Agency Flags Compliance Issues for Employers Using Third-Party Worker Data
New guidance from the Consumer Financial Protection Bureau (CFPB) broadens when employer-collected data may be considered a consumer report under the Fair Credit Reporting Act (FCRA). Employers using third parties to track performance should be cautious of how they use and store this information to avoid FCRA violations.
Recent technological advances and the rise of remote work have led to a rapid increase in worker monitoring. Third-party technology companies now make it easier and more cost-effective for employers to track, assess and evaluate workers.
But the CFPB’s reading of the FCRA highlights the growing complexity of data usage in employment decisions. Per the CFPB, data compiled by third-party applications could be classified as FCRA-governed consumer reports. This classification would impose significant obligations on employers, including obtaining employee consent and providing opportunities to challenge data before any adverse employment actions are taken.
How do employers use monitoring tools?
Consumer reporting agencies and other background screening companies offer a range of reports to employers. These reports can record current workers’ activities, personal habits, attributes and even their biometric information. Some employers, for example, use third parties to:
- Monitor sales interactions
- Track driving habits
- Measure task completion times
- Record the number and duration of messages and meetings
- Calculate time spent off-task through web browsing, screenshot and keystroke recording
What does this guidance change for employers?
With advancements in technology and the increasing use of algorithmic assessments, employers must navigate a landscape where virtually any data shared by third-party applications could trigger FCRA compliance requirements.
Moreover, the FCRA’s definition of “adverse action” covers a wide range of employment decisions, from hiring and promotions to more nuanced actions that might affect an employee’s responsibilities. This underscores the need for employers to be vigilant in how they utilize data in making employment decisions.
The CFPB also notes that the use of tracking technology could be a subject of collective bargaining. This observation suggests there is room for negotiation between employers and employees regarding the implementation and use of surveillance technologies in the workplace. Such negotiations could address concerns related to privacy, data accuracy and the potential impact on employment conditions.
The CFPB’s guidance is part of a broader trend toward scrutinizing the use of algorithms and third-party data in employment, credit and other decisions. As the regulatory landscape continues to evolve, employers should closely monitor these developments to stay up to date with FCRA requirements.
Please contact Austin Laurienzo or any member of the Phelps labor and employment team if you have questions.