Are you avoiding this employment pitfall?
by. Henry Meier
I understand why some of you can’t stand compliance. After all, a successful compliance program often depends on strict adherence to mind-numbing regulations, which can seem divorced from reality, let alone common sense. Well, like it or not, the better your compliance program the less you’ll have to deal with something you probably dislike even more, which is a lawsuit.
A great case in point was highlighted by a recent blog posted by Bond, Schoeneck and King highlighting a recent employment litigation trend that could ensnare your credit union if you are not careful. I haven’t seen any cases on this issue popping up yet in New York, but I am sure we will see them in the near future. In it’s labor report blog, BSK reports on a case in California in which the plaintiffs are seeking to bring a class-action lawsuit against an employer for an alleged violation of the Fair Credit Reporting Act (15 USC 1681). This statute is doubly important to credit unions because it not only regulates the use of credit reports in making lending decisions, but also impacts the way they go about making employment decisions.
I’m sure many of you already know that the Act requires employers to give job applicants notice whenever a credit report is going to be accessed as part of the employment process. The statute requires a written ”clear and conspicuous” disclosure, The tricky part is that the statute mandates that this disclosure be “in a document that consist solely of the disclosure that a consumer report may be obtained for employment purposes.”
Employment litigators are beginning to go after employers who provide the necessary pre-employment disclosures, but couple the notice requirement with language in which the applicant agrees to waive any legal action against the employer for accessing the credit reports. For instance, earlier this year, a federal district court in Pennsylvania ruled that an employer violated the Act by not putting the pre-employment disclosure on a separate document without liability waivers. See Reardon v. Closetmaid Corp.
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