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FTC: Employers Who Buy Profiles from Data Brokers to Supply Profiles on Applicants or Employees Must Comply with the FCRA

Posted in Privacy and Data Security

by Jennifer S. Geetter, Heather Egan Sussman and Carla A. R. Hine

We recently released a Hot Topic that details the Federal Trade Commission’s (FTC) settlement with Spokeo, Inc.  Spokeo collected information about individuals from online and offline sources to create profiles that included contact information, marital status, age range and in some cases included a person’s hobbies, ethnicity, religion, participation on social networking sites and photos that Spokeo attributed to a particular individual.  Spokeo marketed these profiles to companies in the human resources, background screening and recruiting industries as information to serve as a factor in deciding whether to interview or hire a job candidate.  The FTC concluded that Spokeo acted as a consumer reporting agency and thus violated the Fair Credit Reporting Act (FCRA) by: (1) failing to ensure the consumer reports it sold were used for legally permissible purposes; (2) failing to ensure that the information it sold was accurate; and (3) by failing to inform users of Spokeo’s consumer reports of their obligations under the FCRA.  Spokeo agreed to pay $800,000, and comply with the FCRA going forward, among other things.

There is an important message for employers in this settlement:  If you receive profile information from data brokers and use that information in making employment decisions, the FCRA applies.  And while this enforcement action focused on the data broker, the FTC could turn next to offending employers.  The FTC has published guidance on how to avoid an enforcement action in these circumstances and comply with the FCRA at:  Using Consumer Reports: What Employers Need to Know  Employers should also check on the local state laws that may apply, because some states restrict the use of such reports for employment purposes.