Hopefully, you will recall my prior update regarding an employer’s obligation under the Fair Credit Reporting Act to provide an applicant with a copy of the consumer report and a summary of their rights before taking adverse action. (Refer to “The Fair Credit Reporting Act is Tricky” of 12/5/2018). Well, a recent case shows that the FCRA is not only tricky, but it can also be incredibly expensive.
Under the Act, employers must provide “clear and conspicuous” notice to job applicants that a consumer report may be obtained. Generally, these disclosures must not contain any extraneous information and must be given in stand-alone documents. This obligation is in addition to the requirement that the employer obtains the applicant’s permission before obtaining a consumer report.
The huge financial risk in failing to meet these somewhat opaque requirements has recently been emphasized by a California court. On January 17, 2019, a California federal judge certified a class of as many as five million members who applied for jobs at Walmart in the last five years. (If we extrapolate the per class member settlement value of the recent Delta Airlines settlement mentioned below (approximately $52.00) to the 5 million-member Walmart class, the potential settlement figure for Walmart is $26,000,000.00, give or take.)
The lead plaintiff in Randy Pitre v. Wal-Mart Stores Inc., alleges that Walmart’s job application “failed to provide a clear and conspicuous disclosure” to applicants that Walmart would be obtaining background checks. He also alleges that Walmart failed to inform applicants of their rights.
According to the Complaint, Walmart’s job application included extraneous and confusing information that essentially precluded it from meeting the requirement that it be “clear and conspicuous” and contained in a document consisting solely of the disclosures.
Unfortunately for Walmart, the Court certified a class consisting of “all current, former and prospective applicants for employment in the United States” who applied for a job at Walmart where a background report was conducted in the five years before the suit was filed.
The fact that these persons may have been hired by Walmart, or that they did not suffer any tangible financial harm personally, does not mean that this suit won’t be extremely expensive for Walmart to either try or, more likely, settle. Earlier this month, Delta Airlines reached a proposed settlement agreement to pay $2.3 million to a class of approximately 44,000 individuals who alleged that the airline failed to provide clear and conspicuous disclosures of background checks conducted on current and former employees. Omnicare ($1.3 million); PepsiCo Inc. ($1.2 million) and Frito-Lay Inc. ($2.4 million) also paid significant amounts to settle similar claims in 2018.
The take away is this: Check your forms; make certain that you comply with the requirements of the Act. If you don’t, even an innocent mistake can be incredibly costly.
Don’t hesitate to call me if you have any questions about your use of background checks or if you are complying with the FCRA.