Third Circuit Strengthens Your Clients’ Right to Know When Their Criminal History Cost Them a New Job

Finding stable employment today is increasingly challenging, thanks to a cooling labor market driven by slow job growth, economic uncertainty, and mismatches between the skills employers seek and the skills applicants have. Recent forecasts show that job openings are stabilizing rather than expanding, unemployment duration is rising, and shifting economic conditions, such as tariff-related uncertainty, tightening immigration policies, and reduced hiring momentum, are making the job search more competitive for everyone.

These obstacles are even more daunting for individuals with criminal histories. Many employers still view past criminal convictions as a significant red flag when evaluating job applicants. But Pennsylvania job applicants are not without protection. The commonwealth’s Criminal History Record Information Act (CHRIA) and the federal Fair Credit Reporting Act (FCRA) help ensure job seekers with criminal records are treated fairly by limiting how those records can be used against them, and the notice they must receive when those records negatively affect their candidacy.

Recently, in Phath v. Central Transport, LLC, No. 25-1028, the Third Circuit was asked to answer a threshold question about the CHRIA: Do its protections apply when employers learn about an applicant’s criminal history directly from them? The court held that they do.

The CHRIA and FCRA require employers to inform your clients when they lost out on a job because of their criminal history

The CHRIA, 18 Pa. C.S.A. § 9101 et. seq., requires criminal justice agencies to maintain accurate criminal history records that track an individual’s interactions with Pennsylvania’s criminal justice system. Under the statute, employers may request “information collected by criminal justice agencies concerning [job applicants], and arising from the initiation of a criminal proceeding, consisting of identifiable descriptions, dates and notations of arrests, indictments, informations or other formal criminal charges and any dispositions arising therefrom.”

Section 9125 of the CHRIA permits employers to use that information to decide whether to hire an applicant. But felony and misdemeanor convictions “may be considered by the employer only to the extent to which they relate to the applicant’s suitability for employment in the position for which he has applied.” If an employer decides not to hire an applicant “based in whole or in part on” their criminal history, the employer must notify the applicant in writing that they did so.

At the federal level, the FCRA, 15 U.S.C. § 1681 et seq., applies to criminal background checks when an employer obtains an individual’s criminal history through a third‑party consumer reporting agency (CRA) and uses it for “employment purposes.” Given the breadth of the term “employment purposes,” the FCRA governs when an employer uses an individual’s criminal history in connection with any employment action, including hiring, firing, promotion, demotion, reassignment, and compensation changes.

Under the FCRA, employers must provide applicants and employees a clear written disclosure explaining that a consumer report may be obtained for employment purposes. Employers must also obtain individuals’ written authorization before requesting their criminal history.

When employers intend to take an adverse action against an applicant or employee based on information in a background check, the FCRA requires them to follow a two-step process. First, they must send a pre-adverse action notice to the individual, which must include both a copy of the background check/consumer report and a copy of the Consumer Financial Protection Bureau’s “Summary of Your Rights Under the FCRA” document. Second, employees must give individuals a reasonable opportunity—commonly at least a week—to review the report and dispute any inaccurate information with the CRA.

When employers proceed with an adverse action against an individual based on their criminal history, they must send the affected individual a final adverse action notice. This notice includes contact information for the CRA that provided the criminal history, and information about the individual’s right to dispute the accuracy of the report and obtain a free copy of it.

Together, the CHRIA and the FCRA regulate employers’ use of criminal records during their hiring process, but the statutes address different concerns. The CHRIA limits what information Pennsylvania employers may consider when hiring an employee, generally restricting use to conviction records. The FCRA, on the other hand, focuses on how criminal background information is obtained and used for a broad array of employment purposes when sourced from CRAs. It also requires employers to disclose to and seek authorization from an individual before requesting their criminal history, and to give notice before taking adverse action based on that criminal history.

The Third Circuit expands when the CHRIA applies to an employer’s discovery of an applicant’s criminal history

In Phath v. Central Transport, LLC, No. 25-1028, the Third Circuit recently clarified how the CHRIA’s protections apply when criminal history information is disclosed by a prospective employee during the hiring process. The court confirmed that the statute’s protections apply when employers learn about an applicant’s criminal history directly from the applicant.

Rodney Phath, a Pennsylvanian, applied for a truck‑driver position with Ohio-based Central Transport, LLC. Phath was qualified for the position and held a valid commercial driver’s license. During the hiring process, Phath voluntarily disclosed a 15‑year‑old armed robbery conviction. Central Transport immediately informed Phath it would not hire him because of the conviction.

Phath sued under the CHRIA, alleging that Central Transport improperly used his criminal history and failed to provide the required written notice. The district court dismissed the case, holding that the CHRIA applies only when an employer obtains a criminal history from a state agency. On appeal, the Third Circuit reversed the district court and remanded the case back to it for further proceedings.

The Third Circuit’s decision turned on the language from the CHRIA stating that when “an employer is in receipt of information which is part of an employment applicant’s criminal history record information file, the employer may use the applicant’s prior convictions for the purpose of deciding whether or not to hire the applicant.”

First, regarding the information an employer must be “in receipt of,” the court found that the statute covered information that “is part of an employment applicant’s criminal history record information file.” Second, the court reasoned that a “criminal history record information file” is “a compilation of criminal history facts collected and maintained by state agencies.” Third, the court reasoned that felony convictions like Phath’s are included in that file, and that Central Transport was “in receipt of” that information when he disclosed it. Finally, the court observed that nothing in the CHRIA’s text required information that was “part of an employment applicant’s criminal history record information file” to come from a state agency’s file.

Thus, according to the court, Central Transport was “in receipt of information” that is “part of” Phath’s “criminal history record information file” when it received his voluntary disclosure of his conviction, and is subject to the notice requirements of the CHRIA for taking an adverse action against Phath. Had the Third Circuit not held as it did, it would have allowed employers to sidestep the CHRIA by asking applicants directly about their criminal histories and taking adverse action against them when they voluntarily disclosed prior convictions.

Your clients’ unsuccessful job applications might give rise to claims under the CHRIA and/or the FCRA

The Third Circuit’s decision in Phath expands employers’ liability for violations of the CHRIA. It also reinforces that the CHRIA and the FCRA provide your Pennsylvania-based clients a two-pronged approach for challenging employers’ decisions not to hire them when those decisions are based on their criminal histories.

Though the statutes vary regarding their notice requirements and the sources of a client’s criminal history, the CHRIA and FCRA are powerful weapons your clients can use to ensure that if they don’t receive a job offer because of their criminal history, the employer followed both Pennsylvania and federal law regarding the manner in which it used that criminal history and the notice it was required to give them.

John Soumilas is a partner at Center City-based Francis Mailman Soumilas, P.C., a leading consumer rights law firm. He can be reached at jsoumilas@consumerlawfirm.com.