Staffing Agency Sued for Alleged Background-Check Violations

​A staffing agency sued for failing to provide applicants with background-check notices required by the Fair Credit Reporting Act (FCRA) could not have the lawsuit dismissed as a class action for faulty class designations, the U.S. District Court for the Southern District of New York ruled. The lead plaintiff claimed that criminal charges listed in a background check and resulting in his termination were inaccurate.

A former applicant of Execu|Search Group (ESG), an executive recruitment and temporary staffing agency, filed a lawsuit as a class action against ESG under the FCRA.

Around September 2017, an ESG recruiter contacted the applicant about a temporary position in which ESG would employ him to provide information technology training services to nurses and doctors at various New York-Presbyterian Hospital locations. Following a successful interview, the applicant began work in October 2017. The day after he started, the applicant received notice from ESG that his background check revealed open criminal charges and his employment was terminated. Although the applicant protested that the charges had already been dismissed, ESG stood by its decision to terminate him based on those charges listed in his consumer credit report.

The applicant claimed that ESG violated the FCRA by failing to provide him with a copy of his consumer credit report or a written description of his FCRA rights sufficiently in advance of taking adverse employment action against him based on that report. He claimed that ESG provided his consumer credit report and a written description of his rights only after he had been fired, and that the criminal-history information in the report was inaccurate.

[SHRM members-only HR Q&A: When do employers need to comply with the Fair Credit Reporting Act?]

The applicant originally sought to litigate the action on behalf of applicants for employment with ESG in New York who were not provided a copy of their consumer credit report or a written description of their rights under the FCRA before ESG took adverse employment action against them based on their consumer credit report. As a result, the classes consisted of those—and only those—to whom ESG would be liable under the FCRA.

The court raised concerns that the class proposed in the original complaint was an inappropriate "fail-safe" class because it would consist only of those applicants to whom ESG would ultimately be liable for violations of the FCRA. Such a class violates the Federal Rules of Civil Procedure because a proper class must contain plaintiffs who may or may not ultimately prove liability by ESG.

In response, the applicant amended the class definition to encompass all employees or prospective employees of ESG who were the subject of a consumer report and against whom ESG took adverse action based on information contained in each consumer report.

ESG moved to strike or dismiss the applicant's class allegations. In his opposition, the applicant sought sanctions against ESG for purportedly stalling the litigation.

The court denied ESG's motion, finding that the amended class-action allegations sufficiently identified a class of applicants that may or may not have valid FCRA claims. Unlike a fail-safe class, the amended class-action definition included employees to whom ESG may have no liability—namely, those applicants rejected from employment because of background-check information who received the required documents under the FCRA.

In denying ESG's motion, the court considered granting the applicant's motion for sanctions because of the weakness of ESG's position. However, because ESG based its arguments on recognizable legal concepts, the court denied the motion for sanctions.

Garcia v. Execu|Search Group LLC, S.D.N.Y., No. 1:17-cv-09401-WHP (Feb. 19, 2019).

Professional Pointer: Employers that use third-party background-check services must carefully comply with the FCRA's strict notice and disclosure requirements. Inadvertent omissions and background-check mistakes can create widespread liability in class-action litigation that employers cannot easily remedy or prevent.

Jeffrey Rhodes is an attorney with Doumar Martin in Arlington, Va.