As of this month, there have been 27 national Fair Credit Reporting Act (FCRA) class actions filed so far this year against employers.
Those facing cases include retailers, restaurant chains, theater chains, manufacturers, financial institutions and transportation companies.
“These lawsuits can be frustrating for employers,” according to a statement from Littler Mendelson, a law firm which focuses on employment and labor.
Often, the cases claim “hyper-technical” non-compliance with the FCRA, such as defects in an employer’s pre-employment forms and template notices.
“The lawsuits appear to be lawyer-contrived cash grabs because no job applicant or employee possibly could have suffered any real harm,” the statement adds.
But there have been several class action settlements of $1 million or more and apparent pro-plaintiff outcomes in some federal courts.
Just look at these numbers: a settlement of over $5 million with a transit provider; a $3 million settlement with a national retailer; a $2.5 million settlement with a pizza delivery chain; and one transportation company agreed to a $2.75 million settlement and another transportation company ended up with a $4.4 million settlement.
Generally, the FCRA is best known as it relates to credit bureaus (Experian, Trans Union and Equifax) and creditors. But it also regulates information exchanged between employers and consumer-reporting agencies that provide background reports on employees.
“Compliance with the FCRA is indispensable for all employers that use background reports to make hiring and employment decisions,” Littler Mendelson advised in a recent report on the FCRA.
When it comes to the FCRA, if found to be negligent an employer is liable for actual damages and reasonable legal fees and costs. Also, if an employer is found to have willfully failed to comply with the FCRA, it is liable for actual damages or statutory damages (ranging between $100 and $1,000), punitive damages and attorneys’ fees and costs. To prove a “willful” violation of the FCRA, a plaintiff must demonstrate that the company either “knowingly” or “recklessly” acted in violation of the FCRA, based on U.S. Supreme Court rulings.
“A company subject to FCRA does not act in reckless disregard of it unless the action is not only a violation under a reasonable reading of the statute’s terms, but shows that the company ran a risk of violating the law substantially greater than the risk associated with a reading that was merely careless,” the law firm explained in its report. “Thus, the Supreme Court has ruled that where the defendant acted consistent with a ‘reasonable interpretation’ of the FCRA, … the plaintiff will not be able to prove a ‘willful’ violation of the FCRA – even if the court disagrees with the defendant’s interpretation.”