Criminal background check litigation on the rise: What employers need to know

Excerpted from a Hunton Andrews Kurth LLP blog by Robert T. Quackenboss, Kevin J. White and Eileen Henderson

Despite predictions to the contrary, class action litigation over criminal background checks in the hiring process has continued to climb. In 2020, plaintiffs filed over 5,000 claims related to the Fair Credit Reporting Act (FCRA), a 10-year high.

This article discusses important developing FCRA trends employers should be aware of, recommendations on how to ensure FCRA compliance, and reminds employers that although FCRA claims are on the rise, they must also ensure their background check policies comply with Title VII.

The Nature of FCRA Claims and Extent of Exposure
The FCRA governs the delivery and use of criminal background reports in the hiring process by employers and the vendors that furnish these reports. The most frequent claims against employers involve the alleged failure to provide adequate notice to an applicant that a background check will be run, and the alleged failure to provide additional notices in advance of making an adverse action decision, such as denial of a job offer, based on the report.

FCRA non-compliance can result in hefty damages. A recent survey of nearly 150 FCRA class action lawsuits showed that employers have paid more than $150 million in the last 10 years to settle litigation claims for alleged FCRA violations.

Some New FCRA Litigation Trends and Defenses
Several new trends, arguments, and defenses have emerged in FCRA litigation in the past several years.

Double Dipping
Plaintiffs increasingly seek to “double dip” in FCRA damages by pleading two separate causes of action for a single violation. Specifically, plaintiffs will assert that an inadequate disclosure (claim 1) renders invalid an applicant’s written authorization to conduct the background check (claim 2). However, the FCRA does not expressly recognize these as two separate claims, and attempts to bifurcate a single cause of action should be the subject of express defenses and early motion practice to strike or dismiss the duplicative claim.

Summary of Rights Claims
Similarly, plaintiffs will assert that an employer’s failure to send applicants a copy of the summary of rights under the FCRA along with their pre-adverse action notice, is an independent violation of the Act. At least for matters pending in federal court, there is emerging law suggesting that a plaintiff does not have standing to make such an assertion where the plaintiff subsequently learned what their FCRA rights are.

Compliance Certification
An increasing number of FCRA lawsuits are being filed asserting merely that a consumer reporting agency vendor failed to obtain a certification of compliance from the employer, verifying that the background check would be only for lawful purposes, as required by Section 1681e of the FCRA. Although these claims may only be asserted against the vendor, plaintiffs in such a case may also seek discovery regarding the employer’s general compliance with the FCRA, which might expose that employer to a direct claim for its own noncompliance.

Disclosure Forms
Plaintiffs have also begun filing suits alleging that including language regarding “investigative consumer reports” in a regular consumer report disclosure violates the FCRA’s stand-alone requirement for consumer report disclosures. The law is unsettled on this, and some defense theories have prevailed. In March 2020, in Walker v. Fred Meyer Inc., the U.S. Court of Appeals for the Ninth Circuit held that a consumer report disclosure form could include information about investigative reports without violating the FCRA, so long as “the information about investigative reports is limited to disclosing that such reports may be obtained for employment purposes, and providing a very brief description of what that means.”

Class Standing
In a case decided June 25, 2021 by the Supreme Court of the United States, TransUnion LLC v. Ramirez, the Court held that all class members of an FCRA class action lawsuit must have suffered a concrete harm in order to collect individual damages. Although the impact of this case remains to be seen, it may reduce the size of future class action lawsuits.

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