Court rules FCRA protections for consumer reports do not extend to independent contractors

The decision provides further insight for employers and background screening companies on background screening for independent contractors – an issue which has previously lacked clear guidance.

The plaintiff in the case claimed he applied to contract with a company as an insurance salesperson but was not hired due to a falsely reported felony on his background check. What’s more, the plaintiff claims the company failed to provide him with a pre-adverse action letter and a copy of his background check, as required by the federal Fair Credit Reporting Act (FCRA).

The company, however, moved to dismiss the claim on the basis that the plaintiff was only applying to work as a contractor and thus the FCRA’s pre-adverse action notice requirement did not apply.

Still, the plaintiff claimed that he was, in fact, applying as an employee and that even if he was a contractor, the FCRA’s requirements would still apply.

Ultimately, the judge cited the FCRA’s plain language stating that the statute was limited to reports used for “evaluating a consumer … as an employee” to decide that the “the FCRA’s requirement of pre-adverse action notice only applies when an applicant applies to be an employee."

While the FCRA does not directly address independent contractors, the Federal Trade Commission (FTC) previously issued two advisory opinions stating that independent contractors should be afforded the same rights as employees. The FTC also reiterated this view in its staff report published in July 2011, stating that the FCRA’s broad definition of the term “employment purposes” extends beyond traditional employment relationships.

While this decision becomes part of a small but growing body of law providing clarity on this recurring issue, it is important to note that this is only one court’s opinion. As a best practice and until more courts opine on this matter, we will continue to follow the FTC’s opinion that independent contractors fall under the gambit of “employment” for purposes of the FCRA.

Source: Troutman Sanders LLP, 12/13/2018

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