March 13, 2023

One of the world’s largest courier services has successfully overcome a proposed class action. This suit alleged it violated the Fair Credit Reporting Act (FCRA) in its background check procedures when hiring new employees. However, the court dismissed this case, rejecting the opportunity to provide a further amendment to the complaint.

This case began in response to claims concerning how the courier service obtained consumer reports on employees in the hiring process. According to the claims, the service did not supply proper disclosures without authorization from the employees. The FCRA requires employers to provide both to job applicants before running background checks. More specifically, it alleged that the employer’s disclosures about the requested background check contained extraneous information. Cited examples include the following:

• A check box requiring employees to agree that they reviewed the “Agreement” and that an electronic signature is legally binding,
• A misstatement of law about indefinite opportunities to obtain consumer reports after the agreement, and
• External links to other web pages.

The plaintiffs claimed that this violates Section 1681b(b) requirements of the FCRA. This section states the following: 

“Except as provided in subparagraph (B), a person may not procure a consumer report, or cause a consumer report to be procured, for employment purposes with respect to any consumer, unless

1. [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 
2. [T]he consumer has authorized in writing (which authorization may be made on the document referred to in clause (i)) the procurement of the report by that person.”

The U.S. District Court for the Northern District of California had previously granted a motion to dismiss with leave to amend. However, this time, the court found such a measure futile. Instead, the court favored the defendant’s arguments. The defendant disputed that elements in the disclosure would not distract employees and applicants from their rights. As a result, they did not violate the FCRA.

This decision is favorable for employers, clarifying several issues regarding the district’s interpretation of the FCRA and its requirements. However, partnering with a trusted screening provider remains crucial in preventing unnecessary liability. The right partner can help ensure employers comply with the FCRA. They would also ensure compliance with other applicable state and federal laws that govern employment screening.

Discover the benefits of Pre-employ’s seamless background checks for your business. Contact a Sales representative today.

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