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Employers Have Duty to Investigate Under FCRA

December 26, 2013

Employers may be liable to former employees under the Fair Credit Reporting Act (FCRA) for failing to investigate a complaint that false or incorrect information was provided to a consumer reporting agency.

Facts of the Case:  Most employers are aware that they must comply with FCRA’s notice and authorization requirements when they obtain background checks for applicants and employees from a third-party consumer reporting agency.  What many do not know, however, is that there are certain obligations that FCRA imposes on employers as to former employees, as illustrated in Maiteki v. Marten Transportation, Ltd. et al.

Three former employers of a truck driver reported inaccurate negative information about the driver’s accident record to a consumer reporting agency.  Because of the negative reports, prospective employers refused to hire the driver.  When the driver first discovered the inaccurate information, he contacted his former employers and asked them to correct it.  He was told by each of them that they would investigate and remove the false reports, but none of them did so.  This resulted in further rejections of employment, which caused the driver to repeat his requests to his former employers, again to no effect.  He also contacted the consumer reporting agency, which followed up with one former employer.  No corrections by the former employers were ever made.  The driver then sued each of his former employers under FCRA.

The Court’s Ruling:  The federal district court found that FCRA does not provide a cause of action against former employers for providing false or inaccurate information to a consumer reporting agency.  If an employer is informed by a consumer reporting agency that there is a dispute about the accuracy or truthfulness of information that they have provided to the agency, however, FCRA does impose an actionable obligation on employers to “conduct an investigation with respect to the disputed information.”  In this case, it appears that each of the former employers failed to meet this obligation.

Lessons Learned:  Employers should be careful to provide accurate and truthful information about former employees to a consumer reporting agency.  (This information may include driving records, licensing, salary, termination information, etc.)  In addition, if an employer receives a complaint that the information provided is not correct, it is important for that employer to investigate the complaint and make any necessary corrections promptly.