The Fair Credit Reporting Act (“FCRA”) requires employers to adhere to the adverse action procedures when notifying applicants that they have been denied employment when using background checks to make hiring decisions. In simple language, what this means, is that if you apply for a job and are not hired based on information obtained in your background check, the employer must send you a notification letter. That letter must advise you that the adverse action was taken , in part, due to information on a consumer report that was obtained about you. In the absence of following these strict guidelines, on January 25, 2013, retailer Kmart settled an employment class action lawsuit for $3 million after allegedly failing to provide applicants with an adverse action letter.
The class action lawsuit, which included around 64,500 plaintiffs, claims that Kmart violated the FCRA because it failed to notify job applicants after they were denied employment based on information contained in a background check. Under the FCRA, applicants must be notified when a potential employer takes adverse action based on information reviewed from a Consumer Reporting Agency (CRA). In Pitt v. K-Mart Corp., the lead plaintiff filed suit alleging Kmart failed to follow required practices in connection with its use of background checks in the hiring process in violation of 15 U.S.C. § 1681 et seq. Case No. 11-cv-00697, U.S. District Court for the Eastern District of Virginia. Pitt argued that his misdemeanor convictions from 2002 included in the background report reviewed by Kmart took place prior to the time frame listed on the employment application which indicated it would report convictions from the preceding seven years only. Pitt was not notified by Kmart in writing that he was not hired based on this information and therefore was unable to dispute the inaccuracy with the credit reporting agency(s) that were still reporting this information after the reporting period passed.
The lawsuit contends that Kmart’s violation of the act was two-fold….first, that Kmart failed to provide the applicant(s) with the most current version of the FCRA Summary of Rights before taking adverse action that was based on the background check, and second that Kmart failed to provide the applicants with a copy of the applicable background check far enough in advance of taking adverse action against the applicant so that he or she had an opportunity to dispute any inaccurate information reported.
Kmart has denied any and all allegations of wrongdoing claimed in the lawsuit and argued that its conduct was in compliance with the FCRA. Despite these denials, Kmart has decided it is in its best interest to settle the lawsuit to avoid the expense and risk of uncertainty in continuing the litigation.