Retailer Big Lots Stores, Inc. is facing a putative class action in Philadelphia, wherein the plaintiff alleges that the company “systematically” violated the Fair Credit Reporting Act’s (“FCRA”) “standalone disclosure requirement” by making prospective employees sign a document used as a background check consent form that contained extraneous information. Among other things, the plaintiff alleges that Big Lots’ form violates the FCRA because it includes the following three categories of extraneous information: (1) an “implied liability waiver” (specifically, a statement that the applicant “fully understand[s] that all employment decisions are based on legitimate nondiscriminatory reasons”); (2) state-specific notices; and (3) information on how background information will be gathered and from which sources, statements pertaining to disputing any information, and the name and contact information of the consumer reporting agency.
The case filed against Big Lots is in line with the recent increase of cases brought against employers for hyper-technical violations of the FCRA’s “standalone disclosure requirement.” In fact, Big Lots is fighting another, similar putative class action that was filed against it earlier this year in Illinois. In that case, currently pending in the Northern District of Illinois, Big Lots filed a motion to dismiss, which is still pending with the court, and argued, inter alia, that “the inclusion of additional language in [its] form was not so great a distraction to negate the effectiveness of the disclosure and consent,” and “even if [its] form were technically in violation of the FCRA, [the p]laintiff has not and cannot properly allege or prove a willful violation.”
Section 604(b)(2) of the FRCA specifies that an employer may not obtain a background check report unless:
• a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes; and
• the consumer has authorized in writing the procurement of the report by that person.
The Federal Trade Commission (the agency charged with enforcing the FCRA) has advised that employers should not include any extraneous information on the disclosure form to avoid an applicant or employee from being distracted by other information that is presented side-by-side with the important disclosure language. The concern is that the disclosure is not diminished in importance by including unrelated information and that the disclosure is not buried in small text at the end of other documentation where it can be missed.
Failure to comply with the FCRA can result in state or federal government enforcement actions, as well as private lawsuits. See FCRA, Sections 616, 617, and 621. In the case of willful noncompliance, an employer can be subject to any actual damages sustained by the consumer as a result of the failure or damages of not less than $100 and not more than $1,000, punitive damages, and attorneys’ fees. In addition, any person who knowingly and willfully obtains a consumer report under false pretenses may face criminal prosecution. See id., Section 619.
Currently, the courts are split as to what types of additional information will result a violation of the FCRA’s “stand-alone disclosure requirement.” That said, if one accepts what the plaintiffs in the Big Lots cases are arguing, any document that contains more than the nine words specified in the FCRA – “a consumer report may be obtained for employment purposes” – automatically violates Section 1681b(b)(2) because it does not consist solely of the disclosure. That is a hyper-technical, narrow reading of the statute.
However, in light of the recent attacks against employers’ disclosure forms, employers should review their disclosure and/or authorization forms to make sure that their forms provide clear notice that a background check report may be obtained for employment purposes and that the authorization sought is an authorization for the procurement of such a report. Also, in order to avoid litigation, employers should take a critical look at their forms to determine whether their forms include extraneous information that can be easily deleted from them.