2.26.2015

Recent Tide of Class-Action Lawsuits Should Worry Employers Using Background Checks

A new wave of class-action lawsuits should concern any employer that regularly uses background checks in making employment decisions. These lawsuits allege violations of the Fair Credit Reporting Act (FCRA), the federal law that regulates the collection and use of consumer credit information. Many employers are unaware that FCRA also imposes obligations on employers that order background reports, including criminal and motor vehicle record checks, from a consumer reporting agency.

Before the employer may obtain a background report on an employee or job applicant, FCRA requires that the employer provide the individual with a written disclosure in a stand-alone document and obtain the individual’s written permission. Additional steps are required if the employer decides to take an adverse action (such as denial of employment) based on the report’s contents. Before taking the adverse action, the employer must provide the individual with a “pre-adverse action notice” and a summary of the individual’s rights under FCRA. The employer must then provide the individual with a reasonable period of time, generally five business days, to dispute the information in the background report. If the employer still decides to take the adverse action, FCRA requires the employer to send yet another notice.

Common claims by plaintiffs are that employers included extraneous information in their written disclosures, failed to provide a pre-adverse action notice, or failed to wait a reasonable time before taking an adverse action. FCRA allows plaintiffs to recover actual damages, including attorneys’ fees and costs. For willful violations, statuary damages (between $100 and $1,000) and punitive damages are also available. As a result, many of the class-action lawsuits have resulted in multi-million dollar settlements for the plaintiffs.

To mitigate the risk of a lawsuit, employers should review their policies and procedures for conducting background checks of employees and job applicants. We also advise a careful review of the notices and disclosures provided to employees to ensure these documents contain the specific information required by FCRA.



Nathan Pangrace
216.615.4825
npangrace@ralaw.com

2.03.2015

California Court Addresses Employee Status of Uber, Lyft Drivers

Two suits filed in a California federal court (Cotter v. Lyft, Case No. 13-4065, and O’Connor v. Uber, Case No. 13-3826, U.S. District Court, Northern District of California) will address whether drivers of the popular taxi-alternatives Uber and Lyft qualify as “employees.” If so, they would be entitled to compensation for expenses, which would include gas, maintenance, and cleaning of the vehicles. Currently, drivers for both companies must cover all incidental expenses out-of-pocket, which leaves Uber and Lyft drivers footing the bill for everything from oil changes to car washes.

On January 29, 2014, the federal court judge in the Lyft case stated that “people who do the kinds of things that Lyft drivers do here are employees,” strongly implying that the popular taxi alternative will be liable for added compensation to its drivers.

Drivers for the companies are subject to hiring and firing by their respective organizations, and are required to pass background checks and accept a certain number of rides, all factors that would be indicative of an employer-employee relationship. However, neither company appears to require control over where the drivers operate or what time they do so, factors that would tend to show independent contractor status.

The suit could have a wide-ranging impact nationally as both Uber and Lyft have exploded in popularity, with Uber alone valued at nearly $40 billion dollars. Look for similar lawsuits nationwide to erupt if an employment relationship is found to exist between drivers and their respective companies.



Marcus Pringle
216.696.7077
mpringle@ralaw.com