Home Depot USA, Inc. (Home Depot) agreed to pay $1.8 million to settle a class action lawsuit for allegedly violating the Fair Credit Reporting Act (FCRA) over its background check policies. According to the agreement, Class Members will received between $15 to $100. The proposed class includes approximately 120,000 individuals. The initial complaint alleged that Home Depot’s background check disclosure forms contained extraneous information with a release of liability statement, violating the FCRA. Fernandez v. Home Depot USA, Inc., No. 8:13-cv-00648

Here is a reminder of how to stay in compliance with FCRA requirements:

• The FCRA summary of rights must be provided to the applicant before performing a background check and also if/when a Pre-Adverse action letter is sent to the applicant. In order to stay in compliance with the FCRA, this summary of rights must be given to applicants at both times. The latest form can always be found at http://files.consumerfinance.gov/f/201504_cfpb_summary_your-rights-under-fcra.pdf
• Disclosure and Authorization forms must be stand-alone documents. They should not contain extraneous information, and they must be given to applicants at the proper time. Before performing a background check, an employer must disclose in writing to an applicant/employee that he/she will be the subject of a background screening. The employer then must obtain a signed authorization from the applicant/employee permitting the background check. The FCRA allows the disclosure and authorization forms to be combined into one document; however it must be a stand-alone document and not made a part of the employment application. It is also important not to have a release of liability included on these forms.
• Employers must notify applicants when an adverse employment decision is made based on any part of a background check. The FCRA requires a Pre-Adverse Action letter be provided to the applicant to give them a chance to to review their report and dispute any information they believe to be inaccurate. The Pre-Adverse letter should contain a copy of the report along with the ‘FCRA Summary of Rights’. After a final decision has been made not to hire, the employer must send a second Adverse Action letter, sometimes called “Final Adverse Action” or “Second Notice.”

FCRA class action lawsuits have the potential to be extremely costly as evidenced in the latest settlement with Home Depot. Plaintiffs can recover up to $1,000 per violation plus attorney fees, punitive damages and actual damages. It is important that employers and hiring personnel keep these lawsuits in mind when developing and carrying out hiring procedures. Click here for more information about staying in compliance with the FCRA.