Employer beware: Adhere to FCRA when using background dossiers

The Consumer Financial Protection Bureau (CFPB) has a worker tracking and surveillance policy clarifying that employers that use third-party data and algorithmic scores for hiring, firing, and other employment decisions must adhere to federal consumer protection laws, such as the Fair Credit Reporting Act (FCRA).

Many modern-day background dossiers, for example, are compiled from databases that collect public records, employment history, collective-bargaining activity, or other information about a worker, including reports that convey scores assessing a current worker’s risk level or performance. The CFPB’s policy establishes these are “consumer reports” under the FCRA.

Concerns over worker privacy and fairness

The CFPB expresses serious concerns about the use of worker data, dossiers, and algorithmic scores by employers, particularly when it comes to hiring, promotion, and reassignment decisions. “With the rise of artificial intelligence, the data harvested about us can be used to power models that score us and put us into different categories,” explained CFPB Director Rohit Chopra. Further, “this data, the dossiers assembled about us, and the algorithmic scores about us may be sold for profit,” he said.

There are concerns about privacy and fairness, especially if the data and scores are based on factors such as union activity, family leave usage, benefits program participation, or performance assessments that may be derived from incomplete or flawed data or converted into some sort of score using an “opaque” algorithm.