Introduction
Imagine the effect of having to add millions of dollars to your HR budget because you decided to save money by choosing a “big box” background screening vendor that does not provide adequate compliance support. Yet this scenario is becoming an everyday reality for many employers as an alarming number of class action lawsuits are being filed and won by plaintiffs cashing in on big paydays. Many of these cases turned on the employer relying upon inaccurate information provided by their background screening provider.
In 2024, over 500 cases were filed under the federal Fair Credit Reporting Act, an increase of over 3% from 2023. This white paper will discuss key court opinions issued in 2024 and will provide examples of situations employers should avoid in order to avoid costly litigation.
This paper reviews notable 2024 court cases where employers were held liable for FCRA violations and underscores the need for partnering with a compliance-driven background screening provider. As the cases below illustrate, it is imperative that employers partner with a compliance-focused background screening provider that equips employers with the resources to ensure all aspects of their compliance program meet legal requirements.
Key FCRA Compliance Requirements
The Fair Credit Reporting Act (FCRA) mandates specific disclosure and adverse action procedures that employers must follow when using consumer reports for employment decisions. Failure to comply has led to costly lawsuits, including class action settlements. Under the FCRA, employers must:
· Provide a clear and conspicuous disclosure in a stand-alone document before obtaining a consumer report.
· Obtain written authorization from the applicant.
· Provide a pre-adverse action notice, including a copy of the report and a summary of rights, before making a final decision.
· Allow the applicant time to dispute the report.
· Issue a final adverse action notice if the decision remains unchanged.
2024 Court Cases and Analysis
1. Grissom v. Sterling Infosystems, Inc.
Issue: A background check company erroneously linked an applicant to a criminal record due to a faulty SSN trace, leading to employment denial. Outcome: The court found that the employer failed to verify the report's accuracy before taking adverse action, resulting in a class action settlement. Analysis: Employers must ensure that their background screening vendors use robust matching criteria to avoid misidentifications that could unfairly deny employment. The settlement amount was reported at $2.5 million.
2. Helwig v. Concentrix Corp.
Issue: The employer failed to provide meaningful time for candidates to respond to negative background check results before rejecting their applications. Outcome: The court ruled that issuing pre-adverse notices without allowing a reasonable dispute period violated the FCRA. Analysis: Employers should have clear timelines in place to allow applicants to challenge inaccuracies before making final employment decisions. The employer was using Sterling Infosystems for their background reports. The employer and Sterling agreed to pay a settlement reported to be $4.5 million.
3. Forestal v. SH Group and Sterling Infosystems
Issue: Plaintiff filed a class action complaint against the employer and Sterling Infosystems for violations of the Fair Credit Reporting Act in connection with their background reports. Outcome: The settlement by the employer and Sterling was reported to be $630,000.
4. Messina v. S&A Solutions, Inc.
Issue: The employer did not provide a copy of the background report to the plaintiff before taking adverse action. Outcome: The court held that depriving the applicant of an opportunity to respond to inaccuracies violated the FCRA. Analysis: Employers must ensure timely delivery of pre-adverse action notices to allow applicants a fair opportunity to dispute incorrect findings. The background company was Orsus. Financial terms and awards were not available.
5. Stewart v. Baptist Memorial Health Care.
Issue: The employer was using deficient documents for their screening program resulting in a class action lawsuit for damages and attorney fees. Outcome. A settlement for $420,000 for defective disclosure documents and for unlawful adverse action practices.
6. Magallon v. Robert Half International
Class action settlement of $4.375 million for improper adverse action procedures. The employer was using General Information Services for their background reports.
Why Employers Must Partner with a Compliance-Driven Screening Firm
Many FCRA violations stem from employers using database-driven background screening vendors that prioritize speed over accuracy and compliance. A compliance-driven screening partner ensures:
· Legally compliant disclosure and authorization forms
· Accurate and verified reporting to prevent false positives
· Proper adverse action procedures, including timely notice and dispute resolution
· Regular updates on legal and regulatory changes to maintain compliance
Conclusion
The 2024 court rulings reinforce that FCRA compliance is not optional. HR professionals must ensure that their background screening practices align with federal law to avoid costly litigation and reputational damage. Partnering with a trusted screening provider is the most effective way to mitigate risk and maintain a legally compliant hiring process.
At Thuro, we view compliance as a shared responsibility. We empower employers with the tools they need to stay in compliance which include:
· On-demand training sessions for team leaders and recruiters regarding all aspects of background screening compliance.
· Access to experienced attorneys who can assist clients in working though complex compliance issues.
· Monthly legal alerts advising clients of new compliance laws and practical tips for staying in compliance.
· Quarterly compliance webinars from experienced attorneys addressing compliance protocols and processes.
The stakes are simply too high to trust your background screening program to a provider that cannot support your compliance needs. Feel free to reach out to discuss the Thuro difference and how we keep our clients on the right side of the law.
Kevin Prendergast is the President at Thuro, a corporate investigative firm serving clients since 1953. Kevin oversees the compliance program at Thuro and works with clients and their counsel in developing legally compliant corporate investigation programs. Kevin graduated from the Cleveland Marshall College of Law and has been licensed to practice law since 1987. He is a member of the Professional Background Screeners Association and he holds advanced FCRA Certification from the PBSA. Thuro is accredited by the PBSA and is a member of the Better Business Bureau. You can contact Kevin at kprendergast@thuro.ai.