On February 7, 2014, a federal class action lawsuit was filed against Whole Foods Market California, Inc., alleging that Whole Foods’ online employment application process failed to provide the required consumer report disclosure in a “document that consists solely of the disclosure” as required by the federal Fair Credit Reporting Act. According to the lawsuit, the screen containing the consumer report disclosure document “contained language constituting a waiver of claims against those who obtain the consumer reports.”The lawsuit alleges that after the background check has been ordered and the hiring decision made, Whole Foods’ new employee paperwork process includes a second disclosure document that is compliant with the FCRA. The lawsuit alleges that this compliant document is presented too late in the process (after the background check has already been run) to meet the FCRA’s requirements.
The FCRA requires employers who wish to run a background investigation (“consumer report” in the lingo of the FCRA) to first disclose to the individual on a separate document used exclusively for that purpose, that a consumer report will be conducted in relation to his or her employment. The individual must also provide written permission to the company to procure the background investigation.
The new Whole Foods case is very reminiscent of the class action suit brought against Domino’s Pizza which settled for $2.5 million last year. In the Domino’s case, the judge reviewed Domino’s inclusion of a liability waiver in the disclosure document. In the memorandum supporting his order denying Domino’s motion to dismiss the class action complaint, the judge stated “Ultimately, both the statutory text and FTC advisory opinions indicate that an employer violates the FCRA by including a liability release in a disclosure document.“
In consulting with employers about their background screening process, I often find releases of liability tucked away like ticking timebombs in their disclosure documents. Invariably, these liability waivers were recommended by the employer’s corporate or employment law counsel, who often have only a passing familiarity with the Fair Credit Reporting Act.
The FCRA isn’t a difficult law with which to comply but has become a favorite of plaintiff lawyers seeking to land large settlements from employers. The Walt Disney Company is also facing a class action lawsuit alleging violations of the FCRA. In addition to Domino’s Pizza, Kmart, Talecris Biotheraputics, US Express, and First Student have all settled FCRA-related class action suits in recent years.
On February 26th, I will be presenting The Fair Credit Reporting Act’s Requirements for Employers, as part of our series of webinars focused on employment background investigations compliance issues. This free webinar is approved for an hour of HRCI general recertification credit and open to our clients and friends in the HR community. I encourage you to take advantage of this webinar (or watch the previously recorded webinar) just to be sure your background screening process is up to date! While you’re at it, maybe you should go ahead and register for the rest of our compliance webinars this spring.
I appreciate your insights as always. Please feel free to email any of your pearls of wisdom.