On January 20, 2017, the U.S. Court of Appeals for the Ninth Circuit became the first appellate court to rule on the lawfulness of a liability waiver in a Fair Credit Reporting Act (FCRA) disclosure. In Syed v. M-I, the Ninth Circuit ruled that an employer acted willfully in violation of the FCRA when it included a liability waiver in its FCRA disclosure.
Background Checks
Sixth Circuit Upholds Jury Award Of Compensatory Damages Against CRA Under The FCRA For Negligence, But Vacates Punitive Damages Award
Executive Summary: The Sixth Circuit Court of Appeals in Smith v. LexisNexis Screen Solutions, Inc., __ F. 3d ___, 2016 WL 4761325 (6th Cir. September 13, 2016), recently upheld a jury verdict in favor of a plaintiff in a Fair Credit Reporting Act (FCRA) case, who was initially denied a job due to an error made by LexisNexis Screen Solutions, Inc. (Lexis) in performing a background check. The Sixth Circuit found that the evidence supported the jury’s verdict that Lexis was negligent and upheld the $75,000 compensatory damages award, but found no evidence of willfulness and reversed the punitive damages award.
Supreme Court: ‘Actual Injury’ Needed to Establish Standing to Sue for Violations of Fair Credit Reporting Act
Plaintiffs must show they suffered from an actual injury, not just a “bare procedural violation,” in order to sue in federal court, the U.S. Supreme Court has ruled in its long-awaited decision in Spokeo, Inc. v. Robins, No. 13-1339 (May 16, 2016).
SCOTUS Fair Credit Reporting Act Background Check Standing Case Remanded to Lower Court
Executive Summary: On May 16, 2016, in a 6-2 decision, the U.S. Supreme Court remanded the closely watched Spokeo Inc. v. Robins case back to the Ninth Circuit for further analysis. The issue is whether the plaintiff, Robins, has standing to sue Spokeo under the Fair Credit Reporting Act (FCRA) for injuries allegedly caused by Spokeo’s dissemination of incorrect information about Robins. Standing requires the plaintiff to show (1) injury (2) that is fairly traceable to the defendant’s conduct, and (3) that is likely to be redressed by a favorable judicial decision. The appeals court held that Robins had standing. The Supreme Court, however, vacated the appeals court’s decision and remanded the case back to it to consider whether Robins’ complaint sufficiently alleged that his claimed injuries were “concrete.” The case is still alive. Employers had hoped that the Supreme Court’s decision would prevent plaintiffs from establishing standing by alleging mere statutory violations.
FTC Issues Guidance for Background Screening Companies
Employers regularly turn to background screening companies in order to obtain information/reports about applicants and employees. The Fair Credit Reporting Act (FCRA) applies to companies that sell or provide these background screening reports if such a report meets the FCRA’s definition of a “consumer report.” A consumer report is a report which serves as a factor in determining a person’s eligibility for employment, credit, insurance, housing, or other purposes and includes information bearing on an individual’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living. Organizations that sell or provide consumer reports to employers are considered “consumer reporting agencies” under the FCRA.
FTC Releases Updated FCRA Guidance On Background Checks
On May 10, 2016, the Federal Trade Commission (FTC) released a new publication related to background checks and the Fair Credit Reporting Act (FCRA) titled What Employment Background Screening Companies Need to Know About the Fair Credit Reporting Act.1 As the name suggests, the publication surveys the obligations that consumer reporting agencies (background check companies or CRAs) have under the FCRA when compiling employment-purposed consumer reports (background reports). The FTC’s publication is a useful resource for employers for learning about the legal requirements governing the preparation of background reports by CRAs, and indirectly highlights several compliance requirements applicable to employers.
Federal Courts Increase Scrutiny of Employer Compliance with the FCRA’s Adverse Action Requirements
In the last two years, the number of employment class actions under the federal Fair Credit Reporting Act (FCRA) has ballooned. Most of the cases reported in the media have involved challenges to an employer’s compliance with the FCRA’s disclosure and authorization requirements.
President Obama’s Order “Banning the Box” for Federal Employees is an Important Reminder to All Employers to Implement Hiring Best Practices
Last month, President Obama announced a new mandate to the federal government’s human resources department to “delay inquiries into criminal history until later in the hiring process.”
President Obama Bans the Box in Federal Employment
On Monday, November 2, 2015, President Obama announced the federal government is joining the long list of large employers, 19 states, and more than 100 cities and municipalities that currently “ban the box” on employment applications. The President outlined several ideas to improve the reintegration of the formerly incarcerated into society. He noted that “millions of Americans have difficulty even getting their foot in the door to try to get a job; much less actually hang onto that job … so, we’ve got to make sure Americans who paid their debt to society can earn their second chance.” To that end, he announced, “I’m taking action to ban the box for the most competitive jobs at federal agencies.” The “box” refers to the place on job applications where applicants are asked to indicate whether they have been convicted of a crime. Research confirms that a criminal record reduces the likelihood of a job call back or offer by nearly 50 percent.
EEOC Settles Background Check Litigation with BMW, But Also Faces Steep Attorneys’ Fees in Freeman Case
After several high-profile setbacks in disparate impact discrimination lawsuits challenging criminal record screening policies,1 the EEOC has entered into a settlement (consent decree) in one of its few remaining cases, a settlement that includes payouts to individual employees in an amount up to $1,600,000. Beyond this not insubstantial settlement amount, the consent decree also reflects the EEOC’s view of a model criminal record screening policy, and is useful in that respect.2 While the EEOC has been trumpeting the settlement on its Web site, the EEOC’s bluster may have been tempered by a further and strongly worded opinion in the Freeman case in Maryland, one of the EEOC’s spectacularly unsuccessful disparate impact lawsuits challenging criminal record screening policies (affirmed by the Fourth Circuit).3 The opinion awards Freeman just under $1,000,000 in attorneys’ fees and costs from the EEOC.
Private-Sector Employers Doing Business with Local Governments may be Subject to Even More Ban-the-Box and Other Laws Restricting Consideration of Criminal Records
In 1998 Hawaii became the first state to pass a so-called “ban-the-box” law, prohibiting both private- and public-sector employers from inquiring about an applicant’s conviction history until after the employer makes a conditional offer of employment.
Despite Recent EEOC Loss, Employers Must Be Cautious With Criminal Background and Credit Screenings
The U.S. Court of Appeals for the Fourth Circuit recently upheld a district court’s grant of summary judgment dismissing a U.S. Equal Employment Opportunity Commission (EEOC) legal action contending that a company’s policy of using criminal background and credit history checks in its hiring process disproportionately excluded African American applicants
Update on Criminal Background Checks: Impact of EEOC v. Freeman and Ongoing Challenges in a Continuously Changing Legal Environment
The latest chapter in the ongoing saga of employment-related criminal background checks in the United States has been written, and one of the authors had some particularly strong words for the Equal Employment Opportunity Commission.
Fair Credit Reporting Act Litigation Results in Million-Dollar Settlements for Violations Regarding Background Checks
Executive Summary: There has been a recent uptick in class action litigation for technical violations of the Fair Credit Reporting Act when employers seek approval from applicants to obtain background checks from consumer reporting agencies. Employers who obtain consumer reports from such agencies must ensure their authorization and disclosure forms, even those provided by third-party vendors, are compliant with the Act.
Federal Court Grants Class Certification in Title VII Disparate Impact Suit Over Alleged Discriminatory Criminal Records Screening Policy
On July 1, 2014, the court granted class certification in a high-profile disparate impact discrimination case against the Census Bureau in federal court in New York based on its criminal record screening practices, Houser et al. v. Pritzker. The plaintiffs are represented by a well-known New York class action law firm and not by the Equal Employment Opportunity Commission (EEOC). The suit seeks back pay and equitable relief for a class of unsuccessful Latino and African-American job applicants. The Bureau allegedly discriminated against the class members by (1) requiring them to provide the Bureau with detailed information about their prior criminal records in order to progress in the hiring process (referred to as the 30-day Letter), and (2) rejecting job applicants on the basis of an allegedly arbitrary and inflexible assessment of their prior criminal records.