FCRA Compliance: Lawyers Fishing for Big Lawsuits [Video + Transcript]

FCRA Compliance: Lawyers Fishing for Big Lawsuits [Video + Transcript]

By Jennifer Gladstone

 

The Fair Credit Reporting Act has several roles, but when it comes to background screening for employment purposes, it’s the basis for some of the most aggressive and costly lawsuits. Creating the right system before any hint of trouble can not only save you headaches — it could save your shirt. In this piece, Jennifer Gladstone speaks with some of the most knowledgeable people in the industry about how to do everything right. 

 


 
 

 
 
 
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TRANSCRIPT:

Big Lots. Accused of running background checks on applicants and employees without their knowledge or consent.

Chipotle. Accused of burying their disclosure and authorization in bulky applications. 

Whole Foods. Settles after being accused of unlawfully including a release of liability in their disclosure forms.

These are just three of the latest class action lawsuits accusing huge employers of violating the Fair Credit Reporting Act.

Mary Poquette// Owner & Principal, Poquette Screening Solutions

One of the reasons for the ground swell, I believe, is simply because there is a lot of money to be made. There was one that settled for example for $1.75 million and each of the members of the class is going to get a check for $38 and the attorney is going to get over $500,000. So it certainly appears to be a very lucrative business.

Montserrat C. Miller// Partner, Arnal Golden Gregory 

We have a very aggressive plaintiff’s bar. We see a lot of litigation. Some of it is well thought out, some of it is not.

The thing these three cases have in common is that they all revolve around issues with the employer’s disclosure and authorization forms. The rules, as the forms go, are pretty straight forward. Under the FCRA, an employer MUST clearly disclose to an applicant or employee that a background check is going to be performed. Then, they must obtain written permission from the individual to conduct a background check. 

Pamela Q. Devata// Partner, Seyfarth Shaw

Anything that is not a very specific, short pithy disclosure and an authorization just for a background check could be challenged. 

Some of the mistakes employers are making are pretty benign, like including a link to their company benefits. Others have been more egregious like including a waiver of liability. Whatever it is, if the disclosure includes anything extra, your company could become a target. This relatively new environment is leading many companies to take a long hard look at their documents.

Pamela Q. Devata// Partner, Seyfarth Shaw

For years, many many companies had a one size disclosure form that had a disclosure at the top and an authorization at the bottom. And frankly, we think that is absolutely legal; however, right now companies are wise to mitigate their risk and consider separating those documents.

All three of the experts we spoke with say it is clear that the plaintiff’s bar is seeking these cases out. They are described as cookie cutter. Almost all of the class action cases point out the same deficiencies. Right now the main targets are the huge employers, but once those big fish are caught, the attention will undoubtedly drop down to the next tier. 

Montserrat C. Miller// Partner, Arnal Golden Gregory 

It’s like shooting fish in a barrel! Terrible expression, but it’s the lowest hanging fruit.

And if your company turns out to be that low hanging fruit, it is going to cost you.

Montserrat C. Miller// Partner, Arnal Golden Gregory 

Because you just have to understand what your requirements are, otherwise you are going to get litigation.

Pamela Q. Devata// Partner, Seyfarth Shaw

As everyone knows, once you are sued, you lose because you have to pay legal fees to go ahead and defend that.

 And those fees can add up quickly. Your best bet: review everything with your legal counsel so you’re as protected as possible.

Compliance

About the Author

Jennifer Gladstone

Jennifer Gladstone

Jennifer Gladstone is a news anchor and journalist with more than 20 years of experience in front of the camera. She's worked in several markets, large and small, and has performed nearly every task needed in a newsroom. As EBI’s Screening News Editor, she keeps EBI’s customers and blog subscribers up to date on the latest screening news and legislative alerts affecting companies of all sizes.

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