Since December 2014, retail giant Michaels Stores, Inc. (Michaels) has been hit with two class action lawsuits regarding its background-check process. The lawsuits allege that Michaels violated the Fair Credit Reporting Act (FCRA) by having job applicants click an "I Agree" box consenting to the terms and conditions of an online job application, which include an authorization to obtain a consumer report on the applicant.
Employers utilizing a third party to obtain background checks for use in the hiring process (and other employment decisions) must comply with a number of requirements set forth in the FCRA, including that the employer give job applicants a written authorization form that includes a "clear and conspicuous" notice that a consumer report may be obtained for employment purposes. This disclosure and authorization must be part of a separate or "stand-alone" document consisting of the disclosure and nothing else. The employer must obtain the individual's authorization before a consumer report is procured.
While the FCRA mandates the use of stand-alone, written authorization forms, many employers today use applications that are completed online and submitted electronically. Nothing is printed out. Nothing is signed. Instead, many online applications include an "I Agree" box colloquially known as a "clickwrap" agreement. The box is typically found at the end of the application and must be completed in order for the applicant to apply for the job. The plaintiffs in the Michaels lawsuits contend that the "clickwrap" agreement in the applications they completed does not comply with the FCRA because it is not a "stand-alone" statement; rather, it appears at the end of the application surrounded by allegedly irrelevant information.
Michaels is not the only employer accused of using authorization forms that violate the FCRA. Discount retailer Dollar General Corporation and grocery chain Publix Super Markets, Inc. have recently been hit with similar class actions. These lawsuits serve as a stark reminder that the law often lags behind technological innovations. Accordingly, employers seeking to use "new" technologies to streamline certain human resources processes and/or procedures should carefully consider whether the use of such technologies will affect the employers' compliance with certain outdated or "old-fashioned" legal requirements. In some cases, the legal risks may be outweighed by the operational rewards, but those risks should not be ignored.