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Background Check Lawsuits: Legal Rights of Employees, Job Applicants

This Alert Affects:

Employees and job applicants who underwent background checks as a condition of employment.

What's the Problem?
Some companies are failing to comply with regulations regarding the use of background checks and/or using backgrounds checks in a discriminatory manner.
What Is the Fair Credit Reporting Act (FCRA)?
The Fair Credit Reporting Act (FCRA) is a federal law that governs the collection and use of consumer information. The FCRA provides certain rights to job applicants in regard to background checks and outlines what employers must do when these running reports. It also governs how employers can use information contained in background checks when evaluating potential employees.
Type of Lawsuit
Class Action
How Can a Lawsuit Help?
A lawsuit can help you and others seek compensation for lost earnings and lost job opportunities, as well as changes to company policies to help stop discrimination in the workplace.

A number of companies, including Kaplan, Inc., Rite Aid, Whole Foods Market and PepsiCo, Inc., have been sued by employees and job applicants for allegedly failing to comply with federal background check laws. These lawsuits allege that the companies used background checks to discriminate against potential employees and violated the Fair Credit Reporting Act, a federal law that says companies must follow certain procedures when requesting these reports.

If you believe information contained in your background check prevented you from getting a job, get in touch with us using our contact form. You may be able to file a lawsuit against the company that denied you employment.

Background Checks: What Are My Legal Rights?

The Fair Credit Reporting Act provides you with a number of rights regardless of when or how you are subject to an employment background check. Whether you are applying for a new job, vying for a promotion or undergoing a background check for any other reason, these rules must be followed. If not, you may be able to sue the company for violating federal law.

Written Permission

Companies are required to obtain written permission from you before performing a background check, and must provide a disclosure – separate from other any documents (e.g. employment applications) – stating that a background check may be conducted for employment purposes.

Hiring, Demoting and Promotion

When a company decides to hire, demote, or deny employment on the basis of a background check, it must:

  • Provide you with a copy of the background check

  • Provide you with a summary of your rights under the Fair Credit Reporting Act

The purpose of this is to provide you with an opportunity to dispute any incorrect information contained in the background check report to avoid being fired or denied employment.

Firing or Denying Work

When a company decides to fire or deny employment based on a background check, certain rules must be followed. Even in cases where a worker is fired, employers cannot take "adverse action" - meaning they cannot file unfounded charges, make threats, or produce “unjustified negative evaluations, unjustified negative references, or increased surveillance” based on information contained in a background check.  Employers are also required to provide you with a notice containing:

  • The name and contact information of the reporting agency

  • A statement that the reporting agency did not make the adverse employment decision

  • Notification that you have 60 days to obtain a copy of your background check

  • Notice of your right to dispute information contained in the report with the reporting agency that furnished it

Discriminatory Background Checks and EEOC Cases

While a number of employers carry out background checks for security reasons, it has been alleged that background checks can, on occasion, be racially biased and work primarily to disqualify minorities from employment. In fact, in light of these allegations, the U.S. Equal Employment Opportunity Commission  (EEOC) is reviewing its stance on the use of arrest records during hiring processes following concerns that African Americans and Hispanics face discrimination under "blanket" hiring policies that exclude applicants with past convictions.

How Can Background Checks Be Discriminatory?

Several employers have already faced legal action claiming that their hiring policies were discriminatory. For instance, a background check lawsuit against Pepsi beverages resulted in a $3.13 million settlement to resolve claims that the company discriminated against African Americans in its background checks. The EEOC found that Pepsi disproportionately excluded African American applicants, as the company’s hiring policy did not permit those who had been arrested to be hired for permanent jobs, even if they were never actually convicted of any crime. The EEOC’s investigation found that denying employment based on arrest and conviction records could be discriminatory when it is not relevant to the position, as it can limit job openings for applicants based on their race. As part of the settlement, Pepsi had to hire any of the 300 African Americans adversely affected by its hiring policy who still wanted a position at the company.

How Can a Lawsuit Help Me?

If you were subject to an illegal or discriminatory background check, a class action lawsuit could help you:

  • Seek compensation for lost earnings, lost job opportunities and other damages

  • Seek changes to company policies to ensure discriminatory practices stop

If you think you have been denied a job or a promotion because of your background – including criminal history, if this was made known to the employer – it may be time to consider a lawsuit. There’s no risk in learning more about your rights and employers cannot legally take action against you for seeking help. (The EEOC, in fact, lists “participation in an employment discrimination proceeding” as a protected activity). If you’d like to learn more about filing a lawsuit, start by telling us your story. You can use this form to get in touch. 

Sep 23, 2013
Newly Filed / Newly Settled

Rite Aid, Background Checks, and Applicants' Rights

by Staff

Rite Aid is facing a class action lawsuit over its use of background checks during the hiring process, amid claims job applicants aren't given a chance to defend themselves from accusations of theft.… More

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Case Resources

Mack v. Panera, LLC. Complaint
Case number 0:14-cv-61672, U.S. District Court for the Southern District of Florida
The Fair Credit Reporting Act (FCRA)
Federal law that requires consumers be told when their applications for credit, insurance or employment are denied due to information on their credit reports.
A Summary of Your Rights Under the FCRA
The Federal Trade Commission's (FTC) summary describing your rights under the Act, who has access to your credit report, and options for limiting unsolicited offers for credit and insurance.
EEOC v. Pepsi Bottling Group Settlement
Case number 2:05-cv-72583, U.S. District Court for the Eastern District of Michigan
Guide to Employment Background Checks
The Equal Employment Opportunity Commission's (EEOC) guide to what job applicants and employees should know about the proper use of background checks during the hiring process and how to prevent discrimination.