEARCH survey shows continued dependence on state repositories and varying automation/completeness across states, reinforcing why source verification and robust procedures remain critical.
Meanwhile, regulators (CFPB/FTC) are raising the bar on “maximum possible accuracy.” Organizations that rely on “instant database” products without verification risk adverse action mistakes, consumer disputes, and enforcement exposure.
Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.
Independent Contractors, Misclassification, and the FCRA: Lessons from Joel Galarza’s Eleventh Circuit Case
The Eleventh Circuit’s recent decision in Galarza v. One Call Claims, LLC sent ripples through compliance and risk management circles. At its core, the case addressed whether three insurance adjusters labeled as independent contractors were actually employees under the Fair Labor Standards Act (FLSA). The court applied the economic realities test and concluded that a jury could reasonably find these workers were employees, reversing the district court’s summary judgment in favor of the companies. Five of six factors favored employee status, including:
- Control over work: The companies dictated schedules, monitored performance, and approved overtime.
- Economic dependence: Adjusters worked exclusively for the companies for nearly two years.
- Integral role: Their work was central to the companies’ operations.
- Permanency: Long-term, exclusive engagements suggested employment rather than independent contracting.
Why This Matters for Employment Background Screening
While the Galarza case was decided under the FLSA, it raises a critical question for compliance professionals: Should independent contractors be treated as employees for purposes of the Fair Credit Reporting Act (FCRA)?
Under the FCRA, requirements such as stand-alone disclosures, written authorization, and pre-adverse action notices apply when a consumer report is obtained for “employment purposes.” The statute defines this as evaluating a consumer for employment, promotion, reassignment, or retention as an employee. Although Federal Trade Commission (FTC) staff reports have suggested that the FCRA’s “employment purpose” provision may extend to certain independent contractors, courts have generally taken a narrower view. For example, in Smith v. Mutual of Omaha (S.D. Iowa), the court held that background screening for contractor roles did not trigger the FCRA’s employment-related protections.
However, the Galarza decision underscores a practical risk: labels don’t control legal outcomes. If a contractor is later deemed an employee under an “economic realities” or similar test, a company could face exposure—not just under wage laws, but potentially under FCRA if the screening process didn’t meet employment-purpose requirements.
Compliance Takeaways
- Don’t Rely on Labels Alone
Contracts calling someone an “independent contractor” won’t shield you if the working relationship looks like employment. Courts focus on substance over form. - Assess Classification Before Screening
If the role involves long-term, exclusive work under significant control, treat the individual as an employee for FCRA compliance. This means providing proper disclosures, obtaining written consent, and following adverse action procedures. - Update Policies and Vendor Agreements
Ensure your background screening policies clearly address contractor roles and include contingency plans if classification changes. - Monitor Legal Trends
The Eleventh Circuit’s ruling aligns with broader enforcement trends emphasizing misclassification risks. Expect more scrutiny in wage-and-hour and consumer reporting contexts.
Bottom Line
The Galarza case is a wake-up call: misclassification isn’t just a wage-and-hour issue—it’s a compliance risk that touches background screening and FCRA obligations. When in doubt, err on the side of treating high-control, long-term contractors as employees for screening purposes. It’s a small step that can prevent big liability
Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.
Scherzer International sponsors the Sunflower Wine Festival 2023
This year SI is one of the sponsors of Prayers From Maria Foundation’s annual Sunflower Wine Festival held on July 8, 2023. Prayers From Maria is a charity based in Rocky River, Ohio, dedicated to funding global research into the causes, prevention, treatments, and cure for the deadliest childhood brain tumors known as gliomas.
Ed and Megan McNamara started “Prayers From Maria Children’s Cancer Foundation” after their daughter Maria passed away in 2007 from glioma, a cancer of the brain, or brain tumor, which forms in the glial cells of the central nervous system.
Glial cells are those that surround and support nerve cells. While some brain cancers originate elsewhere in the body, gliomas originate in the central nervous system. They are often called “primary” brain tumors. That is dedicated to funding global research into the causes, prevention, treatments, and cure for deadly childhood brain tumors.
The foundation has a Medical Board comprising some of the country’s best doctors for this disease. Because childhood brain tumor research is underfunded, the McNamara family is diligently working to make a difference by raising public awareness and bringing hope to children and their families affected by this disease.
Please visit their website for more information on the Prayers From Maria Foundation.
Minnesota Petty Misdemeanors and How to Report Them
Although nearly all state laws include criminal offense levels divided into two types – felonies and misdemeanors – there are many states with offense levels peculiar to their state law. One such peculiarity is Minnesota’s petty misdemeanor offense level.
In Minnesota, a petty misdemeanor is the lowest level of offense. Many but not all Minnesota traffic violations are petty misdemeanors. The unique aspect of a petty misdemeanor is that it is not considered a crime. (See for yourself here: Minn. Stat. § 609.02, subd. 4a or the accompanying attachment.) A petty misdemeanor does not carry a jail sentence but can result in a fine of up to $300.