Does the FCRA Apply to Background Checks for Independent Contractors?

Fair Credit Reporting Act

From SHRM, Roy Maurer discusses a recent case in which a federal judge said that the Fair Credit Reporting Act (FCRA) did not apply to independent contractors. The Federal Trade Commission (FTC) has considered it applicable for years and courts on split on this issue. Roy also provides guidance on what companies should do. Roy writes:

The U.S. District Court for the Northern District of Georgia is the latest to rule that screening independent contractors does not trigger the requirements for a background check for “employment purposes” under the law. Those requirements include obtaining the person’s written authorization in a stand-alone disclosure and providing a pre-adverse action notice and summary of rights if the report leads to adverse action against the subject.

“It’s an unsettled area, and the recent decisions don’t align with the FTC guidance on this issue,” said Alonzo Martinez, associate counsel for compliance at background-screening firm HireRight.

Tyler Browne, lead product counsel at Checkr, a screening firm known for having gig-economy companies as clients, explained that certain provisions of the FCRA apply regardless of whether screened individuals are classified as employees or independent contractors. “Some form of consent is still required, and consumer reporting agencies still have an obligation to prepare accurate reports,” he said. “But employment-purpose screenings entail much more substantial requirements.”

He added that the FTC’s advisory opinions have generally stated that employment provisions should be applied broadly, to more than the traditional employment classifications, but recently, some courts have taken a more plain-text approach to the language in the FCRA.

Beginning with a case in 2012 (Lamson v. EMS Energy Mktg. Serv. Inc.), a handful of district courts have ruled that the FCRA defines “employment purposes” as “used for the purpose of evaluating consumers for employment … as an employee.” The Georgia court decided that “ultimately, because employee or employment is not otherwise defined in FCRA, this court is required to apply the common law meaning of employment, which does not include independent contractors.”

The FTC has not responded to this trend in case law, but it has issued contrary guidance in the past, said Rod Fliegel, an attorney in the San Francisco office of employment law firm Littler.

The agency issued a document in 2011 compiling several opinion letter summaries and that broadly construed that the FCRA’s permissible employment purpose may extend to nontraditional workers who are not technically employees, such as independent contractors, freelancers, temps and volunteers.

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