So THAT’S Why I Didn’t Get the Job: FTC Spanks Spokeo on Employee Background Checks

Screengrabs of Spokeo.comIn today’s economy, it’s hard enough to land a job without companies secretly compiling inaccurate dossiers of information about you, then aggressively selling them to employers, who – based on the false or simply irrelevant data – decide not to hire you. Yet employment credit checks and other types of background checks can produce exactly this type of absurd barrier to employment. And things get worse when a rogue company violates what little protection the law offers.

Case in point: this week’s Federal Trade Commission (FTC) settlement with online data broker Spokeo.

Today, Spokeo describes itself as “a people search engine that organizes vast quantities of white-pages listings, social information, and other people-related data from a large variety of public sources.” But prior to 2010, the company had a very specific audience in mind for its mass of detailed data on individual Americans: employers. According to the FTC, Spokeo vigorously marketed its data profiles to human resources professionals and job recruiters as an employment screening tool. It lured recruiters through online advertising based on keywords like "employment background checks," "applicant screening," and "recruiting,” and goaded recruiters to use its products to “explore beyond the resume.” If you wanted “credit estimates” on job applicants, or information about the investments, personal hobbies, ethnicity, religion or age of the people you were considering for employment, Spokeo was the place to get them.  

With all of the marketing come-ons and targeted appeals to recruiters, human resources professionals might have missed the little footnote stating that data from the site should not be used as a factor in determining an individual’s eligibility for employment, credit, or insurance. In other words, recruiters were meant to avoid using the information for exactly the purpose it had been sold for. And despite building a business based on assembling and selling consumer reports, Spokeo insisted that it was not, in fact, a consumer reporting agency, and so wasn’t covered by the Fair Credit Reporting Act (FCRA). The company also didn’t tell employers that they were obligated under the terms of the FCRA to notify any job applicant whose dossier they viewed, share the information with them, and give them an opportunity to correct any inaccuracies. Finally, according to the FTC, Spokeo failed to ensure the accuracy of its reports.

Spokeo agreed to pay $800,000 to settle the complaint and was ordered to stop violating the law. With luck, the FTC’s action, its first case that deals with the sale of social media and other online data used for employment screening, will make other consumer reporting agencies think twice about violating the FCRA. And the real hero is the non-profit Center for Democracy and Technology, which in 2010 submitted the complaint against Spokeo that launched the FTC investigation.

But the settlement fails to settle some troubling issues. Why should recruiters and human resources personnel be presented with information about a job applicant’s ethnicity, age, or religion when it is illegal under civil rights laws to make employment decisions based on this information? For that matter, why should employers seek information on personal credit history? As I’ve argued before, although using personal credit history to make employment decisions is currently legal under the FCRA, this information can also have a disproportionate impact on groups protected under civil rights law and has not been proven relevant to employment. It’s not clear that Spokeo was providing any value to employers.

Finally, what about the job applicants who might have missed out on job opportunities because of irrelevant or inaccurate information in a Spokeo report? While the decision may prevent future violations of the law, it does nothing to make those who were impacted whole. In fact, the injured parties will never know they were harmed.