"Dennis Teague was disappointed when he was rejected for a job at the Wisconsin state fair. He was horrified to learn why: A background check showed a 13-page rap sheet loaded with gun and drug crimes and lengthy prison lockups. But it wasn't his record. A cousin had apparently given Teague's name as his own during an arrest.
...A Wisconsin state judge plans to issue his decision in Teague's case by March 11.

Story:
http://finance.yahoo.com...past-isnt-182335059.html 

What is the extent of the liability in these cases for the company providing the background check and for the company that rejects an applicant based on that wrong info, if any?

We're all at the mercy of some computer.

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A very close friend of mine had that happen when entering a Naval Base to play a spot. He is 65 years old and apparently the person they had him pegged as was 27ish... Watching him scream "Does my old ass look 27 to you stupid? Pretty classic.