On April 21, 2014, Swift Transportation Co. of Arizona and a class of plaintiffs jointly moved for preliminary settlement approval to end litigation for alleged violations of the Fair Credit Reporting Act (“FCRA”) in Ellis, et al. v. Swift Transportation Co. of Arizona, LLC, Case No. 13-CV473 (E.D. Va. April 21, 2014).

Plaintiffs brought the class action on behalf of applicants who applied for truck driving positions at Swift and were the subject of a consumer report obtained by Swift for employment purposes. Plaintiffs alleged the Swift failed to disclose that it would obtain a consumer report for employment purposes, and failed to advise the applicants that they could have access to, and dispute the accuracy of, the consumer report used during the hiring process. Ultimately, the plaintiffs argued that the failure to disclose these rights amounted to a lack of authorization for Swift to view the reports.

By way of background, under the FCRA, plaintiffs can seek damages for negligent non-compliance or willful non-compliance. To prove willfulness, plaintiffs must show either malice or reckless disregard for the law. The damages available for willful non-compliance are actual damages or statutory damages of not less than $100 and not more than $1,000, attorneys’ fees, and punitive damages. Most class actions under the FCRA allege willful violations so that statutory damages are at issue, which are much easier to calculate than actual damages because actual damages arguably involve a specific individualized inquiry into each potential class member’s damage.

Under the terms of the agreement in Ellis, et al. v. Swift Transportation Co. of Arizona, LLC, the parties agreed to settle the claims on a class-wide basis for $4.4 million. Many class members will automatically receive $50, while seven class representatives will receive an additional $1,000 and another will receive an additional $5,000.

Notably, while these damages are below the statutory minimum, this settlement continues a trend of increased FCRA litigation resulting in multi-million dollar settlements for employers failing to comply with the FCRA’s specific and detailed disclosure and authorization requirements. The current environment is reminiscent of early wage & hour litigation as plaintiffs’ counsel become more sophisticated in building class actions with limited personal recovery but significant attorneys’ fees.

Implications For Employers

Given the increased litigation and high settlement value of these cases, employers should review their processes to ensure compliance with the FCRA’s requirements, especially those related to disclosures and authorizations.  While the damages to any one individual may be small, the cumulative effect can very quickly exceed millions of dollars. The larger the company, the larger the potential class, and the larger the ultimate potential for damages.  This settlement is another reminder for employers of the risks associated with background check class actions under the FCRA.