Another Employer Settles Multi-Million-Dollar Class-Action Lawsuit for Improper FCRA Disclosure

By Michael Klazema on 11/26/2014

In October, a major supermarket chain agreed to pay $6.8 million to settle a putative class-action lawsuit alleging that it failed to properly disclose that it would perform background checks on more than 90,000 applicants. Each class member is expected to receive approximately $75.

Plaintiffs alleged that including a liability waiver in a disclosure form violated Section 604(b)(2)(A)of the Fair Credit Reporting Act, which requires that a disclosure consist "solely" of the disclosure that a consumer report may be obtained for employment purposes. The plaintiff pointed to the court’s opinion in another class action - Singleton v. Dominos – and long-standing guidance from the Federal Trade Commission stating that including the disclosure in a job application or including a release of liability in the disclosure are FCRA violations.

Employers who fail to provide applicants with a disclosure – consisting solely of the disclosure that it may obtain a consumer report for employment purposes – before obtaining a background check report on the applicant, face a real and substantial risk of incurring multi-million-dollar legal liabilities. We have reported on similar cases previously:

As we reported, plaintiffs’ lawyers are targeting employers in class actions based on violations of the technical provisions of the Fair Credit Reporting Act. These lawsuits do not necessarily allege that the employer’s decision violated the FCRA, but that the process around the employer obtaining and using the background check did. Scores of employers now face or have already settled lawsuits alleging the employer’s failure to provide a disclosure that complies with FCRA § 604(b)(2)(A). Nearly 30 new FCRA-class-action lawsuits have been filed against employers in 2014 alone.

The liability risk is substantial. In two other cases, both involving a liability waiver in the disclosure form, plaintiffs extracted even higher per person settlements. In Singleton v. Dominos, No. 11-1823, 2012 WL 245965 (D. Md. Jan. 25, 2012) the parties settled a class of 11,000 applicants for between $200 and $250 each. In Reardon v. ClosetMaid Corp., 2013 U.S. Dist. LEXIS 169821 (W.D. Pa. Dec. 2, 2013), the settlement awarded was $400 each.

To avoid expensive class actions like this one, employers (1) should not include any extraneous language in the FCRA-required disclosure, including liability waivers; (2) should not include FCRA-required disclosures in the same document or online screen as the general employment application; and (3) should put the disclosure on to a separate piece of paper from the authorization.

Tag Cloud
Recent Posts

Latest News

  • April 19

    In a post-Penn State scandal world, universities are more aware than ever of the need to protect students by vetting faculty. The extent of this vetting and its implementation are hot topics causing controversy on campuses nationwide.

  • April 18 Amazon’s criminal background checks look back seven years and consider any convictions from that time. All finalists must complete criminal background searches, reference checks, and drug tests.
  • April 17

    From entry-level positions to roles involving “Top Secret” security clearances, military roles can involve a variety of different background investigations. We look at what different types of military background checks entail.

  • April 17 A new CNBC series is looking at true HR stories and their lessons. The most recent installment looked at the consequences of not running background checks.
  • April 12 Complicated by patchwork legislation and continuing federal prohibition, marijuana legalization poses several challenges for employers and would-be employees alike. Despite its legal status in a growing number of states, marijuana continues to negatively impact job-seekers.
  • April 12 Familiarizing yourself with the legality of background checks is essential. Continue reading about laws and regulations.
  • April 11

    Understanding the background check obligations in your industry and state.

  • April 10 A former employee of a senior assisted living community is facing charges for stealing from a resident. The alleged theft occurred after the employee gained access to the patient’s credit cards and checking account.
  • April 06 Background checks aren’t pass or fail. Employers consider various factors before making any hiring decision based on background check data.
  • April 06  Level 1 and Level 2 are terms used in Florida law to describe background check requirements for employers. We look at what a Level 2 background check entails.