Plaintiffs lawyers have been filing a profusion of suits over pre-employment background checks, which some observers attribute to a renewed interest in applicants’ rights during the hiring process, but an upcoming U.S. Supreme Court case could slow the trend.
In the U.S. District Court for the District of New Jersey alone, Amazon.com, Uber and Michaels Stores are facing putative class actions over their research into job applicants’ criminal and financial records, and lawyers said the picture is similar across the nation. The suits claim violations of the Fair Credit Reporting Act, which sets rules for use of background checks in hiring.
The FCRA has been around since 1970, and paying a third party to provide a dossier on a job applicant is not a new custom—so why so many suits all of the sudden?
Some lawyers tied the upswing to the spread of “ban the box” legislation on the city, state and federal level, which bars employers from asking employees about their criminal histories before making a job offer. A series of Equal Employment Opportunity Commission suits related to background checks around the country also stirred interest, according to some attorneys. The strict requirements of the FCRA, employment lawyers said, combined with the high volume of job applications large companies receive, make background checks an ideal subject for class actions.
“There has been a lot of attention to background checks in hiring generally, but these types of claims lend themselves to class actions because it’s common for employers to use the same form with job applicants, so if the form doesn’t comply with the statute, there is a large potential class,” according to Adam Saravay, a lawyer at McCarter & English in Newark who has defended FCRA background check suits.
“If the Supreme Court rules that the FCRA’s statutory damages violate Article III’s standing requirement, that could significantly diminish the current surge in FCRA class action suits,” Saravay said.
For the time being, however, there’s no sign of slowing, lawyers said.
The FCRA provides plenty of chances for an employer to commit a violation. Saravay said one of the most common claims in such cases is that the employer failed to provide job applicants with a “standalone” document notifying them of its intent to obtain and use a credit report.
“Many of the recent crop of FCRA class actions have alleged that an employer used a form that contains other provisions besides the notice and therefore does not meet the standalone requirement. So far, to the extent courts have ruled on this, they have issued some conflicting decisions on whether provisions like that violate the FCRA,” Saravay said.
The failure to have a standalone disclosure form is common, especially among employers that accept applications online, Costa said.
The second type of common claim in the current group of cases is that the employer fails to provide notice of the applicant’s rights under the FCRA and a copy of the background check report before making an adverse hiring decision, according to Saravay.
“The FCRA says employers have to give a copy of a report [to the applicant] so the applicant can dispute its accuracy with the reporting agency, not the employer. But courts have issued conflicting opinions on whether there is also a duty on the employer and how much time is considered a reasonable time for an applicant to dispute an inaccuracy in a background check,” Saravay said.
Saravay, noting the settlements in the millions in class action suits by job applicants, said that “reviewing the background check notice and authorization forms is one of the simplest and most cost-effective litigation avoidance steps an employer can take.”