June 30, 2023

A major hospital chain in California has agreed to pay more than $4 million to resolve a class action lawsuit. This suit claims that the chain violated the Fair Credit Reporting Act (FCRA) when performing background checks for employment. Furthermore, the settlement revealed that the company violated multiple state-level laws through the same actions.

The plaintiff filed this class action complaint with the California Superior Court for San Francisco County. According to the case, the defendant “did not provide a disclosure and authorization form to perform a background investigation” on the plaintiff, who applied to work with the hospital. The defendant also ran a background check despite this failure.

As a result, the plaintiff alleged that the employer violated 15 U.S.C. §§ 1681b(b)(2)(A). In relevant parts, this section stipulates: “A person may not procure a consumer report, or cause a consumer report to be procured, for employment purposes with respect to any consumer.” This section also emphasized the following exceptions:

1. The person has made in writing a clear and conspicuous disclosure to the consumer at any time before procuring or causing the procurement of the report, in a document that consists solely of the disclosure, that they may obtain a consumer report for employment purposes; and
2. The consumer has authorized in writing (which they may authorize on the document referred to in clause (i)) the report’s procurement by that person.

The FCRA allows employers to combine disclosure and authorization statements into one document. However, as the Federal Trade Commission (FTC) has warned, the resulting form cannot contain extraneous information. Employers also cannot split this information into separate documents. As a result, the plaintiff emphasized that the employer violated similar state laws through these actions. Examples included the California Investigative Consumer Reporting Agencies Act (ICRAA) and the California Consumer Credit Reporting Agencies Act (CCRAA).

Due to the size of the employer and the “conduct in violation 15 U.S.C. §§ 1681b(b)(2)(A),” the complaint argued that the employer willfully violated the FCRA’s requirements. However, the settlement agreement revealed that neither party admitted liability nor guilt. Regardless, the defendant agreed to pay $4,029,300 for costs and participating class members. These class members include those on whom the defendant ran background checks between August 20th, 2016, and January 31st, 2022. 

The best way to avoid FCRA and other law violations is by partnering with a trustworthy background screening provider. The right provider will use their experience to ensure timely and accurate reports while complying with all applicable laws. Finally, this partnership could prevent unnecessary litigation and ensure a fair and unbiased hiring process.

Pre-employ offers free resources to help you stay compliant in your hiring practices. Check out our guide on 5 Tips To Avoid FCRA Non-Compliance to keep your company up-to-date.

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