Employers have long been under an obligation to provide employees and prospective employees with prior written notice that a credit report – a "consumer report" in the language of the Fair Credit Reporting Act (FCRA) – may be obtained about them.  The FCRA specifically requires this notice to be "in a document that consists solely of the disclosure," although the Act elsewhere clarifies that the disclosure may also contain an authorization by the employee or applicant for procurement of the report.  Recent court decisions, settlements, and new lawsuits have highlighted the importance of ensuring compliance with this provision of the FCRA.

On December 2, 2013, a federal district court in Pennsylvania held that an employer violated the FCRA by combing the FCRA disclosure and authorization form with a waiver of rights related to the consumer report and background check.  After the court’s ruling, the company in that case, ClosetMaid, was forced to settle the lawsuit as a class action, agreeing to pay $400 to each of 1,540 class members who received the combined disclosure/waiver form – a total of more than $600,000 – plus the plaintiff attorney’s fees and the costs of administering the settlement.  There appears to be an upsurge in this type of litigation as class action lawsuits alleging similar claims have been filed in the last week against Publix Super Markets and UBS.

The remedial provisions of the FCRA are very favorable to plaintiffs.  They allow for class certification with no cap on class-wide damages, attorney fee-shifting, and statutory damages between $100 and $1,000 for each willful violation of the Act.  Employers who receive credit reports and conduct background checks on employees and prospective employees should carefully review their disclosures to ensure compliance with the FCRA.