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

  • January 17 As part of efforts to foster more opportunities to work for those with criminal records, many states make allowances for expunging records. Pennsylvania has joined their ranks with a slightly different program.
  • January 15 A viral news story at The Cleveland Clinic has reignited the debate over social media background checks. The hospital recently fired a medical resident with a history of anti-Semitic tweets.
  • January 10 To remain a competitive employment option for retail workers, Best Buy will begin offering childcare options for parents. 
  • January 07 The rise of the "gig economy" was rapid, and questions about safety for users of these new services grew along with the industry. Background check policies in the gig economy can be unclear or unevenly applied, leading to barriers for some seeking jobs.
  • January 04 A new service that offers background checks for babysitters has come under fire for racial bias, invasion of privacy, and non-compliance with FCRA requirements. Predictim has paused its launch due to controversy.
  • December 21 Everyone with a driver’s license has a driving record. Here are some of the details that can be discovered or verified through a driving report records check.
  • December 20 Trust between patient and practitioner is a critical part of a strong healthcare system. An investigation uncovered hundreds of doctors practicing in new locations after giving up their licenses following serious mistakes.
  • December 18 Professional license verification checks help ensure that job candidates have the licenses or certifications necessary for certain positions. Here’s how they work.
  • December 17 When it comes to hiring new employees, Providence Wireless relies on for help with the vetting process.
  • December 13

    As the food truck fad proves it has staying power, many local governments have looked for ways to protect their communities without constraining economic activity. The effort to strike the right balance is ongoing.