FCRA Lawsuits Will Continue to Increase in Target Rich Background Screening Environment in 2016

ESR Top Ten Background Check Trends for 2016

Written By ESR News Blog Editor Thomas Ahearn

Class action lawsuits involving the federal Fair Credit Reporting Act (FCRA) that governs the use of background checks for employment purposes in the United States will continue to increase in 2016 since background screening is a target rich environment even if technical FCRA violations are restricted. This is the number 2 trend selected by Employment Screening Resources® (ESR) Founder and CEO Attorney Lester Rosen for the 9th annual ESR Top Ten Background Check Trends for 2016.

“Most FCRA class action lawsuits against employers are over alleged violations of basic black letter law that could have easily been avoided by a review of forms and processes. It is often FCRA 101 type allegations,” says Rosen, author of ‘The Safe Hiring Manual.’ “Lawsuits against background screening firms can include highly technical claims, even where there is no indication that anyone has actually been harmed, which means that legal compliance has become one of the most critical parts of background check services. ”

Rosen explains that the current trend of FCRA litigation over pre-employment background checks is not limited to lawsuits against background screening firms. Class action lawsuits against prospective or current employers requesting background checks on applicants or employees are mushrooming. These lawsuits are most frequently brought under the FCRA that controls background checks in the United States. Many lawsuits have been brought against employers with well known names across the country.

According to Rosen, employers and background check providers face legal risks involved in background screening due to the increasing complexity of screening consent forms with regard to compliance with FCRA requirements. ESR News has reported on the rise of FCRA class action lawsuits and nationally recognized companies such as Food Lion, Home Depot, Chuck E. Cheese, BMW, Whole Foods, and Calvin Klein paid settlements in FCRA lawsuits ranging from $716,400 to $3 million in 2015 alone.

In December 2015, ESR News reported that a class action lawsuit settlement of $716,400 was reached with Van Heusen, Izod, G.H. Bass, and Calvin Klein over allegations that they obtained background check reports without complying with the FCRA. The lawsuit filed claimed that Calvin Klein, Inc. and PVH Corporation allegedly illegally denied the plaintiff employment as a manager at a Calvin Klein store based on an allegedly inaccurate background check and did not allow the plaintiff a chance to dispute the report.

In October 2015, ESR News reported that natural grocery store chain Whole Foods Market Group Inc. agreed to pay nearly $803,000 to settle a class action lawsuit alleging violations of the FCRA for for improperly disclosing to job applicants that they would undergo background checks. Background checks are subject to strict disclosure and authorization requirements under the FCRA and the lawsuit claimed that the Whole Food application process “violated the FCRA due to the inclusion of a liability waiver in its FCRA disclosure,”

In September 2015, ESR News reported that BMW Manufacturing agreed to pay $1.6 million and provide job opportunities to the alleged victims of race discrimination to resolve a lawsuit filed by the U.S. Equal Employment Opportunity Commission (EEOC) that claimed BMW’s criminal record background check policy disproportionately affected African-American workers at a South Carolina facility by excluding these workers from employment during background checks performed on them.

In July 2015, ESR News reported that Chuck E. Cheese paid $1.75 million to settle a class action lawsuit that claimed entertainment chain restaurant failed to provide job applicants with proper background check disclosures. As part of the class action lawsuit settlement, Chuck E. Cheese – also known as CEC Entertainment Inc. – agreed to change job applications used by the company to better comply with FCRA requirements governing the use of background check disclosure forms.

In April 2015, ESR News reported that a settlement of $1.8 million was reached in a class action lawsuit against Home Depot that claimed the home improvement and construction retailer allegedly violated the FCRA by not having the proper forms for job applicants to fill out in order to conduct background checks on them. The class action lawsuit claimed Home Depot “violated the FCRA by including releases of liability in their preauthorization background and/or credit check disclosure forms.”

In March 2015, ESR News reported that east coast grocery store chain Food Lion, LLC and its parent company Delhaize America, LLC reached a settlement of $3 million in a class action lawsuit filed by a group of job applicants over allegedly illegal background checks in violation of the FCRA. The class action lawsuit claimed Delhaize violated the FCRA requirement for “a clear and conspicuous disclosure” or “stand-alone disclosure” when a background check report is “obtained for employment purposes.”

Rosen notes that the FCRA disclosure requirement is one of the most common reasons for a lawsuit. Section 604(b)(2) of the FCRA clearly states in part that a person may not procure a background check report on a consumer unless “a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes.”

On November 2, 2015, ESR News reported that the Supreme Court of the United States (SCOTUS) heard oral arguments in the case of Spokeo, Inc. v. Robins which could decide whether or not a plaintiff has the legal right, or “standing,” to bring a class action lawsuit for a technical violation of the FCRA if that individual suffered no actual concrete harm from the violation. An earlier lawsuit against Spokeo claimed the online people search engine violated the FCRA by publishing inaccurate information.

According to analysis of the arguments, a ruling that plaintiffs only have to allege a violation of a right created by a statute without needing to show concrete harm from the violation “did not seem likely.” Some Justices agreed that plaintiffs “need to be able to point to actual harm from a violation of a statute, rather than just the violation of the statute itself.” However, Justice Elena Kagan focused on a third option where “Robins was actually injured when Spokeo published false information about him.”

The analysis of the arguments available on the SCOTUS blog stated: “This would allow Robins’s lawsuit to go forward, without forcing the Court to choose between opening the federal courts to frivolous but possibly massive class-action lawsuits (Spokeo’s prediction if Robins were to prevail) and closing the courthouse doors to potentially important privacy, civil rights, environmental, and patent lawsuits (Robins’s prediction if Spokeo were to prevail).” A decision on the case is due in Spring or Summer 2016.

“However, even if the Supreme Court rules that actual harm is needed, that does not necessarily mean there will be less litigation. Many observers have predicted that lawsuits will instead move to state courts which still means that employers and screening firms need to pay the utmost attention to legal compliance,” says Rosen, a frequent speaker on FCRA issues. “The bottom line,” concludes Rosen, “is that employers need to perform due diligence in hiring, but they need to do it correctly.”

Employment Screening Resources® (ESR) has released a whitepaper written by Rosen titled “Common Ways Prospective or Current Employees Sue Employers Under the FCRA” in response to this rising trend of class action lawsuits filed for alleged violations of the FCRA that controls background checks for employment in the United. The complimentary whitepaper is available on the ESR website at www.esrcheck.com/Whitepapers/Ways-Employees-Sue-Employers-Under-FCRA/.

In the whitepaper, Rosen explains how FCRA class action lawsuits can be avoided: These suits against employers have become very common. Ironically, these suits often could have been easily avoided.  More often than not, employers are sued for violating FCRA 101—simple rules and procedures that are clearly set out in the law.  Most of the claims involve aspects of the employer’s screening process that could be easily remedied to comply with the FCRA such as reviewing the forms used for background screening.

Rosen concludes the whitepaper this way: Any decision made by the Supreme Court in the case of Spokeo, Inc. v. Robins will have a dramatic impact on future FCRA litigation. However, given that the majority of these cases are brought on grounds that employers can easily remedy, any employer performing background checks is well advised to review their procedures with a knowledgeable screening partner or an attorney familiar with the FCRA.

ESR Helps Employers Avoid FCRA Class Action Lawsuits

Employment Screening Resources® (ESR), a leading global background check firm, offers FCRA compliant background checks to employers nationwide. ESR is accredited by the National Association of Professional Background Screeners® (NAPBS) and has also successfully completed a SOC 2 Type 2 audit report that confirms ESR meets high standards for protecting the security, confidentiality, and privacy of consumer information. To learn more about ESR, call toll free 888.999.4474 or visit www.esrcheck.com.

NOTE: Employment Screening Resources (ESR) does not provide or offer legal services or legal advice of any kind or nature. Any information on this web site is for educational purposes only.

© 2015 Employment Screening Resources® (ESR) – Making copies or using of any part of the ESR News Blog or ESR website for any purpose other than your own personal use is prohibited unless written authorization is first obtained from ESR.