Do Your Homework Before Doing Background Checks!

By Linda H. Evans,
Senior Associate.


Earlier this week, Home Depot agreed to pay at least $1.8 million to resolve a putative class action lawsuit which accused the store of violating the Fair Credit Reporting Act (FCRA) by using flawed job application background check forms. This is not the first time the chain has been sued for violation of the FCRA. Other claims alleged the chain failed to give current and potential employees copies of the credit and background reports before taking adverse action based on the outcome of the reports.


And this company is just one of many that have been hit by class action suits in the last several months. Whole Foods, Chuck E. Cheese, Extended Stay Management Hotels, TeleTech Holdings, Century 21 Department Stores, Nine West, Publix Super Markets, Uber, LinkedIn, and Panera are just a few of the companies that were sued, alleging various types of violations of the FCRA. Most of the cases alleged some type of problem with the forms being used. Settlement amounts have ranged from Home Depot’s at the lower end to some as high as $10 million.


In case you need a refresher, employers must comply with the requirements of the FCRA when obtaining a “consumer report” on applicants or employees. A “consumer report” is part of the routine background check. These requirements include a written disclosure that is clear and conspicuous which notifies the individual that a background check may be performed. And if the results of the background check cause the employer to take an adverse action (such as not hiring the individual), additional disclosures must be given.


Failure to follow the FCRA’s requirements can prove to be a very expensive mistake! A violation of this law allows for an award of actual damages of not less than $100 and not more than $1,000 per violation, plus potential claims for injunctive relief, punitive damages, civil penalties, reasonable costs of suit, and attorneys’ fees. And, as in the case of Whole Foods, it can include everyone who completed a defective on-line form over the past five years. That’s how the numbers add up to settlements worth millions!