Pre-Employ Blog

3 Costly Lessons to Learn to Avoid FCRA Lawsuits

Posted by Bob Mather on February 03, 2016

3 Costly Lessons on Hiring from FCRA Lawsuits

Would you spend $5.9 million dollars to improve your hiring process? Not if you could help it, right?! Unfortunately for them, some employers have had to do just that as a result of non-compliance with the Fair Credit Reporting Act (FCRA). Companies have paid dearly for not paying strict attention to FCRA and EEOC compliance in the course of conducting background screening on job applicants and current employees.

Gavel on a stack of moneyFortunately for you, though, their loss is your gain. The lessons they have paid so much for are now available to you for free. Make careful note of these employers’ missteps and you can save your company millions of dollars’ worth of avoided lawsuits.

Lesson One: Be Very Detail-oriented Where Form Compliance is Concerned

One employer recently learned this the hard way and is on the hook for at least $1.8 million to resolve a class action lawsuit over claims it violated FCRA by using a form that sought consent for additional provisions not required by FCRA. Stick carefully to the script outlined by FCRA. That includes specific requirements for everything down to the font size.

Courts have also decided against employers for failure to meet the FCRA requirement that disclosure must be made in a document consisting “solely” of the disclosure.

Lesson Two: Don’t Conduct Background Checks Without Knowledge and Consent

A class action lawsuit was filed last year against a national retailer,  alleging that they routinely ran background checks on current and prospective employees without their knowledge or consent. Allegedly, the plaintiff’s application did not authorize the use of a third-party reporting agency to obtain a consumer report, and it wasn’t until weeks after the consumer report was obtained that the employee was given a disclosure and authorization form. The impacted class potentially includes thousands of workers, and the plaintiff seeks statutory damages of $100 to $1,000 for each alleged FCRA violation, plus attorney fees and punitive damages. Tightening up their background check process could have saved this employer a lot of trouble.

Lesson Three: Be Extremely Careful About Process When Criminal Convictions are Returned

FCRA requires a specific notification process that includes allowing time for an applicant or employer to respond to and correct an erroneous report. During that period, they can’t suffer adverse consequences (such as being denied the job). That means the job must be held open for an appropriate amount of time following a negative background check report.

Last year, a federal court found an employer’s failure to follow the process for pre-background check disclosure and revoking a job offer without giving the applicant a chance to dispute an erroneous background check was “reckless” and “objectively unreasonable,” leaving the door open for punitive damages. An estimated 1,795 similarly-impacted class members are expected to receive $325 each from the company.

In another case  recently settled in mediation for $3 million dollars, a major grocery retailer faced claims made by two classes of nearly 60,000 employees and applicants that they not only failed to provide a stand-alone disclosure of an employment-related background check, but that no notice was given before adverse action was taken as a result of the background check results.

Class action lawsuits related to FCRA violations are growing both in number and in dollar amounts. Here is a short list with some examples of recent settlement figures:

  • Transit provider: $5 million dollar settlement
  • National pizza chain: $2.5 million dollar settlement
  • A transportation provider: $2.75 million dollar settlement
  • Another transportation provider: $4.4 million dollar settlement
  • A national grocery chain: $6.8 million dollar settlement
  • A national retailer: $4 million dollar settlement

Don’t be the next cautionary tale. Tighten up your hiring process and background screening procedures now.

Download the guide on the top 3 FCRA lawsuits and how to prevent them.

Download the Guide

Topics: FCRA, Lawsuits, FCRA Compliance, Fair Credit Reporting Act