Last month I wrote about the Ninth Circuit Court of Appeals’ ruling in Gilberg v. California Check Cashing Stores, and the significant impact it may have on determining if an Employee Screening Disclosure and Authorization (DA) form is compliant. The possible consequences are so severe, I am writing about it again.
The FCRA – Fair Credit Reporting Act – the federal law that governs employee screening – imposes a statutory fine of up to $1,000 per individual for technical violations of this law. When class action lawsuits are filed, the law allows a five-year look-back period to see how many applicants applied (not just those who were hired) with incorrect disclosure forms.
This is why these class action lawsuits for technical violations of the FCRA become theoretically so expensive, attracting predatory plaintiff attorneys who develop law practices that primarily pursue these cases. This affects even smaller companies, as hundreds of people usually apply for any job posting, and class action lawsuits go back five years. One hundred applicants represent a $100,000 fine… one thousand applicants, a $1 million penalty – devastating amounts for most small businesses.
Further, there are behemoths of companies that are being targeted for not having “clear and conspicuous” employee screening disclosures. In January, a class action lawsuit was certified against Walmart, with a class size of about five million individuals – representing a potential statutory fine of $5 Billion. Although this case has not yet been adjudicated, the possible multi-billion dollar liability is a serious threat that must be mitigated.
Other notable companies that have settled or proposed million-dollar lawsuit settlements for the issue of “clear and conspicuous” employee screening disclosures over the past year include: a PepisCo subsidiary ($1.2 million); Frito-Lay ($2.4 million); and Delta Airlines ($2.3 million).
The FCRA (Section 604 (b)(2)(A)(i)) has always required a “clear and conspicuous” employee screening disclosure, and that it be “in a document that consists solely of the disclosure.” The FCRA has required that this disclosure’s sole purpose be the background check, and that it be separate and distinct from other documents – including especially the general employment application. Now, based upon the Ninth Circuit Court ruling above, additional state-mandated employee screening disclosures, should also be separated from the federal employee disclosure form.
The bottom line is if you have not reviewed your employee screening disclosure form, you should do it now to mitigate potential lawsuits and statutory fines. Seek out the advice of an employment attorney who is an FCRA expert (not all employment lawyers are FCRA experts), or the expertise of a reliable background screening company that is an FCRA expert (not all background screening companies are FCRA experts, either).
Posted by: Rudy Troisi, President and CEO, Reliable Background Screening
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