Improper background checks on job applicants cost employers millions

Employers listen up: If you want to review a job candidate’s credit history, criminal records and other personal information on a background-check report, you must first obtain written consent from the candidate, per the employment provisions of the Fair Credit Reporting Act.

And if you find something you don’t like that causes you to think twice about hiring that person, you must first give them time to dispute any inaccuracies in the report.

Or else you might get slapped with a lawsuit, and quite possibly a class-action lawsuit – just like these employers did in Good Jobs First’s Violation Tracker, billed as the first wide-ranging database of corporate crime and misconduct that now includes such cases.

Indeed, over the past decade nearly 150 class-action lawsuits citing employment screening violations have been successfully brought against employers or firms that provide background-check reports, according to Good Jobs First. To date, employers collectively have paid $174 million in damages to plaintiffs, and background-check providers collectively have paid another $152 million.

“At a time when employers increasingly use background-check reports to screen job candidates, class-action lawsuits have become an important tool to ensure that the rights of applicants are protected,” says Good Jobs First research director Philip Mattera.

More than 40 employers have paid out class-action settlements of $1 million or more since 2011, with Wells Fargo & Co. in 2016 paying one of the largest settlements — $12 million to thousands of applicants, according to the Violation Tracker.

Other large payouts by well-known companies include Target Corp. ($8.5 million), Uber Technologies Inc. ($7.5 million), Amazon.com Inc. ($5 million), The Home Depot Inc. ($3 million) and Domino’s Pizza Inc. ($2.5 million).

The FCRA cases are the fourth compilation of employment-related class actions to be added to Good Jobs First’s Violation Tracker, following ones covering wage theft, workplace discrimination and retirement-plan abuses, Mattera says. The case information was assembled by the Corporate Research Project of Good Jobs First.

With the addition of the FCRA cases and the updating of data from more than 40 federal regulatory agencies and the U.S. Department of Justice, the Violation Tracker now contains 369,000 civil and criminal entries with total penalties of $470 billion.

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