Workplace Class Action Blog

Bellwether Settlement For $5.9 Million Given Preliminary Approval For FCRA Class Action Involving Criminal History Information

Posted in Settlement Issues

By Pamela Q. Devata

Under the Fair Credit Reporting Act (“FCRA”), an employer has a number of detailed requirements with which it must comply both before it can procure a background report (consumer report) about an applicant or employee, and if it intends to take action in whole or in part based on information in a consumer report. See 15 U.S.C. Sec. 1681 et seq. Specifically, an employer must: (i) have a permissible purpose for procuring a report in the first place; (ii) certify to the background screening company that it will comply with applicable law and will not use any information in violation of Equal Employment Opportunity laws or regulations; (iii) provide a written disclosure to the applicant or employee indicating that specific background checks will be conducted by a third party and obtain authorization from that applicant or employee to conduct such checks; and (iv) follow the detailed two-step adverse action requirements (including providing a copy of the report, a Summary of Rights, and a pre-adverse action notification letting a person know he or she could dispute inaccuracies in the report).

As evidenced by the recent approval of a $5.9 million class settlement in Hunter, et al v. First Transit,, Inc., Case Nos. 09-CV-6178 & 10-CV-7002 (N.D. Ill. Mar. 23, 2011), class actions involving violations of the FCRA carry lofty penalties. Plaintiffs in this litigation alleged that First Transit and First Student, respectively, failed to provide the requisite disclosures to applicants before running a background check on them and also failed to follow the required two-step adverse action process when they denied employment based on information in the criminal background reports.

Under the FCRA, an employer can be liable for willful non-compliance, 15 U.S. C. §1681n, or negligent non-compliance, 15 U.S.C. § 1681o. Claims of willful non-compliance carry possible statutory damages of $100 to $1000 per violation, attorneys’ fees, and unlimited punitive damages. Negligent non-compliance claims do not provide for statutory damages, but instead allow for actual damages, attorneys’ fees, and unlimited punitive damages. Accordingly, most FCRA class actions against employers assert statutory damages claims to avoid defense arguments that the class claims fail under Rule 23 on typicality grounds. 

The Court in Hunter, et al v. First Transit,, Inc., Case Nos. 09-CV-6178 & 10-CV-7002 (N.D. Ill. Mar. 23, 2011), granted preliminary approval of the settlement for more than 143,000 class members. The Court has scheduled a final fairness hearing for August 1, 2011.

It behooves employers to view these cases as an impetus to evaluate their current policies and procedures relating to the use of background checks in employment and seek legal guidance to ensure compliance with the FCRA and similar state laws.