Stanford University Faces Class Action Lawsuit for Alleged FCRA Violations with Background Checks

Fair Credit Reporting Act (FCRA)

Written By ESR News Blog Editor Thomas Ahearn

A class action lawsuit filed in a Northern California District Court in October of 2018 claims Stanford University procured background checks for employment purposes without obtaining the proper authorization from job applicants in an alleged violation of the federal Fair Credit Reporting Act (FCRA) that regulates the collection, dissemination, and use of consumer information in America.

The complaint claims that before plaintiff Theresa Richard was hired as a worker at defendant Stanford University’s “residential and dining enterprises” she completed Stanford’s standard application form during the job application process which permitted Stanford to obtain a “consumer report” – the FCRA’s term for a background check. The complaint claims Stanford’s standard application form stated:

“I authorize a thorough investigation of my prior employment, education background, criminal record, and where applicable to a position, credit check and/or driving record. I agree to cooperate in such an investigation, to execute any consent forms required in connection with those investigations, and release form [sic] all liability and responsibility all persons or entities requesting or supplying such information. I understand that employment is conditional based on investigation results.”

Under FCRA 15 U.S.C. § 1681b(b)(2)(A)(i) and (ii), it is unlawful to procure a consumer report for employment purposes without: “Providing a clear and conspicuous disclosure in writing in a standalone document before the report has been pulled that a consumer report may be obtained for employment purposes; and Obtaining authorization in writing from a consumer for whom a report will be procured.”

The class action lawsuit claims: “Because defendant unlawfully included extraneous information in its standard form permitting defendant to obtain a consumer report verifying plaintiff’s background and experience, plaintiff was confused by the standard form document and did not understand that defendant would be requesting a ‘consumer report’ as defined in the FCRA.”

The class action lawsuit against Stanford University seeks statutory damages of $1,000 for each violation of the FCRA, punitive damages, court costs, and attorneys’ fees. The complaint also seeks to represent a Class of individuals estimated to include more than 1,000 job applicants who applied to work at Stanford University and had a consumer report obtained on their background since August 16, 2015.

This is not the first time Stanford University has been sued over alleged FCRA violations for unlawfully including extraneous information in its standard application form. In 2015, Stanford faced the same claims from another employee in Lagos v. Leland Stanford Junior University. In December 2015, Lagos survived a motion to dismiss the case and proposed class certifications deadlines in November 2017.

Other companies have faced similar lawsuits over the FCRA’s “clear and conspicuous disclosure in writing in a standalone document” requirement and lost. In August 2018, ESR News reported that a California federal judge approved a proposed $1.3 million class action lawsuit settlement against a healthcare company for using disclosures “embedded with extraneous information” instead of a standalone document.

In July 2018, ESR News reported that a bottling subsidiary of PepsiCo agreed to pay $1.2 million to settle a class action lawsuit that claimed the company violated the FCRA by procuring background reports for employment purposes without making certain required disclosures and failing to disclose that it would obtain a consumer report for employment purposes in a document consisting solely of the disclosure.

In April 2018,  ESR News also reported that Frito-Lay Inc. – another subsidiary of PepsiCo – agreed to pay $2.4 million to settle a class action lawsuit that claimed the snack food manufacturer violated the FCRA by using improper disclosure forms for background checks on job applicants without providing a “clear and conspicuous disclosure… in a document that consists solely of the disclosure.”

On May 16, 2016, the U.S. Supreme Court ruled in the case of Spokeo, Inc. v. Robins – which involved a man who claimed FCRA violations for suffering an injury after incorrect information about him was published online – that consumers must prove “concrete injury” in lawsuits for alleged “bare” violations of federal statutes such as the FCRA as required under Article III of the U.S. Constitution.

The fact that employers are still targeted in lawsuits for technical violations of the FCRA even after the Spokeo ruling is one of the “ESR Top Ten Background Check Trends” for 2018 selected by Employment Screening Resources® (ESR). “In no way did the Supreme Court decision in Spokeo mean employers could relax obligations for FCRA compliance,” explained ESR founder and CEO Attorney Lester Rosen.

Passed by Congress in 1970, the FCRA promotes the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies. It is intended to protect consumers from the willful and/or negligent inclusion of inaccurate information in their credit reports and regulates the collection, dissemination, and use of consumer information, including consumer credit information.

ESR Offers Two White Papers on Avoiding FCRA Lawsuits

Employment Screening Resources® (ESR) – a leading global background screening firm – offers a complimentary white paper library that includes two white papers that examine the causes that can lead to FCRA class action lawsuits: “Common Ways Prospective or Current Employees Sue Employers Under the FCRA” and “Common Ways Consumer Reporting Agencies are Sued Under the FCRA.”

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

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