FCRA Class Actions: A Wake -Up Call for Employers ......2014/05/15 · CONFIDENTIAL FCRA Class Actions: A Wake -Up Call for Employers May 15, 2014 Brought to you by Winston & Strawn’s

CONFIDENTIAL

FCRA Class Actions: A Wake-Up Call for Employers

May 15, 2014

Brought to you by Winston & Strawn’s Labor and Employment Practice Group

CONFIDENTIAL ©2014 Winston & Strawn LLP 2

Today’s eLunch Presenters

Julie Capell Labor and Employment

Los Angeles

[email protected]

Wood Lay Labor and Employment

Charlotte

[email protected]


• FCRA Review – Minimum required communications with the applicant as part of the hiring process:

• Disclosure • Authorization • Pre-Adverse Action Notice • Adverse Action Notice

• EEOC & FTC Guidance

• Whole Foods Litigation – NDCA

• The Wave of Class Action Lawsuits – Lawsuits over technical missteps and unwritten rules

• Common Opportunities

• California – FCRA Plus

• Status of Ban the Box Laws

Agenda

CONFIDENTIAL

FCRA Review


• Disclosure [15 U.S.C. § 1681b(b)(2)(A)(i)] – “disclosure has been made in writing to the consumer” – Clear and conspicuous – A document that consists solely of disclosure – Saying a report may be obtained for employment purposes – Additional Requirements for Investigative Consumer Report [15 U.S.C.

§1681d]: • Clearly and accurately disclose • In writing • Not later than three days after the date on which the report was requested • That an investigative consumer report, including information as to character, general

reputation, personal characteristics, and mode of living, whichever are applicable, may be made

• Includes a statement informing consumer of right to request a “complete and accurate disclosure of the nature and scope of the investigation”

• Includes “A Summary of Your Rights Under the Fair Credit Reporting Act”

FCRA Review


• Authorization [15 U.S.C. § 1681b(b)(2)(A)(ii)] – “authorized in writing” – Procurement of consumer report – Must indicate if both for application and future employment purposes – Can be included in disclosure if only authorization included

FCRA Review


• Pre-Adverse Action Notice [15 U.S.C. § 1681b(b)(3)] – Before taking any action (possibly at least 5 business days) – “provide to the consumer”

• a copy of the report • “in writing” – “A Summary of Your Rights Under the Fair Credit Reporting Act”

• Adverse Action Notice [15 U.S.C. § 1681m(a)]

– Provide notice of adverse action (“oral, written or electronic”) – Disclosure of (“written or electronic”):

• Any credit score used • Factors and info regarding credit score, range, etc.

– Provide (“orally, in writing or electronically”): • Name, address, and toll-free telephone number of consumer reporting agency • Statement that agency did not make decision and is unable to provide reasons

– Provide notice of right (“oral, written or electronic”) • To obtain, under FCRA, a free copy of report from agency within 60 days • To dispute, under FCRA, with agency the accuracy or completeness of any info in report

FCRA Review


• Note About State Laws – Approximately half the States have laws with FCRA type provisions – Need to potentially address modifications to process to accommodate, for

example: • Under California’s law, ICRAA, you must list the name, address and telephone number

of the consumer reporting agency on the disclosure • Under Massachusetts’ law, CORI Act, there are specific forms, notices and disclosures

required – FCRA does preempt laws regarding the Adverse Action Notice

FCRA Review

CONFIDENTIAL

EEOC & FTC Guidance


• March 10, 2014 – EEOC and FTC co-publish two technical assistance documents related to background checks

– One document for employers: “Background Checks: What Employers Need to Know”

– One document for employees and applicants: “Background Checks: What Job Applicants and Employees Should Know”

EEOC & FTC Guidance


• Discrimination [Pre-Background Check] – Illegal to check the background of applicants/employees when decision to do so

is based on race, national origin, sex, religion, disability, genetic information, or age

• E.g.: asking only people of a certain race about their financial histories or criminal records

– GINA: Don’t ask for genetic information (including family medical history) – Reserve medical questions until after conditional job offer

EEOC & FTC Guidance


• Discrimination [Post-Background Check] – No disparate treatment

• Apply the same standards to everyone • E.g.: rejecting applicants of one ethnicity with certain financial histories or criminal

records, but not rejecting other ethnicities with the same histories and records

EEOC & FTC Guidance


• Discrimination [Post-Background Check] – Be cautious of disparate impact

• Making employment decisions on background problems that may be more common among certain classes of people

• “Significantly disadvantage” certain individuals? • Accurately predict responsible/reliable/safe employees? • Job related? • Consistent with business necessity? • Consider: allowing applicant to explain, analyzing on a case-by-case basis

EEOC & FTC Guidance


• Discrimination [Post-Background Check] – Disability

• Allow the person to demonstrate ability to do job, despite negative background • Unless that would cause “significant financial or operational difficulty”

EEOC & FTC Guidance


• Disposing of Background Information – Personnel or employment records must be preserved for one year after records

created or personnel action taken, whichever is later • Two years for educational institutions, state and local governments, and certain federal

contractors – If a charge of discrimination is filed, the records must be maintained until case

concludes – Background reports must be disposed of securely, e.g., burning, pulverizing, or

shredding

EEOC & FTC Guidance

CONFIDENTIAL

Whole Foods Litigation – NDCA


• Gezahegne v. Whole Foods Market (N.D. California): – Class action lawsuit alleges:

• Authorization was included within disclosure and contained a waiver of claims/release

– online job application process, applicants had to sign off on a consent form that included a release of liability for receiving or providing information, an admission that the applicant has not knowingly withheld any information, an acknowledgement that the application for employment does not create an employment contract, and a statement that the applicant waives the receipt of a copy of any public record

• Seeks statutory damages of up to $1,000 for each applicant that Whole Foods obtained a consumer report on

Hot Issues in FCRA Compliance


Hot Issues in FCRA Compliance

CONFIDENTIAL

The Wave of FCRA Class Actions


• National Food Chain (D. Maryland): – Class action complaint alleged:

• Disclosure was on fifth page of application • Disclosure included an authorization, release and acknowledgement • Pre-adverse action notice did not include copy of the report • Did not provide a reasonable amount of time to respond to pre-

adverse action notice – Settled in March 2013 for $2.5 million



• National Retailer (E.D. Virginia): – Class action complaint alleged:

• Online disclosure and authorization is not “written” • Disclosure was not limited to employment purposes • Disclosure did not disclose investigative consumer report • Disclosure did not disclose right to request “nature and scope” • Disclosure regarding investigative consumer report was not clear

and accurate, but was “pointless clutter” • Disclosure includes unnecessary and irrelevant information • Pre-adverse action notice included old version of Summary of Your

Rights – In January 2013, parties reached a $3 million settlement



• National Retailer (C.D. Ca.) – Class action complaint alleges:

• Disclosure contained “extraneous information”

• Disclosure included a waiver

• Failed to provide a pre-adverse action copy of report and/or summary of rights

• Failed to provide a separate post-adverse action notice

– Seeking a nationwide class of all applicants from prior two years who executed terms and condition form

– Seeking a nationwide class of all applicants whose suffered an adverse employment action based on a consumer or investigative report






I hereby release [the Company] and its representatives, as well as all persons and organizations providing information, from an liability for damage arising from any such investigation.

I understand that my refusal to sign this release will make me ineligible for hire at [the Company].


• National Transportation Company (E.D. Virginia): – Class action lawsuit alleges:

• Failed to notify of right to receive a free report within 60 days • No pre- or post-adverse action notices • No info on the consumer reporting agency • No info regarding right to dispute accuracy

– Company failed to provide compliant disclosures, authorizations and pre-adverse action notices

• Similar case in the E.D. Tennessee settled for $2.75 million in April 2013



• National Financial Institution (E.D. Virginia): – Class action lawsuit alleges:

• Failed to provide pre-adverse action notice 5 business days before adverse action

• Failed to provide consumer report with pre-adverse action notice • Failed to provide Summary of Rights with pre-adverse action notice

– Seeking nationwide class action of all applicants since effectively April 2012 who were denied employment based upon a consumer report


CONFIDENTIAL

Common Opportunities


• Is disclosure “clear & conspicuous”? • Is the disclosure in a “stand alone” document? • Using current version of Summary of Rights • Is pre-adverse action notice being timely issued? • Make sure you review examples of documents actually used

• Including if Company uses a Vendor

• Monitor Developments in Case Law • Waiver Language • Use of Electronic Disclosures

Common Opportunities

CONFIDENTIAL

California: FCRA PLUS


• California’s Investigative Consumer Reporting Act [ICRAA – Cal. Civ. Code §1786]

– Broader in scope than the FCRA

• Covers employers who conduct background checks, along with outside companies – Different terms:

• Employment background check = “Investigative Consumer Report” or ICR • ICR is not limited to personal interviews with friends, neighbors or business associates • ICR covers an applicant’s “character, general reputation, personal characteristics, or

mode of living” obtained through “any means” • Third-party screening company = Investigative Consumer Reporting Agency or ICRA • ICR does not include credit reports [see CCRAA – Cal. Civ. Code §1785]

– As of January 1, 2012, employer can only request credit reports for certain positions (e.g., position in state Dept. of Justice, managerial position, sworn peace officer, etc.)



• When an outside company (an ICRA) obtains background check for employer:

– Must receive notice (more extensive than FCRA) • States purpose of report • Name, address, and telephone number of screening company • Summary of rights to see and copy report • Includes box to check if a copy of the report is desired

– Written authorization – Screening company must post privacy practices on Company website (or copy

available if no website) – Copy of report must be sent within 3 business days – Report may come from employer or screening company – Notice and authorization is required any time an ICRA is obtained



• When employer obtains background check: – Job application/related document must include box indicating whether you waive

the right to obtain a copy of public records obtained in investigation • If not waived, employer must give copies of public records to employee within 7 days of

receipt – No detailed notice requirement – Cautious employer should still ask for employee’s consent, although there is no

specific requirement to do so – Exception: permission not required and no entitlement to notice if employer

suspects wrongdoing or misconduct



• Ability to obtain copy of records after waiver: – Even if originally waived, an applicant/employee is entitled to copy of records if

adverse employment action is taken – If employer checks background based on suspected misconduct, only entitled to

copy of records: • 1) After investigation is completed; and • 2) If you did not earlier waive your right to a copy of the records



• Applicants/employees are allowed to dispute inaccurate or incomplete information [Cal. Civ. Code §1786.24]

• The dispute process: – File dispute in writing and with evidence – Screening company must investigate dispute – If agency cannot verify information, it must be removed – No need to continue investigation if complaint is “frivolous or irrelevant” – Company has 30 days to provide results of investigation – Must be notified if negative information is deleted but later reinserted – If Company refuses to remove negative information, can include own statement in

file


CONFIDENTIAL

Status of Ban the Box Laws


• Timing – Application – Interview – Post-Conditional Offer

• Information Requested – Expunged Records

• Jurisdictions

Ban The Box Laws – Requests for Criminal Convictions


Thank You.

Julie Capell Labor and Employment

Los Angeles

[email protected]

Wood Lay Labor and Employment

Charlotte

[email protected]

FCRA Class Actions: A Wake -Up Call for Employers ......2014/05/15 · CONFIDENTIAL FCRA Class Actions: A Wake -Up Call for Employers May 15, 2014 Brought to you by Winston & Strawn’s

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