This warning was made at the CEI Fleet Customer Advisory Council meeting last September by Luanne Peterpaul, an attorney and partner of the law firm Peterpaul, Clark & Corcoran in Springfield, NJ, which specializes in labor law.
"The name Fair Credit Reporting Act is a misnomer because it covers not only credit reports, but all consumer and investigative reports conducted by third parties, including motor vehicle reports," said Peterpaul.
Before going furthur, it is important to state that background checks, such as MVRs, which are done by your own staff as part of their regular responsibilities, are not covered by the FCRA. Employers are required to comply with the FCRA when they are using a "consumer reporting agency" to perform credit and background checks on their current or prospective employees. According to Peterpaul, the FCRA definition for a "consumer reporting agency" is so broad that it would include fleet services companies that provide MVRs as a third-party service.
What brought this about were amendments to the FCRA, which went into effect on Oct. 1, 1997. Known as the Consumer Credit Reporting Reform Act, it imposes the following responsibilities and duties on employers who use reports supplied by third-party reporting agencies. Before requesting a consumer report (which includes MVRs), employers must:
1. Make a clear and conspicuous disclosure to the applicant or employee that a report may be requested.
2. Obtain written permission from the applicant or employee before obtaining or ordering a consumer report pertaining to that individual.
"Furthermore, a consumer reporting agency (such as a fleet services company) may not furnish a consumer report to an employer until the employer certifies that it has given the required notice and received written authorization from the employee or applicant to obtain the report," added Peterpaul. "The employer also must certify that it will comply with the FCRA's requirements if it subsequently uses information from the consumer report to take adverse action with respect to the employee or applicant."
The amendments also require that before taking any "adverse action" based in whole or in part on the consumer report, the employer must provide the employee or applicant an actual copy of the report and a written summary of the consumer's rights as prescribed by the Federal Trade Commission (FTC). "Adverse action" is defined to include "a denial of employment or any other decision for employment purposes that adversely affects any current or prospective employee," said Peterpaul.
In the event an employer negligently or willfully fails to comply with the FCRA, that employer shall be liable to the applicant or employee for actual damages, costs, and reasonable attorney's fees. Actual damages for willful non-compliance are limited to an amount not less than $100 and not more than $1,000. There is no set limit on punitive damages. The FTC can sue violators for up to $2,500 per violation for injunctive relief, according to Riker Danzig, a New Jersey law firm that has published a paper on this issue.
Employers should also be aware that there are restrictions on the type of information that can be supplied by a consumer reporting agency. According to Riker Danzig, the FCRA specifies that no consumer reporting agency may make a consumer report containing information about "records of arrest, indictment, or conviction of crime (such as a drunk driving conviction) which, from the date of disposition, release or parole, antedate the report by more than seven years
." However, these limitations do not apply to searches performed on individuals whose annual salaries are expected to exceed $75,000, which could exempt many sales representatives, who are assigned company vehicles.
If you are using a third party to order MVRs on your current or prospective employees, there are four rules you need to follow:
1. Employers must provide a written disclosure.
2. Obtain written permission from applicants and employees before obtaining MVRs from a third-party reporting agency.
3. Refrain from using any information contained in an MVR in violation of any federal or state equal employment opportunity law or regulation.
4. Employers must provide copies of the reports to employees, along with a summary of the consumer's rights, before taking any adverse employment action based on the report.
In addition to the federal requirements, many states are enacting their own statutes regarding MVRs. It is in every fleet manager's best interest to become familiar with the requirements of the Consumer Credit Reporting Reform Act, which amends the FCRA, along with state statutes governing MVRs.
Let me know what you think.
Originally posted on Automotive Fleet