The CFPB is signaling its intent to hold companies responsible for promoting employees’ rights in a … [+] tech-driven period of workenvironment security.
The Consumer Financial Protection Bureau (CFPB) hasactually provided brand-new assistance, worrying that companies who usage tracking innovation and synthetic intelligence (AI) to screen and make work choices about employees needto now adhere to Fair Credit Reporting Act (FCRA) requirements. This assistance signals that, even as brand-new innovations improve workenvironment practices, compliance with federal law is obligatory—not optional.
FCRA in the Workplace: An Expanding Compliance Mandate
Traditionally, the FCRA hasactually governed customer credit and reporting practices, covering what are frequently referred to as background checks utilized in hiring. However, as in-depth in CFPB Circular 2024-06 and current declarations from CFPB Director Rohit Chopra, the FCRA now likewise extends to a variety of employee tracking tools, especially those utilizing data-driven insights, algorithmic ratings, or what the CFPB hasactually called “background files.”
Background files are a CFPB-developed term that refers to employee profiles assembled from numerous information sources, consistingof public records, work history, and efficiency tracking. Unlike conventional background checks, which focus on confirming criminal history, work, and education, background files might consistof extra, insomecases delicate, information, such as union activity, household leave use, and individual practices tracked by AI. Both background files and conventional background checks, nevertheless, should satisfy the verysame FCRA requirements for precision, authorization, and openness.
As AI advances and remote work increases, numerous companies rely on third-party tools to track whatever from efficiency metrics to physical motion throughout shifts. The CFPB’s assistance clarifies that such info, specifically if it affects workingwith, promo, or daily work choices, might certify as a “consumer report” under the FCRA.
How Workplace Tracking Technology and AI Fall Under the FCRA
Employers are significantly utilizing background files and third-party ratings to notify work choices. While some tracking might merely record actions—such as time invested in particular places or on particular jobs—many tools today usage AI-driven designs to transform raw information into ratings or evaluations. For example, an AI tool might create a “risk” rating based on web surfing practices or keystroke frequency, or a “productivity” rating based on job efficiency metrics.
Under the FCRA, these evaluations are managed when created by third-party suppliers of employee tracking services and background files, which the CFPB now thinksabout customer reporting companies. According to the CFPB and the Federal Trade Commission (FTC), which share enforcement authority for the FCRA, companies and customer reporting companies should follow these FCRA requirements:
- Worker Consent: Employers needto acquire permission before askingfor these customer reports.
- Clear Disclosure in Standalone Format: The disclosure should be a clear and noticeable written notification, in a standalone file, notifying the employee about the intent to get a customer report for work functions.
- Pre-Adverse and Final Adverse Action Notices: If an company means to take unfavorable action b