January 29, 2019

‘Clear and Conspicuous’ Disclosure About Background Checks Critical for Employers

Employers need to make sure that they provide “clear and conspicuous” disclosures of consumer reports to job applicants, in light of the steady uptick in the number of Fair Credit Reporting Act (FCRA) class actions filed in federal courts.

Among the myriad technical provisions in the FCRA, a potentially costly trap relates to the law’s requirement that employers ensure consumer report disclosures provided to job applicants are clear and conspicuous, are absent of any extraneous information and are given in stand-alone documents.

Consider a recent development in a case centering on consumer report disclosures and the FCRA: On January 17, 2019, a California federal judge certified a massive class of as many as five million members who applied for a job at Walmart in the last five years.

Randy Pitre, the lead plaintiff in Randy Pitre v. Wal-Mart Stores Inc., No. 8:17-cv-01281 (DOC/DFM), alleges Walmart’s job application failed to provide a clear and conspicuous disclosure to applicants informing them that Walmart would be obtaining a background check. He also alleges that Walmart failed to inform applicants of their rights related to such checks.

Section 1681b(b)(1)(A)(i) of the FCRA requires both that a “clear and conspicuous” disclosure be made to applicants, and that the disclosure be made “in a document that consists solely of the disclosure.”

According to Pitre’s complaint, Walmart’s job application included extraneous and confusing information that precluded it from meeting these requirements. The complaint alleges Walmart’s job applications did not comply with the FCRA from 2012 through 2015.

The now-certified class includes “current, former and prospective applicants for employment in the United States” who applied for a job at Walmart where a background report was conducted in the five years before the suit was filed.

Beyond Walmart, failing to provide clear and conspicuous disclosures in stand-alone documents is proving to be a costly mistake for many employers.

Earlier this month, Delta Airlines reached a proposed settlement agreement to pay $2.3 million to a class of approximately 44,000 individuals who alleged that the airline failed to provide clear and conspicuous disclosures of background checks conducted on current and former employees.

This settlement follows on the heels of Omnicare paying a $1.3 million settlement in August 2018, a subsidiary of PepsiCo Inc. paying $1.2 million in July 2018, and Frito-Lay Inc. paying $2.4 million in April 2018.

These costly class actions should prompt employers to take a moment to review job application materials to ensure all background check documents comply with the FCRA, and in particular that any consumer report disclosures are clear and conspicuous, absent of any extraneous information, and are provided in stand-alone documents.

State laws may also impose additional requirements for background check disclosures and employers should analyze applicable law for each location in which applicants are sought. As seen from the above examples, even technical errors can result in significant liability for employers.

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