Class Action Claim For Running Background Check Gets Tossed in Court

Finally, a voice of reason.

Employers got some good news from a judge in the Northern District of California last week, when the court granted Paramount Picture’s motion to dismiss a class action claim for alleged Fair Credit Reporting Act (FCRA) violations. The case was one of the many class actions that have been flooding the federal courts, disputing the validity of the disclosure form used for running a background check.

This wave of litigation has erupted over the past 12 months, putting employers on the defensive against FCRA claims seeking millions in statutory and punitive damages. The judge’s decision to dismiss the case against Paramount is a welcome development, and may be a turning point for employers facing FCRA class actions of this type.

Splitting hairs?

The plaintiff alleged that Paramount violated the FCRA’s requirements for disclosure of consumer reports. The specific code section, 15 U.S.C. § 1681b, provides that before conducting a background check, an employer must make a “clear and conspicuous disclosure,” “in a document that consists solely of the disclosure” (emphasis added).

The plaintiff alleges that Paramount violated the above provision of the FCRA by including some extraneous information in its disclosure form — namely a certification that the information provided by the plaintiff was true and correct.

If this sounds like splitting hairs to you, suffice it to say that the court agreed. Citing a 1997 opinion[i] letter from the FTC, the court maintained that the one-sentence certification Paramount included in its disclosure form, while not technically part of the statutorily permitted authorization, was close enough.

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The court found that while Paramount may not have followed the exact letter of the law, its actions certainly did not rise to the level of willful disregard of the statute. The court reasoned that the additional sentence served to “focus the consumer’s attention on the disclosure.”

[E]ven if inclusion of the certification in Paramount’s disclosure form did not comply with a strict reading of § 1681b(b)(2)(A)’s requirement that the document consist solely of the disclosure and the authorization, it is not plausible that Paramount acted in reckless disregard of the requirements of the FCRA by using this language.”

Will other cases follow?

The icing on the cake was the judge’s determination that there was nothing the Plaintiffs could do to amend the claim to refile or salvage their case. Let’s hope that other courts hearing dozens of similar cases will follow Judge Vince Chhabria’s lead.

This was originally published on the EmployeeScreen IQ blogEmployeeScreen IQ is not a law firm, and the contents of this article are not intended to be a substitute for legal advice.

Angela Preston is senior vice president and counsel, corporate ethics and compliance for SterlingBackcheck.com. Angela has broad industry experience including more than 20 years as a licensed attorney and 12 years as a leader and expert in the background screening industry. She has extensive expertise in employment law, privacy law, EEO law, and the Fair Credit Reporting Act. Contact her at Angela.Preston@sterlingbackcheck.com.

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