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Monday, May 20, 2019

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Recent FCRA class actions present a cautionary tale for employers

Recent FCRA class actions present a cautionary tale for employers

A handful of class action lawsuits regarding Fair Credit Reporting Act (FCRA) violations has resulted in victories for the employers named. Although these cases were a win for the defendants, employers nationwide should still be proactive in ensuring the legality of their hiring processes.

The FCRA regulates the use of background checks, ordering employers to obtain an applicant's authorization prior to a screening via a "stand-alone disclosure requirement." Before taking adverse action based on a background check, the employer must allow the applicant an opportunity to dispute any negative findings or risk violating their rights. Recent cases asserting technical violations of FCRA requirements reflect the need for employers to remain vigilant in reviewing their background screening procedures.

In Lewis v. Southwest Airlines, the plaintiff claimed "willful" violations of the FCRA disclosure requirement as well as mistreatment of California's fair credit reporting act. While the plaintiff did not accuse Southwest of ignoring the FCRA, he asserted the airline "impermissibly" presented the statutory disclosure, along with other "extraneous" information.

The court dismissed the suit based on the U.S. Supreme Court's opinion in Safeco Insurance Company of America v. Burr, stating that Southwest's disclosure obligation was too uncertain to support a willful violation when the plaintiff applied for the job. Also, the court said that conflicting answers have derived from past court considerations about whether extraneous information in an FCRA disclosure constitutes a "willful violation."

In Branch v. GEICO, the court ruled in favor of the insurer in a case where a plaintiff alleged adverse action on a negative preliminary background check. As the failing grade occurred before the applicant was provided her report, she reported it as an FCRA violation. However, the court agreed with GEICO that a preliminary grade does not constitute a "final" decision. Nor does it equal an adverse action, because the candidate was not denied an opportunity to dispute the results. The court did uphold a pre-adverse claim on summary judgment, as a GEICO employee allegedly told the plaintiff -  on the day of the grading - that her job offer had been rescinded.

Culberson v. Walt Disney presented similar allegations to Branch, with claims that Disney "coded" pre-notice background screens to "no hire" based on certain criminal convictions. The plaintiff said this "coding" resulted in both an adverse action and a "willful" violation of FCRA mandates, but the court backed Disney's argument that its "coding" was only an "internal decision" to possibly take future adverse action.

As law in FCRA cases is dynamic, employers should continually review their disclosure documents and pre-adverse action notices. Hiring managers should also check up on state or regional ban-the-box laws, which sometimes intersect with FCRA processes.

OPENonline is a trusted source for comprehensive background screenings. For more information, visit our website.

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