Trend of suing employers for technical FCRA violations continues

The threat of a multi-million potential class action lawsuit alleging technical violations of the Fair Credit Reporting Act (FCRA) continues to haunt employers, even where the plaintiffs have alleged or proven no harm.

Pursuant to the statute, employers are required to “provide prior written notice before they can procure a consumer report about any employee or applicant for employment.” Just as important, 15 U.S.C. Section 1681b(b)(2)(A)(i) adds that the notice must be given “in a document that consists solely of the disclosure.”

Seeking to take advantage of the statutory damages available under the FCRA – from $100 up to $1,000 for a willful violation – plaintiffs have challenged employers’ use of a disclosure form that combined the written notice to procure a consumer report with other information or documents, such as an application form.

The trend to sue for FCRA technical violations was started by Singleton v. Domino’s Pizza, LLC in the U.S. District Court of Maryland (case no. 8:11-cv-01823-DKC) where the court ruled that inclusion of a liability release in the employer’s disclosure/authorization form violates the FCRA. Domino’s ended up reaching a settlement with the plaintiffs in 2013 for $2.5 million.

Also taking a strict reading of the statutory language, the Western District Court of Pennsylvania ruled in 2013 in Reardon v. Closetmaid Corporation (case no. 2:0S-cv-01730) that an employer could be liable for the combination of a disclosure/authorization with a liability waiver, and granted summary judgment in favor of the roughly 1,800 job applicants.

In a more recent example, a class of applicants sued Publix Super Markets in the U.S. District Court for the Middle District of Tennessee (case no. 3:14-cv-00720) also based on a violation of the sole disclosure requirement and release of liability. With Domino’s and Closetmaid’s payouts looming over its head and a class of 90,000, Publix agreed to settle the claims for $6.8 million earlier last year.

Although these companies opted not to fight the suits on their merits, a defendant in a case filed in the U.S. District Court for the Eastern District of California (case no. 1:14-742-WBS-BAM) did and won dismissal in October 2014. Syed v. M-I LLC involved identical claims but the judge reached a contrary decision, finding that the FCRA text was not as clear-cut as the plaintiff claimed. Immediately following the subsection mandating the sole disclosure of the employer’s intent to procure a consumer report is a provision that states that the consumer’s authorization is to “be made on the document referred to in clause (i)” – “that is, the same document as the disclosure,” the court noted, and “…thus, the statute itself suggests that the term ‘solely’ is more flexible than at first it may appear…”

The Syed decision is the second one that may give hope to employers facing similar suits. (There are at least six class actions pending.) But the obvious answer for companies looking to avoid the problem entirely is simple: use a standalone disclosure/authorization form that is separate from any other information or documents.

January 29th, 2015|Employment Decisions, Lawsuit|

EEOC fails to prove disparate impact in another case involving background checks

In August 2013, a Maryland federal judge dismissed without a trial a putative suit filed by the Equal Employment Opportunity Commission (the “EEOC”) against event-promoter Freeman for alleged discriminatory background screening practices. Calling the EEOC’s expert report “an egregious example of scientific dishonesty,” the court granted a summary judgment to Freeman based on its findings that the EEOC’s expert testimony was unreliable, and would not support a claim of disparate impact. According to the court’s opinion, the EEOC failed to establish an element of its case when it made no effort to analyze Freeman’s multi-step screening policies to identify the specific practices that caused the alleged disparate impact. The court went on to say: “By bringing actions of this nature, the EEOC has placed many employers in the ‘Hobson’s choice’ of ignoring criminal history and credit backgrounds, thus exposing themselves to potential liability for criminal and fraudulent acts committed by employees, or, on the other hand, incurring the wrath of the EEOC for having utilized information deemed fundamental by most employers.”

The EEOC most likely will appeal the decision, as it has done in another high-profile background check case in Ohio, where in January 2013 the court similarly ruled  that the EEOC failed to prove disparate impact. Although these rulings represent a victory for the employer, the EEOC has not reversed its position, and is expected to continue its attempts to severely limit, if not eliminate, the use of criminal and credit checks by private employers.

September 12th, 2013|Employment Decisions, Judgment|
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