FTC and Class Action FCRA Lawsuits Increase By 60%
If the much-heralded tax cuts are going to unleash a flood of hiring, that also portends a flood of mistakes in background screening of job applicants that could make plaintiff attorneys the real winners.
Litigation filed under the Fair Credit Reporting Act (FCRA) increased by 60% in September 2017 over the previous month. In South Florida, one plaintiff’s attorney filed three Federal lawsuits in a single day. The lawsuits allege the same mistakes we have mentioned in previous blogs: the hiring business allegedly committed technical and procedural errors in paperwork and procedures when it screened a job applicant.
But We Didn’t Mean to Do Anything Wrong
The end cost of these unintended errors, which may seem trivial or obscure when they are made: six-figure settlements and staggering legal fees. The underlying causes:
How Do I Protect My Business?
The answer is not as simple as it sounds: Get the paperwork, the screening, and the procedures absolutely right, to comply with strict regulations and unforgiving courts.
Full protection starts with obtaining proper authorization from the job applicant to conduct the screening, which means using a consent/release form that does not violate any regulations. Warning to those who take applications online: Online employment applications can present unique problems with disclosure forms and other documents.
Federal Trade Commission (FTC) lawsuits are expensive. Home Depot was fined $3 million; Whole Foods coughed up $803,000 and the list goes on. Class action lawsuits cost Publix $6.8 million, Dollar General $4 million, and K- Mart $3 million. These amounts do not include legal fees, which can run into the millions.
These companies have world-class corporate legal departments, backed up by outside specialist law firms. How did they fail to provide correct paperwork to prospective employees and deter such lawsuits? The fact is, paperwork to authorize applicant screening and keep the average business out of trouble is a small niche in the legal world. As mentioned above, the lawyers who have in-depth knowledge of this niche can make more money suing than they can make in correcting applicant forms. A lot more money.
Trends: Lawsuits Up, and Enforcement is Severe
Both class-action lawsuits and FTC enforcement actions seem to be on the increase for 2018.
In a class action lawsuit involving McDonald’s, a settlement was reached involving 2,500 applicants. According to the lawsuit, McDonald’s failed to provide applicants with the required “clear and conspicuous disclosure” alerting the applicant that a consumer investigative report would be obtained in connection with their employment application.
Currently Amazon is embroiled in two FCRA class action lawsuits. In the first, the job applicant (the plaintiff) alleged that the online retailer violated the FCRA by checking his credit report without permission. In addition, Amazon allegedly did not disclose the results to the applicant so that he could dispute the information. Based on the results of the report, the applicant was not hired.
In the second case against Amazon, the applicant was initially offered a job. However, the job offer was withdrawn after faulty information was reported in his background report. The applicant alleges that Amazon violated the FCRA by not giving him a copy of the report so he could correct the erroneous information.
Despite these examples, no company can be lax in screening job applicants. Ride-sharing giant Uber has had myriad problems with its background-screening program. California prosecutors said that Uber’s background checks had “systemic failures” and missed the criminal histories of drivers with felony convictions for sex offenses, kidnapping and murder. In one FCRA case, Uber settled for $ 10 million because it had made a misleading statement regarding background checks.
A Potential Gold Mine for Plaintiffs
As the above examples show, slightly imperfect procedures and forms are at the root of multi million-dollar lawsuits. It seems incongruous that Fortune 1000 companies with ample legal resources have difficulty complying with the Fair Credit Reporting Act, which applies to these hiring and screening situations.
The fact is, these multinational defendants struggle to achieve compliance, and paid a steep price for failing to get it right. What are the implications for regional and smaller enterprises that are now squarely in the sights of personal-injury lawyers looking for a new revenue source?
What You Can Do Today to Address Liability
If you are the owner, CEO, GM, or HR director of an auto dealership or other business that needs to screen job applicants, and you would like to discuss a cost-effective way to ensure your compliance with all FCRA and screening regulations, let’s schedule a face-to- face, 15-minute meeting. At no cost, former FBI agent and licensed private investigator Hank Balevic will help you address this significant potential liability today.
Disclaimer: Fidelity Data Service and Blog Editor, Hank Balevic, are not in the practice of dispensing legal advice. This Blog is produced for the purpose of publicizing Background Screening issues, both legal and otherwise, for the benefit of our clients and readers. If legal questions arise, it is recommended that the services of an attorney be obtained.
“Our business is to provide the best employee screening in the country. Our mission is to protect all our clients against potential liabilities related to hiring.” -Hank Balevic, Fidelity Data Service