Given the need for employers to exercise due diligence in hiring and at the same time comply with the complex legal environment regulating hiring, employers can expect to see an increase in legal actions in 2014 – including class action lawsuits – for failing to perform proper background checks or failing to do them right. This is Trend Number Four of the 7th Annual Employment Screening Resources® (ESR) ‘Top Ten Background Check Trends’ for 2014. For more information about the trends, please visit https://www.esrcheck.com/ESR-Top-Ten-Background-Check-Trends.
The number of class action lawsuits against both employers and background firms that fail to comply with the federal Fair Credit Reporting Act (FCRA) is on the increase, as employment attorneys are becoming more familiar with the FCRA and the whole area of background checks. Conversely, lawsuits for negligent hiring for an employer that fails to demonstrate due diligence in hiring or does an inadequate background checks will also be subject to litigation. When a class action is brought, the potential exposure, not to mention legal fees, can be enormous.
The importance of legal compliance and background checks was underscored in several class action lawsuits in 2013. In November 2013, two background check firms agreed to pay $18.6 million to settle three class action lawsuits alleging violations of the FCRA for “failing to take reasonable measures to ensure the accuracy of background check report provided to prospective employers.” The two background check firms were accused “of violating the FCRA by providing incorrect, outdated or incomplete information to potential employers.” The two companies also failed to provide “consumers with copies of their consumer reports before delivering them to prospective employers.” The two defendants have denied all allegations in the class action lawsuits. A story by TopClassActions.com about the lawsuits is available at http://www.topclassactions.com/lawsuit-settlements/lawsuit-news/5437-background-check-firms-agree-to-18m-class-action-settlement.
In October 2013, a class action complaint that alleged Domino’s Pizza used consent forms for background checks that violated the FCRA and took adverse actions against applicants without providing the required notices was approved and Domino’s agreed to pay $2.5 million to a settlement fund. More details in the case of SINGLETON, et al. v. DOMINO’S PIZZA, LLC are available at http://docs.justia.com/cases/federal/district-courts/maryland/mddce/8:2011cv01823/191745/82/0.pdf?1380802688.
In September 2013, a tenant screening company that background checks tenants for rental housing agreed to pay $150,000 to settle a class action lawsuit over its screening practices. The tenant screening company did not admit to any wrongdoing under the settlement but will pay $400 to each of the plaintiffs plus $32,600 in attorney fees and other costs. The lawsuit was filed by a woman in Kent, Washington who was denied rental housing based on drug convictions well over seven years old. Under Washington law, tenant background checks should only include cases where the conviction, sentence, or parole period occurs within the past seven years. An Associated Press (AP) report on the case is available at http://www.businessweek.com/ap/2013-09-18/150k-settlement-in-lawsuit-over-background-checks.
In August 2013, a class action lawsuit filed claimed a trucking company allegedly failed to tell more than 10,000 job applicants that they could “access the same information as the company for background checks and question the information the company reviews in making hiring decisions.” The plaintiff in the suit applied to be a driver in 2012 but “was turned away due to his background check.” The lawsuit claims the company allegedly violated the federal FCRA for several years by not informing applicants that they had a right to get a free copy of the background check report used by the company and could also dispute any information contained in the report. A story from TruckingInfo.com about the case is available at http://www.truckinginfo.com/news/story/2013/07/swift-transportation-faces-lawsuit-over-background-checks.aspx.
In June 2013, the U.S. Equal Employment Opportunity Commission (EEOC) filed lawsuits against two employers alleging they violated Title VII of the Civil Rights Act by implementing and utilizing a criminal background check policy that resulted in employees being fired or screened out for employment. These two lawsuits filed by the EEOC – the agency enforcing federal laws prohibiting employment discrimination – show the EEOC is starting to enforce its updated ‘Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964’ issued on April 25, 2012. A press release about the lawsuits – the first enforcement action against employers under the revised EEOC Guidance for using criminal records – is available at http://www.eeoc.gov/eeoc/newsroom/release/6-11-13.cfm. The updated EEOC enforcement guidance regarding employer use of arrest and conviction records is available at http://www.eeoc.gov/laws/guidance/arrest_conviction.cfm.
In February 2013, a large national retailer settled an employment class action lawsuit for $3 million that alleged the company violated the FCRA by failing to send proper notices to nearly 65,000 plaintiffs who were job applicants. Although the original complaint alleged other violations of the FCRA, the settlement was based upon an allegation that the employer utilized an older version of a form known as a “statement of rights” that an employer must provide any applicant that is rejected for employment based in any way upon a background check. This is part of the “adverse action” process under the FCRA. Before an employer utilizes a background check to take an adverse action, such as not hiring someone, the employer has certain legal duties. Those duties include sending an applicant a copy of the background report as well as a statement of rights. However, the lawsuits alleged the statements of rights were not updated. More detailed information is available at http://www.archive.org/download/gov.uscourts.vaed.272989/gov.uscourts.vaed.272989.56.0.pdf.
Class action lawsuits also always include claims for punitive damages. The U.S. Supreme Court in Safeco vs. Burr 551 U.S. 47 (2007) ruled that an entity can face punitive damages if it acts willfully under the FCRA by either knowingly or recklessly disregarding its statutory duty. Even if a screening firm or employer believes it is acting lawfully that is NOT a protection from an allegation of willful violation of the FCRA and exposure to punitive damages if the defendant should have known it was acting out of compliance.
As Employment Screening Resources® (ESR) has noted in previous blogs, the impact of that ruling was to make it easier to allege punitive damages. For more information on the Safeco case, read the ESR article “Supreme Court Decision on Willfulness Under FCRA May Have Dramatic Impact on Employers and Screeners” available at https://www.esrcheck.com/Articles/Supreme-Court-Decision-on-Willfulness-Under-FCRA-May-Have-Dramatic-Impact-on-Employers-and-Screeners/197/. For more information about background checks that are legally compliant with the FCRA, visit Employment Screening Resources® (ESR) – a nationwide background check firm accredited by the National Association of Professional Background Screeners (NAPBS®) – at https://www.esrcheck.com.
About Employment Screening Resources® (ESR):
Founded by safe hiring expert Attorney Les Rosen in the San Francisco, CA-area in 1997, Employment Screening Resources® (ESR) – ‘The Background Check Authority®’– provides accurate and actionable information that empowers employers to make informed hiring decisions for the benefit of their organizations, employees, and the public. CEO Rosen literally wrote the book on background checks with “The Safe Hiring Manual” and ESR is accredited by The National Association of Professional Background Screeners (NAPBS), a distinction held by a small percent of screening firms. Employers choosing ESR know they have selected an agency meeting the highest industry standards. To learn more about ESR, visit https://www.esrcheck.com, call toll free 888.999.4474, or email [email protected].