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Littler Mendelson, the largest global employment law practice, recently released a report in which it documents the "swelling tide" of class actions brought against employers under the Fair Credit Reporting Act (FCRA).
In the report, it discusses why the number of FCRA class actions is growing, and what your company can do to protect, or defend, itself from a class action. Here's a brief summary of the report, which you can read in full by clicking here.
The FCRA regulates the exchange of information between credit reporting agencies (CRAs) and employers, which is triggered when employers request not only a credit report, but other kinds of reports including motor vehicle or criminal records.
Under the Act, an employer must notify the employee or applicant in writing in a "clear and conspicuous disclosure" (and solely the disclosure -- not anything else) that it would like to obtain a consumer report, and the applicant or employee must give permission in writing.
If the employer is going to take "adverse action" based on the consumer report, it must do two things. First, it must give the applicant or employee "pre-adverse action" notice, including a Summary of Rights and a copy of the consumer report. Next, if the employer decides to take adverse action, it must give the applicant or employee an adverse action notice.
Littler Mendelson attributes the growing trend in FCRA class actions against employers to four reasons: (1) Recent multi-million dollar settlements; (2) law firms focusing on "wage and hour class actions"; (3) favorable outcomes for plaintiffs in federal court; and (4) "the lure of statutory damages awards to the plaintiff's bar when the U.S. Supreme Court has demonstrated a healthy measure of hostility towards class actions."
These types of class actions are occurring across industries, so all companies that request consumer reports of applicants or employees should take the following steps to protect themselves from class actions:
If your company is in the unfortunate position of having to defend an FCRA class action, there are certain things you can do. Littler Mendelson recommends:
When you weigh the cost of multimillion-dollar settlements against the simple costs of making sure your company is in compliance, the decision seems easy. Put FCRA compliance at the top of your legal department's to-do list, and protect yourself from this growing trend in class action litigation.
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