A recent federal court decision demonstrates the value in reviewing all documents related to the background screening process for independent contractors, Littler Mendelson attorneys Rod Fleigel and William Simmons write in JDSupra.

Under the Fair Credit Reporting Act, businesses using consumer reports (background checks) “for employment purposes” are required to provide a copy of the report and summary of rights under the FCRA before taking any adverse action “based in whole or in part” on the report. In Smith v. Mutual of Omaha Insurance Co., the plaintiff claimed that he did not obtain a position as an insurance agent based on his background check, and that the company had failed to comply with these pre-adverse action requirements.

The company claimed, and the court agreed, that the position was for an  independent contractor,  so the “employment purposes” FCRA requirements did not apply.

While the company’s summary judgment motion was pending on the threshold FCRA coverage issue, however, the plaintiff amended the complaint to claim that if it turned out that he was an independent contractor, and if the court agreed that the FCRA’s employment purposes provisions do not apply to independent contractors, then the company had violated a separate FCRA provision, which states:

“A person shall not use or obtain a consumer report for any purpose unless—

(1) the consumer report is obtained for a purpose for which the consumer report is authorized to be furnished under this section; and

(2) the purpose is certified in accordance with section 1681e of this title by a prospective user of the report through a general or specific certification.”

Among the permissible purposes for a consumer reporting agency to prepare consumer reports for businesses is “employment purposes.”  According to the amended complaint, Mutual of Omaha certified to the credit reporting agency it would obtain consumer reports only for “employment purposes.” By claiming that there was no employment relationship with the plaintiff, the company now asserted that his consumer report was not obtained for “employment purposes”; therefore, the company violated the FCRA by obtaining a report for some other purpose that it had not certified to.

JDSupra points out that the court made no ruling on whether the plaintiff’s assertions about the certification were true, and it noted there were other “permissible purposes” for which the company could have properly obtained the plaintiff’s report.  The company moved to dismiss this alternative theory of relief, but the court held that the plaintiff could proceed to litigation.   Read more from JDSupra on the case here.