Rise in FCRA Lawsuits: Employer Liability in Background Checking

Employers are being more heavily scrutinized for taking potentially illegal action when background checking employees either prior to hire or during the course of employment. A class action lawsuit was filed in a Missouri federal court alleging Michaels, a craft store chain, violated the Fair Credit Reporting Act in its hiring process. According to the complaint, the store violated the law because it failed to properly disclose to candidates that a credit report could be requested and reviewed during the application process.

The FCRA governs how credit reports, criminal background checks, traffic reports and other consumer records can be used during the hiring process. Employers do have the right to access these records. However, they must follow a very strict set of guidelines to ensure compliance with the law. Even though the majority of job applicants may be unaware of their rights under the law, employers should be in full compliance when requesting information on a job candidate.

Michaels is far from the only alleged offender. Whole Foods, Publix and Dollar General are all facing lawsuits over purported FCRA violations.

The law was intended to prevent companies, landlords, employers and banks from unfairly discriminating against employees and to protect the privacy of consumers. The spate of lawsuits illustrates how employers can easily be targets of lawsuits if they fail FCRA compliance. This means that every employer must give notice to an employee before requesting records. The employee must also provide authorization in a form separate from the application. Many employers have included a clause in a consent form, but courts have decided that this is not sufficient. Others have included the authorization in an online form, which is also a violation of the law.

Employers must also notify employees if they do not choose to hire them because of the results they turn up in a background check. This means if any employer fails to hire you because of bad credit, a criminal record or other negative mark in your record, they must provide you with the results of the background check and give you the opportunity to fix any errors. For plaintiffs’ attorneys, there is ample opportunity for widespread class actions, as companies have been violating the rights of thousands of applicants, simply because of technical compliance failures.

The penalties in these cases can be significant, with the ultimate objective being deterrence of future behavior.

According to reports, many restaurants and retail companies have become targets of FCRA lawsuits because of the significant number of applicants who are subject to background checks. Issues can also be complicated by cities and states that have additional requirements. Some employers outsource the application process to third-parties, which can open them up to liability. If you have recently applied for a job and believe that you were rejected because of a background check, you may have a claim. Our Orange County employment law attorneys are experienced in protecting the rights of clients who have suffered from discrimination or adverse employment action.