FCRA Case Dismissed! Court says LinkedIn is not a CRA

 

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LinkedIn is off the hook. A California district court has dismissed a class action lawsuit filed against the business networking site. The full decision can be found here. The popular social network was sued last year by job seekers who claimed that LinkedIn’s Reference Searches cost them jobs. The theory of the case was that LinkedIn should be treated like other background screening companies–a theory that was successful against another website, Spokeo.

Case Background

Tracee Sweet, the named Plaintiff, had what she thought was a positive interview with a prospective employer. In fact, she later got word that she would be hired. Soon thereafter, the company called her back and said it had changed its mind. As it turns out, the company had checked some references using LinkedIn’s “References Searches” function. Reference Searches is pretty much what it sounds like—it’s a LinkedIn feature that employers use to track down people with whom an applicant may have worked previously.

Sweet and other similarly situated job seekers filed suit, alleging that the reference feature violated their rights under the Fair Credit Reporting Act. At the crux of the complaint was the plaintiffs’ argument that LinkedIn was acting as a consumer reporting agency (CRA) under the Fair Credit Reporting Act (FCRA), and that Reference Searches were consumer reports. Last week a California U.S. District Court dismissed the case, finding that the Plaintiffs had not alleged sufficient facts to support a plausible FCRA claim.

The Decision

In reaching its findings, the court emphasized the following points:

First, the court found that LinkedIn’s publications of employment histories of the consumers who are the subjects of the Reference Searches are not consumer reports:

“because the information contained in these histories came solely from LinkedIn’s transactions or experiences with these same consumers. The FCPA excludes from the definition of consumer report any “report containing information solely as to transactions or experiences between the consumer and the person making the report.”

Second, the court found that LinkedIn’s publications Reference Searches still would not be consumer reports because Plaintiffs’ allegations do not raise a plausible inference that LinkedIn acts as a consumer reporting agency when it publishes these histories:

The court distinguished the Plaintiffs from the plaintiffs in Robins v. Spokeo, Inc., noting that in Robins, the court held that the plaintiff’s allegations that the defendant “regularly accepts money in exchange for reports that contain data and evaluations regarding consumers’ economic wealth and creditworthiness [were] sufficient to support a plausible inference that [d]efendant’s conduct falls within the scope of the FCRA.”

In this case, the court found that LinkedIn was merely carrying out consumers’ information-sharing objectives and not acting as a consumer reporting agency with regard to its assembly of this information.

Third, the court found that the Plaintiffs’ allegations are insufficient to state a claim that the information in the Reference Search bears on the “character, general reputation, mode of living” and other relevant characteristics of the consumers as required by the FCRA.

Fourth, the court found that Plaintiffs do not state a claim that the Reference Search results are used or intended to be used to determine eligibility for employment. “A communication must be “used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for . . . employment purposes . . . .” in order to be a consumer report.” The court did not find that the search results themselves were used in the hiring decision. Rather, the results were used to locate people who may or may not then provide information about the candidate.

Bottom Line

The good news is that employers and recruiters can continue to use LinkedIn as they always have, without fear of additional compliance requirements that would have attached if the court had found that the web site was in fact a CRA. Likewise, LinkedIn can carry on business as usual. Since it is not a CRA, it has no duty to verify the accuracy of the information reported in the Reference Searches, nor does it have a duty to put consumers on notice about the use of the information in the hiring process. The results of the case have an upside for users and consumers alike who rely on the power and convenience of LinkedIn every day (including me!).  The downside, if there is one, is buyer beware. Like any other social media source, much of what you find on LinkedIn is user generated content. There’s no good way to know if it’s accurate. My advice–make sure you do your homework and conduct a real background check before hiring someone you find on social media.

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Litigation Update: FCRA Claim Against Paramount is Thrown Out

Background Checks

Paramount Gets FCRA Claim Thrown Out

Finally, a voice of reason. Employers got some good news from a judge in the Northern District of California last week, when the court granted Paramount Picture’s motion to dismiss a class action claim for alleged Fair Credit Reporting Act (FCRA) violations. The case was one of the many class actions that have been flooding the federal courts, disputing the validity of the disclosure form used for running a background check. This wave of litigation has erupted over the past twelve months, putting employers on the defensive against FCRA claims seeking millions in statutory and punitive damages.  The judge’s decision to dismiss the case against Paramount is a welcome development, and may be a turning point for employers facing FCRA class actions of this type.

The plaintiff alleged that Paramount violated the FCRA’s requirements for disclosure of consumer reports. The specific code section, 15 U.S.C. § 1681b, provides that before conducting a background check, an employer must make a “clear and conspicuous disclosure”, “in a document that consists solely of the disclosure” (emphasis added). The plaintiff alleges that Paramount violated the above provision of the FCRA by including some extraneous information in its disclosure form—namely a certification that the information provided by the plaintiff was true and correct.

If this sounds like splitting hairs to you, suffice it to say that the court agreed. Citing a 1997 opinion[i] letter from the FTC, the court maintained that the one-sentence certification Paramount included in its disclosure form, while not technically part of the statutorily permitted authorization, was close enough. The court found that while Paramount may not have followed the exact letter of the law, its actions certainly did not rise to the level of willful disregard of the statute.  The court reasoned that the additional sentence served to “focus the consumer’s attention on the disclosure.”

[E]ven if inclusion of the certification in Paramount’s disclosure form did not comply with a strict reading of § 1681b(b)(2)(A)’s requirement that the document consist solely of the disclosure and the authorization, it is not plausible that Paramount acted in reckless disregard of the requirements of the FCRA by using this language.

The icing on the cake was the judge’s determination that there was nothing the Plaintiffs could do to amend the claim to refile or salvage their case.  Let’s hope that other courts hearing dozens of similar cases will follow Judge Chhabria’s lead.

Case Name: MICHAEL PEIKOFF, Plaintiff, v. PARAMOUNT PICTURES CORPORATION, Defendant Case No. 15-cv-00068-VC, U.S. District Ct. for the Northern District of California.

Case File Date: February 19, 2015

Dismissal Date: March 25, 2015

Cause of Action: Class Action, Fair Credit Reporting Act 15 USC 1681

Bottom Line: Finally a voice of reason from California’s Northern District. The court threw out an FCRA class action claim for alleged disclosure violations, finding that the additional language in the document did not constitute a willful violation of the statute and did not rise to the level of a violation. This is welcome news for employers facing similar claims for their background screening process.

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[i] See Letter from William Haynes, Attorney, Div. of Credit Practices, Fed. Trade Comm’n, to Harold Hawkey, Emp’rs Assoc. of N.J. (Dec. 18, 1997), 1997 WL 33791224.

 

Government Study on Background Checks Addresses Incomplete FBI Criminal Records

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The Government Accountability Office (GAO) has been busy. At the request of Congress, it’s been looking into criminal background checks. Last week the GAO released a report of findings from a two year study titled “CRIMINAL HISTORY RECORDS: Additional Actions Could Enhance the Completeness of Records Used for Employment-Related Background Checks.” The report lives up to that lengthy title–it is the most comprehensive accounting of the current state of FBI background checks, criminal record databases, and practices since 2006. It reveals when and why states conduct FBI record checks, and looks at whether states have improved upon reporting complete records into the FBI database. It also looks at the practices of private companies that conduct criminal record checks.

Congress has good reason to be concerned. Every year, more state and federal agencies are turning to statewide databases and the FBI records to screen employees for safety and security reasons. The number one concern is this: incomplete records.

Back in 2006, the Attorney General reported that the FBI criminal background check system was woefully inadequate, consisting of a patchwork of state and federal laws. It found inconsistencies in access to FBI criminal record checks across states and industries, concluding that records were incomplete and were not reported consistently. Since then, little has changed.

State Reporting and the FBI

The FBI database relies on the states to supply complete and accurate records. The GAO reports that while some states have made improvements, more progress is needed. More records now contain both the arrest and final disposition (e.g., a conviction), but there are still gaps. According to the report, twenty states reported that more than 75 percent of their arrest records had dispositions in 2012. That means around 25 percent of those state’s records did not have dispositions. That’s a pretty big gap. Those of us in the private sector know from experience that incomplete records can’t be relied upon for hiring decisions; they lead to delays in hiring, rejection of qualified candidates, and lawsuits.

The report notes that the FBI’s Advisory Policy Board, which includes representatives from federal, state, and local criminal justice agencies, created a Disposition Task Force in 2009 to address this very problem. But the Task Force has no current plans or time frames in place to do what’s needed—to make improvements in national standards for collecting and reporting disposition information.

Private Background Companies

Given the state of affairs with state reporting and FBI sources, it’s no wonder that employers, including government agencies, have turned to private screening companies. The report notes that the use of private companies to conduct criminal history record checks appears to be increasing because of employer demand:

“(P)rivate background check companies can offer benefits that government agencies are not always able to provide, including collecting and consolidating criminal justice information from multiple sources, achieving faster response times than Management officials from state agencies, and creating reports that include non-criminal-justice information.”

Private companies are able to return results faster because they don’t rely on the FBI database or state-reported records. They conduct name-based searches on a wider variety of sources, going directly to the courts for the most current and up-to-date information. The report points out challenges to the private model as well, like false positives—which can occur when a person with a common name is associated with another person’s records—and false negatives, which can occur when a search misses a record because of errors in the record. However, private background check companies mitigate these errors by using additional identifiers—such as date of birth and address— when conducting checks. Moreover, regulators like the FTC are actively enforcing consumer protection laws like the Fair Credit Reporting Act, to keep private companies in line.

Conclusions

After conducting a nationwide survey of 47 states and the District of Columbia, interviewing officials that manage checks from the FBI and 4 states, speaking to stakeholders like private background companies and trade associations for background screeners, and regulators like the Federal Trade Commission, the GAO concluded that one thing is clear. Criminal background checks are here to stay. Employers and government agencies are increasingly using criminal history records for employment, volunteers, and licensing. And to do that well, they need accurate and complete criminal records— including the final disposition of any criminal charges.

What the GAO Recommends

The report concludes with these specific recommendations:

  • To improve disposition reporting that would help states update and complete criminal history records, we recommend that the Director of the FBI task the FBI Advisory Policy Board to establish a plan with time frames and milestones for achieving its Disposition Task Force’s stated goals.
  • To potentially help states enhance the completeness of their criminal history records, we recommend that the Director of the FBI and the Director of the Office of Personnel Management clarify what disposition information OPM will provide to the FBI and formally agree on how OPM will provide it. This would enable the FBI to forward the information to states and allow each state to determine if the information can be used to update their criminal history records.
  • To better equip states to meet the regulatory requirement to notify individuals of their rights to challenge and update information in their criminal history records, and to ensure that audit findings are resolved, we recommend that the Director of the FBI—in coordination with the Compact Council—determine why states do not comply with the requirement to notify applicants and use this information to revise its state educational programs accordingly.

It will be interesting to see the kind of follow up that ensues. One thing conspicuously absent from the recommendations is any follow up with private industry, which has an active stake in the process. Ironically, the private background screening industry is miles ahead of the states and other government employers when it comes to ensuring the accuracy of records and protecting the rights of consumers in the screening process.

Criminal Background Checks

Is Big Brother Watching? When Big Data Meets HR

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Big Data and Work-Force Science: A Boon for HR

Big data is transforming the information world at an alarming rate. It’s no surprise that the data being collected, sliced, sorted, and sold is being used to help businesses make better hiring decisions. According to the New York Times, a growing number of entrepreneurs are applying big data to human resources and the search for talent, creating a field called work-force science. To quote technology writer Steve Lohr, “work-force science, in short, is what happens when big data meets HR”  The data part of the equation is collecting all of the digital imprints that a worker or job seeker has left in the course of web browsing, e-mailing, instant messaging, or posting on social media. The “science” part—evaluating and measuring the data—is the tricky part. Silicon Valley start-ups are developing analytics and algorithms to put this data to work for recruiters and employers. Continue reading Is Big Brother Watching? When Big Data Meets HR

New Jersey’s Ban the Box Law Effective March 1, 2015

New Jersey

The New Jersey ban the box law, titled The Opportunity to Compete Act, went into effect on March 1, 2015. The law impacts both private and public employers hiring in the Garden State. Like most ban the box laws, the statute does not prohibit employers from asking candidates about their criminal past nor does it prohibit criminal background checks, but it does change the timeframe within which an employer can make an inquiry about criminal history.

Continue reading New Jersey’s Ban the Box Law Effective March 1, 2015

Litigation Update: Sports Bar and Grill Hit with Class Action

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Beef ‘O Brady’s has been served with a class action complaint for alleged violations of the Fair Credit Reporting Act (FCRA). The U.S. sports bar and grill is being targeted for now-familiar claims surrounding the company’s authorization and disclosure for employment background checks. Continue reading Litigation Update: Sports Bar and Grill Hit with Class Action

Litigation Update: Transportation Firm Served With FCRA Class Action

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Genwest/Gencom Transportation LLC has been served with a class action complaint for alleged violations of the Fair Credit Reporting Act (FCRA) and the California Investigative Consumer Reporting Agencies Act (ICRAA) as well as a discrimination claim. The US transportation, warehousing, and distribution firm is being targeted for now-familiar claims surrounding the company’s authorization and disclosure for an employment background check. Continue reading Litigation Update: Transportation Firm Served With FCRA Class Action

Litigation Update: Home Depot Hit for Employment Background Checks

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Litigation Update

Home Depot has been hit with another class action lawsuit[1] alleging violations of federal law based on its employment background screening practices. The mega home improvement store is facing a second Fair Credit Reporting Act (FCRA) lawsuit—this one filed in the Northern District of Georgia on February 11, 2015. The focus of the present case is, like many other cases we have seen in recent weeks, the portion of the FCRA that requires a “clear and conspicuous disclosure” about the background check that is made in writing “in a document that consists solely of the disclosure.” Continue reading Litigation Update: Home Depot Hit for Employment Background Checks

Litigation Update: FCRA Class Action Filed Against Time Warner

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Litigation Update

Time Warner Cable has been named in a Fair Credit Reporting Act (FCRA) class action lawsuit filed last week in the Eastern District of Wisconsin. The class action complaint was filed on February 6, 2015, alleging that the company violated portions of the Fair Credit Reporting Act in its employment background screening process. The Plaintiff is a frequent flier—he’s the same guy who was named in one of the FCRA class action cases we reported on last week. Same law firm, same plaintiff, same allegations. Once again, the case focuses on the portion of the FCRA that requires a “clear and conspicuous disclosure” about the background check that is made in writing “in a document that consists solely of the disclosure.” Continue reading Litigation Update: FCRA Class Action Filed Against Time Warner

Litigation Update: Michaels Stores Hit Again for Background Checks

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Litigation Update

Michaels Stores was hit with another FCRA class action case last week. You might recall that the arts and crafts retailer was named in a similar suit just a few months ago*. The current complaint is once again about the Fair Credit Reporting Act (FCRA) disclosure requirement under 15 USC 1681b(b)(2)(a). Specifically at issue is the requirement that disclosure is made in a document that consists solely of the disclosure. The complaint alleges that in the company’s employment background screening process, the disclosure is “embedded within one long continuous web page that applicants fill out” that includes application information and a liability release. Continue reading Litigation Update: Michaels Stores Hit Again for Background Checks