Avoid Background Check Class Actions With Arbitration Agreements

Companies are increasingly faced with class actions for alleged violations of one of the “big three” —the Telephone Consumer Protection Act (TCPA), Fair Debt Collection Practices Act (FDCPA), or the Fair Credit Reporting Act (FCRA). Although several thousand of these claims are filed each year, FCRA claims related to background checks is the only category that has grown since last year.

Background checks have become a matter of necessity for employers wanting to thoroughly vet job applicants. Most companies perform background checks on employees as part of the employment application or new hire process.  However, state and local ban-the-box laws are becoming more and more popular, which usually place some restrictions on when a background check can take place; typically not until after a conditional offer of employment has been extended to the applicant.

As mentioned above, FCRA class actions brought by employees or job applicants are on the rise. Recently the popular ridesharing company Lyft, was successful in convincing a federal judge to dismiss a FCRA class action and order the Plaintiff to submit his claims to arbitration. The Lyft driver who brought the suit accepted Lyft’s terms of service when he signed up to be a Lyft driver.  The terms of service included a mandatory arbitration agreement, which was used by Lyft to compel the matter to arbitration.

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Some employers wait until a candidate is selected for hiring before having the candidate sign an arbitration agreement. Oftentimes it is signed as part of the new hire paperwork. Employers are cautioned from doing this. To avoid FCRA class actions, employers should consider having all applicants sign an arbitration agreement, at least before or at the same time the background disclosure / authorization forms are given to the applicant. Having an arbitration agreement with a class action waiver will go a long ways in defending against a FCRA class action lawsuit.

This article was originally published on the Fisher Phillips blog.

Spencer is an associate in the Irvine, California office of Fisher Phillips. He is an aggressive litigator who has successfully represented clients in mediation, arbitration, in front of governmental agencies, as well as state and federal court proceedings. Spencer has special experience in the areas of wage and hour laws, employee compensation plans, laws regulating drug testing and background checks, and harassment/discrimination claims. 

Spencer has litigated numerous multi-plaintiff cases and class-action cases, including wage and hour claims, claims brought under the California Labor Code Private Attorneys General Act of 2004 (PAGA), the Fair Credit Reporting Act (FCRA) and analogous state laws, state and federal prevailing wage laws. 

Spencer has also successfully defended employers against cases brought by individual plaintiffs, including claims of wrongful termination, discrimination, harassment, and retaliation. Likewise, he has handled audits conducted by the Department of Labor Standards Enforcement (DLSE), the United States Department of Labor (DOL), and the Employment Development Department (EDD).

Additionally, Spencer provides preventive advice and training to clients on various personnel issues, including background checks, drug testing, employee classification issues, strategic restructuring and layoffs, disciplinary issues, termination, medical leaves, FMLA/CFRA compliance, employee compensation agreements, and general employment policies and procedures.


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