Employer Settles Disclosure, Adverse Action Lawsuit

An employer recently entered into a settlement over claims it violated the Fair Credit Reporting Act (FCRA)— namely, the disclosure, authorization and adverse action requirements. The settlement fund is $60,500, while the plaintiff’s attorneys will receive $236,500.00 (paid by the employer).

The Case

The case began in September 2019, when a class action complaint was filed against the employer. The plaintiff, a job applicant, alleged the employer obtained and used consumer reports (i.e., background screens) for employment purposes without complying with the FCRA.

This case in particular is interesting as the employer used a private security firm to conduct the background checks. The employer then argued that the private security firm was not a consumer reporting agency (CRA) and thus the FCRA did not apply.

The Takeaway

Drawing the line between an entity operating as a CRA versus not operating as a CRA is a difficult one. Employers that use private security firms, private investigators or other websites that purport to operate outside of the FCRA are encouraged to discuss this practice with qualified legal counsel as it can have significant ramifications.