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He had a background check come back with him having a dishonorable discharge from the Marines, but he had never served in the Marine Corps. As it turned out, the DD belonged to another person with the same first name, last name, middle initial, and date of birth.
He wasn't unemployed at the time, though, so he just stuck around with his current crappy job until he got the background check straightened out.
You're right, though - the average person (employed or unemployed) has no real recourse in that scenario. How do you prove conclusively that you've never been in the military? How do you prove a negative? How do you get a completely unaccountable agency (the private background-check firms) to correct their records? It's a crap situation, at best.
What I would suggest is to contact Legal Aid and try and get them to represent you in a defamation-of-character suit against the background-check provider.
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