What is the FCRA:

The Fair Credit Reporting Act (FCRA) is a federal law (15 U.S.C. §§ 1681–1681x) that governs credit reports, background checks, consumer reporting agencies, and the rights consumers have to access, dispute, and correct their information. It also restricts who can access a consumer report and for what legally permissible purpose.

Who it applies to:

The FCRA applies to three major groups: consumer reporting agencies, furnishers of information, and users of consumer reports. These categories are defined throughout federal regulations implementing the Fair Credit Reporting Act.

Why it matters in background screening:

The Fair Credit Reporting Act applies whenever an employer uses a third‑party background screening company to gather information about a job applicant or employee. In that situation, the background report becomes a consumer report, and the screening company becomes a consumer reporting agency (CRA) under the law.

This triggers strict requirements for both the employer and the screening company.

Scherzer’s Relevance:

Scherzer International complies with the FCRA by implementing AI‑supported accuracy controls, securing proper disclosures and written authorizations, and following all required pre‑adverse and adverse‑action procedures when delivering employment background screening services.


Why Civil Court Searches Are a Smart Hiring Advantage

In today’s complex hiring environment, civil record searches elevate screening from a routine step to a strategic safeguard for your business. In case of disputes or legal challenges related to hiring decisions, including civil court searches as part of the screening process shows that the employer conducted a reasonably thorough background check.

What Can Civil Records Reveal?

  • Workplace Safety
    A civil records search may disclose an applicant’s actual or potential for violence in cases that involve petitions for restraining orders regarding stalking, harassment, or domestic violence; whether the applicant is currently under a restraining order for any of the foregoing, or a complaint for assault, battery, property damage, or vandalism.
  • Workplace Conduct
    Civil records may disclose whether the applicant has engaged in antisocial, inappropriate workplace conduct or behavior contrary to public policy. For example, a civil records search may disclose complaints for workplace sexual harassment or discrimination, and whether such a case is pending, thereby leaving doubt in determining the applicant’s liability. There is also the issue of reputational risk to the employer for an applicant who was found liable in such cases.
  • Criminal-related Conduct
    Civil records may disclose whether an applicant has been sued by a former employer for financial claims such as embezzlement, theft, intentional property damage, or improperly using or disclosing an employer’s trade secrets. Although some of these claims can also be charged as crimes, a local prosecutor may decline to do so, and employers are left with only civil remedies.
  • Other Records
    The most common civil records are lawsuits for breach of contract, personal injury, small claims, or other minor disputes, as well as records of liens, foreclosures, and judgments. Whether any of these records provide relevant information for an employment decision can only be made on a case-by-case basis.

Building a Defensible Hiring Process

The purpose of a civil records check is to create a more complete profile. By identifying potential risks early, employers can:

  • Mitigate Risk: Help protect employees, customers, and organizational reputation.
  • Demonstrate Due Diligence: Show a reasonably thorough screening process if hiring decisions are later challenged.
  • Make Better Decisions: Evaluate findings in context, based on the specific role and responsibilities.

 

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

In‑House Background Screening: A Closer Look at the Tradeoffs

There is no law or regulation that prohibits employers from conducting their own background screening. In fact, many organizations, especially smaller companies or those hiring infrequently, assume that doing it themselves will be faster, cheaper, or more flexible. But while in‑house screening is legally permitted, it comes with both benefits and meaningful tradeoffs that employers should understand before choosing that path.

The Pros

One advantage of employer‑led screening is control. Employers can decide exactly what to look for, how deep to go, and how the information is weighed in hiring decisions.

Cost is another perceived benefit. By avoiding third‑party screening vendors, employers may reduce direct expenses, at least on the surface. For organizations with limited hiring volume, internal screening can seem economically efficient.

Finally, some employers value the speed and informality of conducting their own research, especially when reviewing publicly available information or calling references directly. When done carefully, this can support timely decision‑making.

The Cons

The biggest downside is increased legal and compliance risk. While laws like the Fair Credit Reporting Act (FCRA) primarily apply when third‑party screening companies are used, employers conducting their own checks are still subject to anti‑discrimination laws, state and local fair‑chance rules, privacy considerations, and consistency requirements. Without structured processes, it’s easy for internal screening to become uneven, undocumented, or vulnerable to unconscious bias.

Accuracy is another concern. Public records are often incomplete, outdated, or misleading when viewed without proper context. Employers relying on surface‑level searches may unintentionally base decisions on incorrect or mismatched information, creating both legal exposure and reputational harm.

There’s also the issue of internal capacity and expertise. Effective background screening isn’t just about finding information; it’s about interpreting it. Understanding how to assess relevance, and apply findings consistently requires experience. Many employers underestimate the level of expertise required.

Finally, in‑house screening can blur accountability. When adverse decisions are challenged, employers must be able to show how information was obtained, evaluated, and applied fairly. Without third‑party documentation or standardized workflows, that defense becomes harder.

The Bottom Line

Employers can conduct their own employment background screening, but permission does not equal protection. Whether screening is handled internally or with external support, the process must be lawful, consistent, accurate, and grounded in sound judgment. Cutting corners on screening may save time upfront but it often costs more later.

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

Does the Fair Credit Reporting Act (FCRA) Apply to Background Checks of Law Firm Partners?

It depends on who you ask. The Federal Trade Commission (FTC) has long taken the position that the FCRA should be interpreted broadly, and in its guidance, treats “employment purpose” as covering not only traditional employees, but also non‑traditional workers such as independent contractors, freelancers, temporary workers, and volunteers. However, in recent years, a few federal district courts have issued opinions that don’t align with the FTC’s guidance and instead use a strict common-law definition of the employer-employee relationship.

Because there’s no clear answer and the FCRA does not account for modern law firm partnership tiers, a hybrid compliance approach may be the best practice for avoiding FCRA liability.

Background Checks are Consumer Reports When Used for an Employment Purpose

The FCRA regulates information contained in consumer reports in order to protect the consumer’s privacy, promote fairness, and to guarantee the data reported is as accurate as possible. When a background check is used for employment purposes, it is considered a consumer report, and the requirements of the FCRA apply, including disclosure, authorization, and adverse action, as well as applicable state and local laws and regulations.

The FCRA defines the term “employment purposes” as evaluating a consumer for “employment, promotion, reassignment or retention as an employee.” It is important to note that the FTC interprets the ending phrase “as an employee” in the definition of “employment purposes” as modifying only “retention,” and not the words “employment, promotion, reassignment” preceding it.

Equity v. Non-Equity Partners and the FCRA

Equity partners typically share profits and losses, contribute capital, and participate in governance. Non‑equity partners, by contrast, often receive fixed compensation, do not bear profit‑and‑loss risk, and remain subject to the firm’s control. In practice, non‑equity partners frequently resemble senior employees. Distinctions can also be made between candidates for partner who are recruited from outside the firm and associates being evaluated for promotion to partner.

Law firms should consider a hybrid compliance model that establishes separate screening policies for partner candidates recruited from outside the firm, for existing equity partners, and for candidates with an existing employment relationship with the firm, such as associates or non-equity partners. Background checks for associates and non‑equity partners should generally be treated as subject to the FCRA’s employment‑purpose requirements.

For outside partner candidates and equity partners, firms may instead rely on a non‑employment permissible purpose under the FCRA: “the written instructions of the consumer.”

Key Takeaways

  • Titles do not control—structure and control do
  • Default to FCRA employment purpose compliance for non‑equity partners
  • Apply FCRA employment purpose rules to internal promotions
  • Ensure screening vendors and internal teams align on the permissible purpose

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

AI Hiring Just Hit a Legal Wall

The class action filed last month against Eightfold AI may be a defining moment for employers relying on algorithmic hiring. The lawsuit alleges that while employers are legally responsible for providing disclosures, obtaining written authorization, and issuing pre-adverse‑action notices, under the Fair Credit Reporting Act (FCRA) and the Investigative Consumer Reporting Agencies Act, those steps never occurred for the plaintiffs.

Why, then, is the lawsuit directed at Eightfold rather than the employers who failed to provide those notices? The complaint claims that Eightfold acted as a consumer reporting agency (CRA) by compiling applicant data, including information from public sources, online activity, and inferred traits and generating ranking‑style Match Scores for employers. Because of this alleged CRA role, Eightfold had its own independent legal duties, such as obtaining certain employer certifications before furnishing the reports. The plaintiffs argue Eightfold violated those duties at the moment it created and transmitted its reports, meaning the alleged misconduct occurred upstream, before employers ever had the chance to meet their own obligations.

If courts agree these AI‑generated outputs qualify as consumer reports, FCRA obligations could extend to a wide array of AI‑driven hiring platforms across industries. For employers, this could shift AI hiring from “emerging technology” to “regulated technology” almost overnight.

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

Your Next Hire Is Online. Here’s How to Screen Them Legally.

Social media screening is legal, but only if done right. Here are the essentials.

Federal nondiscrimination laws still apply.
Anything that reveals protected characteristics (race, religion, disability, age, pregnancy, etc.) cannot influence a hiring decision.

Using a third‑party screener? That triggers the FCRA.
Employers must provide a standalone disclosure, get written authorization, and follow pre‑adverse and adverse‑action steps. Accuracy rules also apply and the CFPB is enforcing them more aggressively.

28 states restrict employer access to personal social media.
Most ban requesting login credentials, requiring applicants to log in on the spot and demanding they add HR as a “friend.” In some states, even asking for a username may create risk.  

Public vs. private content matters.
Employers may review public posts but accessing private content without permission can violate the federal Stored Communications Act.

NLRA protections apply online.
Employees’ posts about wages or working conditions may be protected concerted activity. Don’t treat them as negative findings.

California adds extra compliance layers.
ICRAA and CCRAA impose stricter disclosures when using third‑party screeners.

Best Practices

Use a consistent, documented process focused ONLY on job‑related behaviors (e.g., threats, fraud, harassment). Keep decision makers away from protected information. Never request access credentials. Stick to public content. And follow the FCRA if a third-party is involved.

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

Bankruptcy Records: Credit Reports Erase Them But Employment Background Checks Find Them

Many people assume that once a bankruptcy drops off their credit report, it disappears everywhere.

Not true. And this difference matters, especially for employers and job seekers.

Credit Reports Follow Standard FCRA Time Limits

Under the Fair Credit Reporting Act (FCRA), national consumer reporting agencies (TransUnion, Experian, Equifax) must remove bankruptcies after specific time periods:

  • Chapter 7: reportable for up to 10 years
  • Chapter 13: typically removed after 7 years, sometimes sooner
    Once these limits are reached, credit bureaus delete the record entirely, meaning they cannot provide it for any purpose, including employment screening.

Employment Background Checks Work Differently

Employment screening companies are also consumer reporting agencies under the FCRA, but they don’t rely solely on credit bureaus. They frequently pull records directly from the courthouse, which may contain older bankruptcy filings long after the credit bureaus deleted them.

Under the FCRA’s $75,000 salary exception, employment background check companies may report adverse information with no time limit. So if a bankruptcy exists in public court records, it may still appear on an employment background check even though it no longer appears on a credit report.

State Reporting Laws Add Another Layer

Several states have their own rules on how long bankruptcy records may be reported in employment background checks–specifically California, Colorado, Kansas, Maryland, Massachusetts, Montana, New Hampshire, New Mexico, New York, Texas, and Washington. California, for example, prohibits reporting a bankruptcy that is more than 10 years old measured from the date of the relief order, unless a narrow exception applies.

Bottom Line

A bankruptcy “dropping off” your credit report does not guarantee it disappears from employment background checks. Different rules, different timelines.

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

Can Employers Charge Job Applicants for Their Background Check?

When candidates apply for a job, they expect a thorough screening process: interviews, reference checks, and often a formal background check. But can an employer require a job applicant to pay for their own background check?

The answer is more nuanced than a simple yes or no. It depends on state law, federal wage-and-hour rules, and how the background check is conducted.

Federal Law: No Direct Prohibition, but Important Limits

At the federal level, there is no law that explicitly prohibits an employer from requiring applicants to pay for a background check. The Fair Credit Reporting Act (FCRA) regulates how background checks must be conducted but it does not regulate who must pay for the screening.

However, the federal Fair Labor Standards Act (FLSA) does impose limitations once a person becomes an employee. Employers cannot deduct background check costs if doing so would reduce the individual’s pay below the minimum wage for that workweek. While this usually applies to employees, not applicants, it still influences how some states treat pre‑employment expenses.

State Laws: The Deciding Factor

State legislation determines whether an employer can charge job seekers for the cost of a background check. And many states say no. These include: California, Louisiana, Minnesota and Vermont.

In states without specific prohibitions, employers may legally require applicants to pay for background checks as long as the practice does not violate any other wage, consumer protection, or hiring transparency rules.

Should Employers Charge Applicants?

Even in states where charging applicants is legal, many employers avoid it for several reasons:

  • Competitive Disadvantage

Requiring applicants to pay, especially lower‑wage candidates, may shrink an employer’s talent pool.

  • Perception and Candidate Experience

Applicants may view the request as unfair or predatory, damaging employer reputation.

  • Administrative Burden

Collecting fees, issuing reimbursements, and maintaining compliance increases operational complexity.

 

  • Equity Concerns

Cost‑shifting disproportionately impacts economically vulnerable job seekers.

For these reasons, most employers see background check costs as part of doing business.

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

The FCRA Big Three Lawsuit Triggers

Hiring the right talent is critical but one overlooked detail in your background screening process can cost your company millions. Employers often assume background checks are routine, yet the legal landscape tells a different story. The majority of lawsuits tied to employment screening aren’t about discrimination or bad hires—they’re about technical compliance mistakes under the Fair Credit Reporting Act (FCRA). These errors are easy to make and expensive to fix.

Research shows that approximately 73% of FCRA-related lawsuits against employers stem from these three common mistakes:

  • Non-compliant disclosure forms
  • Missing or delayed pre-adverse action notices
  • Inadequate authorization forms

The consequences can be significant: statutory damages of $100–$1,000 per violation, plus attorney fees, with settlements often reaching mid-six to seven figures.

Emerging Risk: Disparate Impact Discrimination

Background check policies and particularly those applying strict pass/fail criteria based on criminal history can unintentionally violate Title VII if they disproportionately impact protected groups. The EEOC has successfully challenged such blanket policies in litigation.

EEOC guidance emphasizes individualized assessments, considering:

  • The nature of the offense
  • Time elapsed since the offense
  • Relevance to the job

Relying on generalized exclusions without job-specific review creates legal risk. Additionally, many state and local laws impose specific requirements for individualized assessments.

Best Practices to Reduce Lawsuit Risk

To minimize exposure from background screening:

  • Use standalone, plain-language disclosure forms before any check.
  • Obtain written authorization in a separate form, not embedded in applications.
  • Follow the adverse action protocol: provide a pre-adverse notice with a copy of the report and summary of rights, and wait at least five business days before issuing the final notice.
  • Allow candidates to dispute findings.
  • Implement individualized assessments, especially for criminal record policies.
  • Regularly audit processes and train HR staff on evolving regulations.

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

The Illusion of Instant Criminal Checks: Why a True National Criminal Database Still Doesn’t Exist

If you’ve ever been pitched a “national criminal database,” you’ve probably imagined a single, authoritative system that instantly returns every criminal record across the United States. That database doesn’t exist for non‑law‑enforcement users and relying on anything marketed that way can lead to missed records, inaccurate matches, and regulatory headaches.

What actually exists at the national level?

The FBI operates several national systems—NCIC, III, NGI, N‑DEx, and NICS—to support criminal justice operations. These are law‑enforcement systems, with access tightly constrained by federal law and regulation (including 28 C.F.R. § 20.33). Employers generally cannot query NCIC/III directly unless a statute authorizes fingerprint‑based checks for specific roles (e.g., child care, elder care, or other regulated positions) and the check is routed through the state repository per the Compact Council rules.

Even within law enforcement, these systems are indexes and exchanges that depend on state and local repositories to submit arrests and dispositions; coverage and timeliness vary. The DOJ/BJS surveys and FBI guidance repeatedly emphasize gaps and the critical need to report final court dispositions to keep records accurate.

So what are “national criminal databases” sold by private vendors?

Commercial “national” or multi‑jurisdictional files aggregate data from many sources (state repositories where available, departments of corrections, sex offender registries, selected county uploads, watchlists, etc.). They can be useful as a pointer or discovery tool, but they are not comprehensive and often not current enough to stand alone. Coverage varies by jurisdiction and update cadence; name‑match noise creates false positives/negatives, especially with common names.

Industry resources and compliance guidance are consistent on this point: use multi‑jurisdictional databases to broaden the net, then verify at the originating court or repository before reporting or taking action.

Why “database‑only” screening creates risk

  1. Incomplete coverage: Not all courts or states report; updates lag. Recent charges or local misdemeanors may be absent.
  2. Identity ambiguity: Limited identifiers can mis‑match results; aliases and data entry errors compound the problem.
  3. Stale or missing dispositions: Arrests without case outcomes mislead; expungements or dismissals may remain in bulk feeds.
  4. Fair Credit Reporting Act (FCRA) compliance exposure: The FCRA requires “reasonable procedures to assure maximum possible accuracy” and complete, up‑to‑date public record reporting. Database “hits” must be confirmed at the source, and consumers must be notified appropriately when adverse public records are reported for employment decisions.

Regulators have sharpened expectations. In 2024, the Consumer Financial Protection Bureau (CFPB) reiterated that consumer reporting agencies (CRAs) must prevent reporting of duplicate or expunged/sealed items and include disposition information where available. CRAs also must disclose the source(s), both original and any intermediaries, when consumers request their files.

Why this still matters

Despite modernization, data gaps persist—especially in disposition reporting and identity matching. The newest BJS/SEARCH survey shows continued dependence on state repositories and varying automation/completeness across states, reinforcing why source verification and robust procedures remain critical.

Meanwhile, regulators (CFPB/FTC) are raising the bar on “maximum possible accuracy.” Organizations that rely on “instant database” products without verification risk adverse action mistakes, consumer disputes, and enforcement exposure.

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

Independent Contractors, Misclassification, and the FCRA: Lessons from Joel Galarza’s Eleventh Circuit Case

The Eleventh Circuit’s recent decision in Galarza v. One Call Claims, LLC sent ripples through compliance and risk management circles. At its core, the case addressed whether three insurance adjusters labeled as independent contractors were actually employees under the Fair Labor Standards Act (FLSA). The court applied the economic realities test and concluded that a jury could reasonably find these workers were employees, reversing the district court’s summary judgment in favor of the companies. Five of six factors favored employee status, including:

  • Control over work: The companies dictated schedules, monitored performance, and approved overtime.
  • Economic dependence: Adjusters worked exclusively for the companies for nearly two years.
  • Integral role: Their work was central to the companies’ operations.
  • Permanency: Long-term, exclusive engagements suggested employment rather than independent contracting.

Why This Matters for Employment Background Screening

While the Galarza case was decided under the FLSA, it raises a critical question for compliance professionals: Should independent contractors be treated as employees for purposes of the Fair Credit Reporting Act (FCRA)?

Under the FCRA, requirements such as stand-alone disclosures, written authorization, and pre-adverse action notices apply when a consumer report is obtained for “employment purposes.” The statute defines this as evaluating a consumer for employment, promotion, reassignment, or retention as an employee. Although Federal Trade Commission (FTC) staff reports have suggested that the FCRA’s “employment purpose” provision may extend to certain independent contractors, courts have generally taken a narrower view. For example, in Smith v. Mutual of Omaha (S.D. Iowa), the court held that background screening for contractor roles did not trigger the FCRA’s employment-related protections.

However, the Galarza decision underscores a practical risk: labels don’t control legal outcomes. If a contractor is later deemed an employee under an “economic realities” or similar test, a company could face exposure—not just under wage laws, but potentially under FCRA if the screening process didn’t meet employment-purpose requirements.

Compliance Takeaways

  1. Don’t Rely on Labels Alone
    Contracts calling someone an “independent contractor” won’t shield you if the working relationship looks like employment. Courts focus on substance over form.
  2. Assess Classification Before Screening
    If the role involves long-term, exclusive work under significant control, treat the individual as an employee for FCRA compliance. This means providing proper disclosures, obtaining written consent, and following adverse action procedures.
  3. Update Policies and Vendor Agreements
    Ensure your background screening policies clearly address contractor roles and include contingency plans if classification changes.
  4. Monitor Legal Trends
    The Eleventh Circuit’s ruling aligns with broader enforcement trends emphasizing misclassification risks. Expect more scrutiny in wage-and-hour and consumer reporting contexts.

Bottom Line

The Galarza case is a wake-up call: misclassification isn’t just a wage-and-hour issue—it’s a compliance risk that touches background screening and FCRA obligations. When in doubt, err on the side of treating high-control, long-term contractors as employees for screening purposes. It’s a small step that can prevent big liability

 

Disclaimer: This communication is for general informational purposes only and does not constitute legal advice. The summary provided in this alert does not, and cannot, cover in detail what employers need to know about the amendments to the Philadelphia Fair Chance Law or how to incorporate its requirements into their hiring process. No recipient should act or refrain from acting based on any information provided here without advice from a qualified attorney licensed in the applicable jurisdiction.

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