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Court rules automatic scoring of background check does not constitute adverse action

A company who utilized a third-party background screening firm’s internal coding to score the results of their background checks faced claims from plaintiffs who received an unfavorable grade that the company took premature adverse action against them.

When procuring background checks on potential hires from a third-party background screening company, Family Dollar Stores would have the results of the checks scored using the background screening company’s internal coding based on criteria provided by Family Dollar. Reports would return one of three results: (1) recommended; (2) decisional; and (3) not recommended. Those who received a “not recommended” grade were then sent pre-adverse notifications informing them that the results of their background check “may” adversely affect their employment. Then, if an applicant had not chosen to dispute the results of their report, they would ultimately receive a final-adverse notice from Family Dollar several days after receiving the pre-adverse notification, as required by the Fair Credit Reporting Act (FCRA).

However, the plaintiffs argued that the final-adverse action didn’t occur when they received their final-adverse notice from Family Dollar, but rather when the background screening firm returned the “not recommended” result. The plaintiffs claim this practice ran afoul of the FCRA’s provision that grants consumers the opportunity to dispute the accuracy of the information within the results of their background check prior to having adverse action taken against them.

The court disagreed, stating that the coding returning a result of “not recommended” only demonstrates a “formation of intent” to take an adverse action, and does not constitute a final-adverse action. Furthermore, the court argued that Family Dollar’s use of coding and it’s procedures for the handling of pre- and final-adverse notifications were in line with the requirements of the FCRA, and thus the discount retail chain committed no willful violation of the statute.

Source: Employment Law Daily Wrap Up, 7/20/2016

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