Privacy & Cybersecurity Law Blog

As reported in the Hunton Employment & Labor Perspectives Blog:

While much attention has been paid this year to the Equal Employment Opportunity Commission’s (“EEOC’s”) agenda and litigation over criminal background checks (the agency asserts such background checks have a disparate impact on minority groups), a parallel challenge kept pace in the form of private class action litigation under the Fair Credit Reporting Act (“FCRA”). 2013 saw a number of significant class action settlements against both employers and consumer reporting agencies (“CRAs”) for alleged violations of the FCRA in the use of criminal background checks:

• Pitt v. K-Mart Corp., Case No. 11-cv-00697 (E.D. Va.): plaintiff’s October 2011 class action complaint alleged that K-Mart willfully violated the FCRA prior to obtaining consumer reports and prior to taking adverse actions against the class. In January 2013, parties reached a $3 million settlement, which received final approval from the court on May 24, 2013.
• Singleton v. Domino’s Pizza LLC, 8:11-cv-01823-DKC, --- F. Supp. 2d --- (D. Md. Oct. 2, 2013): in this class action complaint, filed in July 2011, plaintiffs alleged that the consent form Domino’s used for procuring a consumer report violated the FCRA and that Domino’s took adverse actions against applicants without providing the required notices prior to the adverse action being taken. The matter settled in March 2013, and was subsequently approved in October 2013. Under the terms of the settlement, Domino’s agreed to pay to $2.5 million to a settlement fund, from which plaintiffs’ counsel’s 25% fee award would be taken.
• Bell v. U.S. Xpress, Inc., 1:11-cv-00181-CLC-WBC (E.D. Tenn.): plaintiff alleged that, after applying with U.S. Xpress, defendant did not ask him if the company could obtain a consumer report as part of the application process, that defendant’s decision not to hire plaintiff was based, in part, on erroneous information in the report, and that plaintiff did not receive notice until after the decision was made, all in violation of the FCRA. In April 2013, defendant settled the class action lawsuit for $2.75 million.
• Johnson v. Midwest Logistics Systems, Ltd., Case No. 2:11-cv-01061-ALM-TPK (S.D. Ohio): plaintiff in this purported class action alleged that he was hired by defendant, pending a successful criminal background check, but that he did not receive a stand-alone consent form, as required under the FCRA, that his consumer report was inaccurate, and he was denied the position without the proper notices. The case settled in May 2013, and Midwest agreed to pay $452,380.00.
• Roe v. Intellicorp Records, Inc., Civ. No. 1:12CV2288-JG (N.D. Ohio): in this consolidated class action, plaintiffs accused two CRAs of providing inaccurate criminal background reports to employers that caused the class of applicants to suffer adverse actions, and of not notifying them at the time defendants provided the consumer reports to prospective employers. The case settled on November 12, 2013, when defendants agreed to pay $18.6 million to settle the FCRA claims.

2013 also has seen a number of new FCRA class action lawsuits, including a high-profile lawsuit filed against the Walt Disney Company, as well as class actions against two different national transportation and trucking companies, a national home improvement retailer, a broadcast company, and several large CRAs. It seems clear that the trends in FCRA litigation will continue. Thus, while employers may be focused on potential disparate impact claims based on the use of criminal background checks, they also should evaluate exposure to the companion risk that comes with criminal background check practices – class action claims under the Fair Credit Reporting Act.