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FCRA Compliance and Third-Party Applicant Tracking Systems

Question: Can an employer be held liable for FCRA compliance issues stemming from a third-party vendor’s applicant tracking system? 

Response & Analysis:

Yes. A growing trend in Fair Credit Reporting Act (FCRA) litigation against employers is a move to hold employers liable when the third-party employment application software they use does not comply with the technicalities of the FCRA. Recently, several employers have come under fire for implementing third-party applicant tracking systems into their company websites without ensuring that the employment application form provided by the third-party complies with all FCRA requirements.

Most notably, plaintiffs are bringing actions under Section 604(b)(2) for the employer’s failure to provide the consumer with “a clear and conspicuous disclosure ... in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes.” Employers are being targeted for using online applications that include extraneous information in the disclosure and authorization forms, including employment-at-will language, release information, liability waivers, shipping information and advertisements.

In a case filed against Food Lion and its parent company (Brown v. Delhaize America, LLC et al, No. 1:14-CV-00195 (M.D.N.C. Mar. 7, 2014)), the plaintiffs allege that the employer contracted with a third-party vendor who provided an online application tool and in-store application kiosks. The vendor allegedly combined information it received through the employment applications with the employer’s applicant tracking software. The plaintiffs claim that the third-party job application interface used by the employer to procure employment applications failed to provide a clear and conspicuous disclosure to the consumer, in a document that consisted solely of the disclosure. The employer in this case relied on a third-party’s employment application software and appears to have taken no additional steps to ensure the provided application form’s compliance with FCRA requirements.

In a similar suit against Panera Bread (Mack v. Panera, LLC, No. 0:14-CV- 61672-WJZ (S.D. Fla. July 23, 2014)), the plaintiff filed a class action against the national bakery-café chain for its alleged failure to provide the proper standalone disclosure and authorization form as required by the FCRA. The plaintiff alleged that Panera’s online and paper employment applications contained extraneous information, in addition to the disclosure and authorization language, including a statement that the position is employment-at-will. Panera allegedly used an applicant tracking system and online application interface provided by a third-party. Similar class-action lawsuits have been filed against American Multi-Cinema (AMC) and Nine West (see Mack v. American Multi-Cinema, Inc., No. 0:14-CV-61676 (S.D. Fla. July 23, 2014); Rumph v. Nine West Holdings, No. 0:14-CV-61673 (S.D. Fla. July 23, 2014)).

Employers are expected to comply with all FCRA requirements—including the standalone disclosure and authorization form requirement—regardless of whether they develop their own online employment application or utilize the services of a third-party vendor.

Before implementing an online employment application form, employers should ensure that the form meets all FCRA requirements and is fully compliant with all applicable laws. If your company allows applicants to apply for employment using more than one method, such as through a website and also through a paper employment application, it is critical that every application form used by your company be FCRA compliant.

For additional information on the FCRA’s disclosure and authorization form requirements, please see our Compliance Issue Analysis titled “Disclosure & Authorization Form Under the FCRA: It is Not a Release.”

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This document and/or presentation is provided as a service to our customers. Its contents are designed solely for informational purposes, and should not be inferred or understood as legal advice or binding case law, nor shared with any third parties. Persons in need of legal assistance should seek the advice of competent legal counsel. Although care has been taken in preparation of these materials, we cannot guarantee the accuracy, currency or completeness of the information contained within it. Anyone using this information does so at his or her own risk.

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