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With FCRA Lawsuits on the Rise More Companies are at Risk!

A recent report shows that FCRA litigation increased 9.9% in 2016 from the previous year continuing a trend of increasing FCRA legal action against employers over the past 8 years. Littler reports that Geico, Disney and Southwest Airlines have all found themselves amidst FCRA class actions or lawsuits this year.

A complaint was filed against Geico for allegedly deciding an applicant would not be hired prior to adverse action steps being taken, and before a copy of the report being or a summary of the applicant’s rights were presented to them. When Geico received results from the potential hires background check they were assigning a pass or fail grade to the report and passing it on for consideration. While the court ruled that assigning the grade was not considered an adverse action but that since an applicant had been told their offer was rescinded there is a possibility that the grade could be considered an adverse action. Basically, if Geico had not told the potential employee they were not going to hire them and had instead followed the adverse action procedures the court would have decided in Geico’s favor. The case could continue to litigation based on this fact.

Southwest Airlines found themselves in FCRA hot water when a potential employee filed suit alleging the airline gave him the required disclosure in combination with other paperwork. The FCRA dictates this notice should be provided separate from other disclosures. A court in Texas dismissed the suit when they found that the information combined with that disclosure could not be considered a willful violation pursuant to Safeco Insurance Company of America v. Burr. It is important to ensure your company is presenting the FCRA disclosure strictly separate from other information, here Southwest may not have purposefully violated the FCRA by including extra information, but they came very close to costly litigation and likely had to pay quite a bit in attorney fees to ensure the case was dismissed.

A complaint filed against Disney recently included the same concept we saw in the Geico case where Disney was assigning grades to applicant’s background checks prior to presenting the applicant with adverse action paperwork, summary of their rights under the FCRA or a copy of their background report. Disney argued this was not adverse action but just a note that they may take adverse action in the future. Despite the grade reading “No Hire” the court agreed that there was no willful violation of the FCRA and that it was possible applicant grading is not unreasonable.

Overall the recent FCRA lawsuits do show a trend in more litigation for these claims, the expectation is that FCRA lawsuits will continue to rise so it is imperative that companies continue to follow FCRA guidelines and stay up to date with changing regulations and local ordinances. When running a background check with HireSafe the FCRA and local regulations are always carefully considered. Electronic authorization forms and adverse action paperwork ensures your company is always in compliance with the latest rules.

Legal disclaimer: we are not attorneys and this information is provided based upon the Fair Credit Reporting Act and our experience as a consumer reporting agency. Clients are advised to consult with counsel to create their own policies and procedures with regards to hiring suitability.

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