What a False Background Report Could Cost You 29 Jul 2017

Definition of a False Background Report: Background check involves pulling an “investigative consumer report” about a possible future employee. These investigative consumer reports gather all kinds of information about employees. They collect employees’ credit history and credit scores, public records, employment histories, insurance claims histories and so on. False Background Report is a result of employers using unreliable sources or agencies to run a Background Check on employees.

Pre-employment background checks are a routine screening tool, used by 93% of all employers today. But, what if an employer gets a false background report, and denies the applicant as a result? What if the applicant sues?

This Spring, in some closely watched legal proceedings, several employers are learning anew just how costly that mistake may be.

In cases of three separate class action lawsuits, job applicants who were wrongly denied employment based on a false background report are seeking damages for themselves and on behalf of any other past or present applicants who may have been wrongly rejected in the same manner.

Speaking of first two cases, plaintiffs are suing the companies where they’d applied for jobs. In the third case, the plaintiff is suing the background check company itself.

False Background Report: Starbucks

One of these cases is a well-recognized brand with thousands of stores across the world. Plaintiff Jonathan Santiago Rosario says defendant Starbucks Corp. denied him a job based on inaccurate results of a background check, without giving him a proper chance to correct those results.

In doing so, he claims, Starbucks violated provisions of the federal Fair Credit Reporting Act or FCRA.

Rosario says he applied for a Starbucks job in Castle Rock, Colo. in March 2016. After interviewing Rosario, the company requested a background check from its screening vendor, Accurate Background Inc.

That background check listed criminal felony and misdemeanor records from counties in Pennsylvania. Surprisingly, some of them involved violent crime and drug-related charges. Accurate Background determined Rosario ineligible under Starbucks’ hiring criteria.

Starbucks sent Rosario a letter informing him that the results of his Starbucks background check did not meet the company’s requirements. Rosario claims that by the time he received the letter, Starbucks had already rejected his application.

Rosario saw that all the criminal records were false, and assumed they resulted from identity theft. He got Accurate Background to correct the errors and forwarded their revised report to Starbucks. Still, the company declined to revisit its decision.

By failing to give Rosario a meaningful opportunity to dispute the contents of his Starbucks background check, he claims, Starbucks violated the pre-adverse action notification requirements in the FCRA.

Case #2: IMG Management Group

Another FCRA class action is now pending. It’s about an applicant who applied for a nursing job with Ide Management Group in March. IMG, doing business as Cathedral Health Care Centers, operates skilled nursing and assisted living facilities in Indiana, Illinois, and Iowa.

IMG declined to hire Michele Petry after a background report was completed by an unnamed consumer reporting agency. It was showing multiple felonies, including charges of drug paraphernalia and theft. Petry says she was not shown the report, which she could prove was false, nor given the required notification of her pre-adverse action rights under the FCRA before her application was rejected.

Case # 3: Infomart

A proposed class action filed in West Virginia alleges consumer reporting agency Infomart, Inc. violated the Fair Credit Reporting Act (FCRA) when it sent a background report to the plaintiff’s prospective employer that wrongly included a vacated civil judgment on the man’s record. Although plaintiff Robert Mills says the prospective employer also failed to show him a copy of the report prior to taking action, he is only suing the reporting agency for its errors, alleging it could have made similar errors on others’ records.

All three lawsuits are awaiting trial.

What is the cost to defend a class action FCRA lawsuit, or to lose one?

The award can include actual, statutory and punitive damages for the plaintiff and everyone in the represented Class who files a timely notice and proof of claim. There’s also reimbursement of court costs and attorneys’ fees, all with pre- and post-judgment interest.

The exposure for employment practices vis-a-vis class action vulnerability is high. Consumer fraud and labor and employment matters account for more than 50 percent of all class actions. It makes them the most prevalent, with the FCRA playing a prominent role in many of those cases.

Since 2010 there have been over 374 class-action lawsuits filed under the FCRA claiming failure to properly notify job applicants of adverse actions against them. Settlements have reached as high as nearly $6 million. K-Mart paid out a $3 million FCRA settlement in 2013.

Class action lawsuits involving highly visible companies like Starbucks make job applicants everywhere more aware of their legal rights. Thus, if they think an adverse decision is based on an incorrect, incomplete or misleading report, they can be protected better. They hear about that law called the FCRA. And if the job stakes are high enough or the error feels egregious, they start talking to an attorney.

Companies such as Trusted Employees follow industry-leading best practices and internal cross-verifications processes to guard against such mistakes, and we’re extremely proud of our record in providing accurate reports to every client. However, with dozens if not hundreds of background check companies out there, we’re sad to say that some who use less rigorous methods can give our industry a bad name.