A California court has certify that five million Walmart applicants may bring a lawsuit against Walmart for violating the Fair Credit Reporting Act (FCRA).  The Plaintiffs allege that Walmart violated federal and state law by not properly acquiring consent by the applicant to conduct the background check, and providing proper federal and legal notices and disclosures that must be provided to said applicants.

One of the main components of the FCRA is that consumers/applicants MUST provide written consent to the employer authorizing the background check otherwise known as the “Disclosure and Authorization” form.  Furthermore, the disclosure and authorization must be separate from any employer on-boarding forms and reside on 2 pages (disclosure separate from the authorization).  Walmart’s issue is that there was “extraneous language” on the disclosure that can be misleading to the applicant (i.e. Release Company of any liability pertaining to the results of the background check).

The Disclosure and Authorization must also be accompanied by certain federal and state notices, specifically the “Summary or Rights under the FCRA” which must be given to any applicant no matter geographical location when conducting a background check.  There are also certain states that have an applicant notice requirement (i.e California has the “Statement of Consumer Rights” under state law, and “Notice regarding background investigation pursuant to CA law”).  With the advancement of technology specifically HRIS (Human Resources Information Systems) employers can identify where the applicant resides and will be working which will assist in providing the appropriate federal and state disclosures and notices.

The now certified class will consist of “current, former and prospective applicants for employment in the United States” who applied for a job where the background report was conducted in the five years before the suit was filed.

One would think Walmart would have learned their lesson based on previous companies being held liable for violating the “stand alone” disclosure and authorization rule:

  • Frito-Lay Inc., settled in April of 2018 for $2.4 million
  • Omnicare settling for $1.3 million in August of 2018
  • Delta Airlines agreed to pay $2.3 million in January 2019

What can employers do to ensure they don’t become a casualty?  First line of defense, is to make sure you have a competent and compliant employment or labor law attorney that has a grasp on state law and federal law (depending on the size of the employer).  Secondly, the company should align itself with an NAPBS (National Association of Professional Background Screeners) Accredited Company that can assist with navigating a myriad of compliance issues facing employment background checks, while providing “real time” updates to any changes in federal and/or state law.  Additionally, employers should review their end-user agreement with the background screening company and look for any release of liability or one-sided indemnifications.   Lastly, ensure that on an annual or even bi-annual basis a review is conducted on the entire background screening program (Screening policy, compliance forms including disclosure/authorization, state/federal notices, and pre-adverse/adverse action letters) to ensure complete compliance with background screening laws.

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