As the use of technology in the employment sphere increases, employers need to consider how technologies may be governed by employment laws. The Consumer Financial Protection Bureau (CFPB), the federal agency that enforces the Fair Credit Reporting Act (FCRA), recently addressed how utilizing technology from a third party to track and/or analyze employees and job applicants is likely governed by the FCRA.
The CFPB addressed this in a circular, a policy statement advising various agencies on how to enforce federal consumer laws so there is a consistent approach across the agencies. The CFPB also issued a press release on the circular.
What the FCRA Does
The FCRA generally applies to employers that use a third party to conduct background screens of applicants and/or employees before hiring or making employment-related decisions. The FCRA limits how employers can use employee and applicant information provided by consumer reporting agencies. Additionally, covered employers must provide notices and disclosures, get consent related to obtaining information, and provide pre- and post-adverse action notices.
If employers fail to comply with these requirements, they can be sued in court and/or sued by the FTC, as well as other federal agencies, for noncompliance with the FCRA. Thus, noncompliance with the FCRA can be quite costly for employers. Learn more about the FCRA in this Employers Council whitepaper.
What the Circular Says
Employers using new technologies to make employment-related decisions may not be aware that the FCRA may apply. The circular notes that many “background screening companies now offer a range of reports to employers, including those that record current workers’ activities, personal habits and attributes, and even their biometric information.”
The circular notes some specific examples, such as using “third parties to monitor workers’ sales interactions, to track workers’ driving habits, to measure the time that workers take to complete tasks, to record the number of messages workers send and the quantity and duration of meetings they attend, and to calculate workers’ time spent off-task through documenting their web browsing, taking screenshots of computers, and measuring keystroke frequency.”
The circular provides guidance to agencies enforcing the FCRA to determine “whether an employer that makes employment decisions based on a report from a third party is regulated by the FCRA.” The circular states that agencies should consider the following:
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Does the employer’s use of the data qualify as use for “employment purposes” under the FCRA?
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Is the report obtained from a “consumer reporting agency,” meaning that the report-maker “assembled” or “evaluated” consumer information to produce the report?”
The circular goes into detail about how agencies are to address both of these questions.
In the press release on the circular, issued October 24, 2024, CFPB Director Rohit Chopra said the following: “The kind of scoring and profiling we've long seen in credit markets is now creeping into employment and other aspects of our lives. Our action today makes clear that longstanding consumer protections apply to these new domains just as they do to traditional credit reports.”
Takeaway for Employers
If you are using technologies from a third party for employment purposes and making employment-related decisions based on the information provided, you should consider whether it’s covered by the FCRA. Employers Council can assist Consulting and Enterprise members in determining whether they must comply with the FCRA and with the steps needed to comply. Contact us at info@employerscouncil.org.
Erika Paulus is an attorney for Employers Council.