FCRA Violations On Employment Applications

(updated October 2016)

Lawsuits Against Employers For Alleged Violations Of The FCRA Rules On Employment Applications And Background Check Release Forms (August 2016)

Well meaning laws such as the Fair Credit Reporting Act were designed to provide people a means of disputing and correcting inaccurate information contained on their background checks. For employers, complying with these laws is often not quite so simple.
Lawyers continue to discover lucrative violations of the FCRA in employment applications, the background check release and procedural requirements of the Fair Credit Reporting ACT.

Companies are being sued for failure to comply with applicant consent, required disclosures and failure to comply with prescribed adverse action procedures.

Recent settlements have ranged from $6.8 million paid by Publix supermarkets, $2.5 million paid by Dominos Pizza and $4 million paid by Dollar General.

The following violations are responsible for most of these Lawsuits against employers;

  1. Failure to include a copy of the report or a Summary of Rights with the pre-adverse notice.

  2. Failure to send a final Adverse action letter.

  3. Including a release of liability or other language in with the disclosure or authorization form.

  4. Failure to meet the “stand alone” or “sole” disclosure requirements of the FCRA in the disclosure/authorizaion form.

  5. Obscuring the disclosure by including application questions and state disclosures.

In particular, companies must:

  1. Obtain a written, stand alone authorization disclosure form.

  2. Provide a conspicuous written disclosure.

  3. Specific adverse action requirements are mandated if you use any of the information provided by a consumer reporting agency in your employment decisions.

    This includes a copy of the report, a summary of rights and pre and post adverse action notification letters.

Whole Foods Class Action Lawsuit

On Dec 4,  class action lawsuit was filed against Whole Foods in a Florida federal court alleging that the grocery store chain performs illegal background checks on prospective and existing employees in violation of the Fair Credit Reporting Act.

Plaintiff Colin Speer worked at a Whole Foods in Tampa. He alleges that Whole Foods performed a background check on him and other employees and job applicants and such background checks were not in compliance with the guidelines required by the FCRA.

Document Requirements

The release or authorization to perform a background check or credit report must be a "Stand Alone" document. Specifically, a company is required to disclose to its applicants and or employees in a document that consists solely of the disclosure, that it may obtain a consumer report on them for employment purposes before the prospective employer actually performs the background check.

The FCRA has a “plain language requirement which prescribes “that forms granting the authority to access and use consumer report information for employment purposes be ‘stand alone forms’ and not include any additional agreements.”

The plaintiff alleges in his lawsuit that Whole Foods violated these requirements by inserting liability release provisions into forms granting the authority to obtain and use consumer report information for employment purposes.

Since the disclosure forms did not comply with the FCRA, the Whole Foods class action lawsuit asserts that these alleged violations resulted in Whole Foods not having the proper legal authorization to obtain consumer reports on its employees

He is charging Whole Foods with violating the FCRA by failing to make proper disclosure and failing to obtain proper authorization of the pending background checks.

This is not the first illegal background check class action lawsuit filed against Whole Foods.

Adverse Action Requirements

A class action lawsuit against Uber Technologies alleges it performs illegal background checks and violated federal law when it checks on drivers for its mobile-app that helps users find transportation.

Plaintiff Abdul Kadir Mohamed, alleges that Uber along with its subsidiary Rasier, LLC and Hirease, LLC, the background check company,violated the Fair Credit Reporting Act as well as credit reporting laws in both California and Massachusetts.

Mohamed claims that he had been employed by Uber as an “Uber Black” driver and wanted to become and “Uber X” driver. However, Uber said that he would have to get a new car.

In the lawsuit against Uber, Mohamed says that in September he bought a new car for about $25,000 to comply with the Uber X requirements.

However, on Oct. 28, the plaintiff says he received an email from “uberreports@hireease.com” saying that because of information from a consumer report from Hireease, Rasier was “unable to further consider” his proposal to become an Uber X driver.

At  the same time that he received the email, access to the Uber app on his phone was turned off.

While the email said that Mohamed had received a copy of the report “‘in accordance with the Fair Credit Reporting Act,'” Mohamed alleges says that he never received a copy of the consumer report.

Moreover, Mohamed asserts that In addition to not receiving a copy of the consumer report, he also did not receive a “pre-adverse action notice,” giving him a chance to explain the contents of the consumer report in accordance with the FCRA.

Hireease terminated Mohamed because a consumer report concerning plaintiff indicated he had a minor criminal record.  That record was the result of Mohamed receiving much-needed Medicaid benefits,

After being fired by Uber, Mohamed claims he is left “without an alternative means of providing for his family, including his seven children.”

 The credit reporting laws embodied in the FCRA give businesses guidelines for how consumer background checks may be used for hiring or firing employees.

The statutes require that an employer first disclose its intent to use a background report in its hiring decision and must obtain the prospective employee’s written authorization to do so, and the employer’s disclosure must be ‘in a document that consists solely of the disclosure,'” Mohamed alleges in the FCRA lawsuit.

In addition, because “misreported information can and does often lead to grave consequences for the job seeker,” businesses are supposed to provide a copy of the report to the subject, as well as a copy of the person’s rights under the federal law, and give each person “a reasonable opportunity to dispute the information” before there are “any adverse” decisions about the person’s employment.

The same rights are granted under the California law, where Uber is headquartered, and Massachusetts credit reporting laws, where Mohamed lives and works.

Also, under California law, employers are supposed to notify the person in writing that a consumer credit report is going to be performed. That notice is also supposed to include “the source of the report, and shall contain a box that the person may check off to receive a copy of the credit report.”

Mohamed claims that Uber and Rasier uses consumer reports for the purpose of employment and that the FCRA applies to them.

He “alleges that Uber and Rasier knowingly, voluntarily, and with the assistance of its counsel, executed a certification providing that it would comply with various provisions of the FCRA,” but that the companies “knowingly violated” the federal and state laws.

Mohamed is represented by Tina Wolfson, Robert Ahdoot, Theodore W. Maya and Bradley K. King of Ahdoot & Wolfson PC.

Counsel information for Uber, Rasier and Hirease was not immediately available.

The Uber Illegal Background Check Class Action Lawsuit is Mohamed v. Uber Technologies Inc et al., Case No. 3:14-cv-05200, in the U.S. District Court in the Northern District of California.

FCRA Class Action Lawsuit Filed Against Pizza Hut

In another lawsuit alleging violation of the FCRA,  a lawsuit against Pizza Hut asserts that Pizza Hut violated the FCRA by inserting a liability release provision into a form purporting to grant Pizza Hut the authority to obtain and use consumer report information for employment purposes.

The FCRA prohibits this practice and requires forms granting the authority to access and use consumer report information for employment purposes to be stand-alone forms, and may not include any additional information or agreements.

Pizza Huts decision to include liability release provisions in their authorization forms is contrary to the plain language of the statute and unambiguous regulatory guidance from the Federal Trade Commission (“FTC”), which states “The inclusion of such a [liability] waiver in a disclosure form will violate . . . the FCRA, which requires that a disclosure consist ‘solely’ of the disclosure that a consumer report may be obtained for employment purposes.” Letter from William Haynes, Attorney, Div. of Credit Practices, Fed. Trade Comm’n, to Richard W. Hauxwell, CEO, Accufax Div. (June 12, 1998).

Here is a a copy of the release and language used in the form by Pizza Hut®  that was referenced in the lawsuit. Click Here

Class Action Lawsuit Against Home Depot Filed July 2014

A class action lawsuit against Home Depot Inc. in a Georgia Federal court by a resident of Texas for allegedly running credit reports and background checks without notifying employees and job applicants. The company is said to have violated the FCRA by by failing to give current and potential employees copies of their credit and background reports before taking adverse actions against them based on the information contained in these consumer reports.

Trent Henderson asserts that he applied for a job with a Home Depot store in Houston Texas through an "Online" application. The "Online" application included an "I Agree" button which was clicked by Mr. Henderson. The application also included above the button additional terms, disclosures and other application information.

The Home Depot class action lawsuit was filed at a Georgia federal court by Texas resident Trent Henderson on behalf of himself and other potential class members. Henderson alleges he applied for a job at his local Home Depot in Houston earlier this year via online application. The application included an “I Agree” button was preceded by terms, disclosures and application confirmation, which Henderson clicked and provided in his agreement.

Henderson disclosed information about his past history completed a drug test and an interview as required Home Depot.
According to the Home Depot class action lawsuit, “Home Depot obtains consumer reports about applicants, including Henderson, at approximately the same time it requires applicants to complete drug tests.”

Henderson was alleges that shortly after the drug test was conducted, Home Depot informed him that he would not be hired because of his background. By refusing to hire Henderson based on the information of this consumer report, Home Depot’s actions are considered adverse employment action and a violation of the FCRA according to the to the Home Depot background check class action lawsuit.

Henderson requested information about Henderson’s files from Home Depot, including copies of background checks and consumer reports. Home Depot did not respond and did not provide the plaintiff’s information.

“Home Depot did not provide Henderson with a copy of any consumer report that Home Depot had obtained or a written description of his rights under the FCRA, whether prior to or after notifying him of its decision not to hire him,” the class action lawsuit says. His complaint says that Home Depot routinely refuses to release copies of consumer reports or provide notice of these reports to employees and job applicants.

Henderson’s class action lawsuit also seeks to address how Home Depot violated FCRA rules through its application agreement prompt. Nowhere in the terms and disclosures provided by Home Depot’s online application does it use the term consumer report or indicate to an applicant that Home Depot may search for personal information from consumer report agencies.

The Home Depot background check class action lawsuit seeks to certify a Class of individuals who applied for work at Home Depot, agreed to the terms and disclosures, and were subject to consumer report without being informed on or after July 3, 2013. Henderson’s class action lawsuit is also seeking to certify those who have faced adverse employment action, like Henderson, and who did not receive copies of these reports.

Because of the sheer number of people who have applied for employment at Home Depot in the past year alone, the Class of plaintiffs could potentially include thousands of Home Depot applicants.

Henderson is represented by Steven L. Woodrow and Christopher L. Dore of Edelson PC and Jennifer Auer Jordan of The Jordan Firm LLC.

The Home Depot Background Check Class Action Lawsuit is Henderson v. The Home Depot Inc., Case No. 1:14-cv-02123, in the U.S. District Court for the Northern District of Georgia.

A recent Florida lawsuit is  Mack vs. American Multi-Cinema, Inc. (AMC).

Mack, the plaintiff in this case, alleges that she applied online for employment at the company that has more than 300 locations nationwide. The class action suit alleges that the online application process did not contain "stand alone" consent. It violated the FCRA because it included other language related to employment and the employment process.
Case No. 0:14-cv-61676-DPG in United States District Court Southern District of Florida Broward County Florida Division.

A recent Florida case, Rumph, vs. Nine West Holdings, in which a lawsuit was filed against a Nine West Holdings, a company with over 6,000 employees. Nine West Holding  is an American designer, marketer and wholesaler of branded clothing, shoes and accessories.
The basis of this complaint alleges that "consent language" was included as part of the company's website page that contained a number of links to Nine West information on the website. The Case No. 0:14-cv-61673-UU in United States District Court Southern District of Florida Broward Division.

Mack vs. Panera, LLC is Case No. 0:14-cv-61672-WJZ in United States District Court Southern District of Florida Broward County Division.

Panera Breads was also the subject of a class action lawsuit filed on behalf of "Mack". In this suit she in which Mack alleges that the online application system used by Panera Breads did not have a consent authorization form included which authorized and granted consent for the company to conduct a background check, which is a "Consumer Report".
A consumer report is the term used to describe a background check. Also, the lawsuit alleges that the language used referred to "At Will" employment and other matters not related to the employment screening background check or "Consumer Report".

How to Avoid Being Targeted

A.  Make sure your consent forms comply. First, have a professional human resources consultant conduct a careful review to make sure all of your consent and disclosure forms are up to date and in full compliance with every word.
In the alphabet soup of compliance regulations, it is very easy to overlook one of the myriad requirements.

The FCRA requires a “disclosure” form and an “authorization” form must be signed and dated by the applicant before a report is ordered from a CRA (Credit Reporting Agency).

B. Electronic Forms: Pay special attention to your electronic forms. These are often overlooked for compliance, and are becoming a frequent target.

C. Don't Combine Forms: Make sure the background check authorization is not combined with a disclosure form. Don't include liability releases or other acknowledgements as part of the forms. Your employment screening company should be able to assist you in making sure your forms are compliant.

D. Include a Copy of Both: Always be sure to include a copy of the background check and a Summary of Rights with the pre-adverse action notice.

E. Go over your adverse action procedures. If you decide not to hire an applicant based on the information contained in a background check, you will want to make certain you are first sending a pre-adverse action notice before a decision is made.

F. Wait at least  5 business days (minimum) before sending the final notice of adverse action.

G. State Disclosure Requirements: If your state has requirements relating to he employment process, put them on an entirely separate form that provides for an applicant's signature and date.

Prepared jointly by the  U.S. Equal Employment Opportunity Commission (EEOC) and the Federal Trade Commission (FTC), the Federal government provides the publication.

"Background Checks: What Employers  Need To Know"

This helps to explains how compliance with the FCRA and other anti-discrimination laws come together when employers use the background check process.

For more information, Click Here

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