Employment background checks help employers hire individuals with integrity whom they can trust, and who do not present a risk to the business, other employees, or the customers and clients that the business serves. Buyers in transactions may view target businesses that run background checks as lower risk for employee performance and retention issues. Background checks also constitute an important area for employment diligence in transactions because an employer or background check vendor’s failure to follow the hypertechnical disclosure and authorization requirements of the Fair Credit Reporting Act (FCRA) and other applicable state and local laws risks potentially material class action exposure and $1,000 penalties per violation. This article explores mitigation strategies that buyers may use in due diligence to identify and valuate potential FCRA exposure.
The 411 on Employment Background Checks in Stock and Asset Transactions
By Marjorie C. Soto Garcia and Michelle S. Strowhiro on October 13, 2022
Posted In Employment, Fiduciary and Investment Issues
Marjorie C. Soto GarciaMarjorie C. Soto Garcia’s labor and employment practice covers single plaintiff and class action litigation, employment counseling, traditional labor (including union activity and collective bargaining), and M&A and complex transactions. She regularly defends employers in state and federal lawsuits alleging discrimination, harassment, retaliation, wrongful termination, wage and hour violations, violations of the Fair Credit Reporting Act (FCRA), Private Attorney General Act (PAGA) actions and unfair labor practice charges under the National Labor Relations Act (NLRA). Marjorie is additionally experienced in managing complex transactions (including M&A), regularly providing clients with strategic advice on potential risks and practical, business-oriented solutions. She is also experienced in dealing with trade secret, confidentiality, non-compete and non-solicit matters in employment and separation contracts. Read Marjorie C. Soto Garcia's full bio.
Michelle S. StrowhiroMichelle S. Strowhiro is an employment advisor and litigator. She provides trusted counsel to US and international companies on all aspects of employment law compliance. Michelle partners with clients to establish and maintain their strong and lawful employment policies and practices; manage their employee relationships from hire to termination; conduct workplace investigations; administer leaves and other workplace accommodations; and resolve disputes. She provides manager and employee trainings on management and sexual harassment. She regularly prepares and negotiates agreements, and advises companies on employment law issues for mergers and acquisitions. Michelle works with clients in the technology, fashion, food and restaurant, health care, sports, media and entertainment industries. Read Michelle Strowhiro's full bio.
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