April 2011

By: Nancy E. Joerg, Esq.

A huge and historic class action settlement ($5.9 million!) has been granted preliminary approval by a Federal Judge so that lawsuits may be resolved [involving alleged violations of the Fair Credit Reporting Act (FCRA)]. These lawsuits were filed on behalf of workers and job applicants against sister companies First Transit and First Student Bus Company.

In Hunter, et al v. First Transit,, Inc., Case Nos. 09-CV-6178 & 10-CV-7002 (N.D. Ill. Mar. 23, 2011), Federal Judge Rebecca Pallmeyer sitting in the United States District Court for the Northern District of Illinois granted preliminary approval of the settlement. A final fairness hearing is scheduled for August 1, 2011.

This national class action lawsuit has captured national headlines. It alleges that sister companies First Student Bus Company and First Transit both obtained criminal background checks about drivers and job applicants of First Transit (which employs mass-transit drivers) and First Student (which employs school bus drivers) without their written authorization and in some cases denied them jobs without providing them a copy of their criminal background report prior to taking the adverse action, in violation of the Fair Credit Reporting Act (FCRA).

STRUCTURE OF SETTLEMENT: The class action settlement is structured so that:

• each worker terminated (by either company) based on an unauthorized criminal background check report could receive $2,000 to $4,000;
• each worker terminated (by either company) based on a criminal background check without first receiving a copy of that report will receive $750; and
• each worker who was the subject of an unauthorized criminal background report, but who continued to work for either company, likely will receive between $150 and $300.

Under the FCRA, employers (like this unfortunate bus company) are subject to civil liability for negligent or willful non-compliance. The overall settlement was for $5.9 million, with $4.3 million going to the class action and the court awarding an additional $1.6 million for court costs and attorneys fees.

A spokeswoman for the law firm who filed the lawsuit, Hughes Socol Piers Resnick & Dym of Chicago, said the settlement of these class action lawsuits was the largest ever involving employment-related Fair Credit Reporting Act claims. Workers will be required to complete claim forms in order to receive their money from the settlement.

EMPLOYERS MUST COMPLY WITH FCRA REQUIREMENTS: Under the FCRA, employers must comply with detailed requirements before the employer can properly obtain a background report (consumer report) about an applicant or employee, and if it intends to take action in whole or in part based on information in a background report. Employers are legally required to notify consumers (i.e., job applicants in this case) of any adverse actions (i.e., failure to hire, in this case) as a result of a background check and to give the job applicant a reasonable and fair opportunity to dispute the accuracy of the reported information. The class action lawsuits sought monetary damages for all employees summarily dismissed and all applicants similarly refused employment on the basis of a background check.

This case highlights that obtaining background checks is highly technical and that employers and background firms need to pay strict attention to all the legal rules under the FCRA.

LABOR UNIONS WERE INVOLVED: Yes, there were labor unions behind these lawsuits! According to the press release about the initial suit, the largest labor organization representing transit workers in the United States filed these two separate class actions in federal district court in Illinois.

ADVICE FOR EMPLOYERS: Employers should carefully note that the FCRA requires that all background checks be conducted with consent and that in the case an adverse employment action occurred as a result of a background check, the applicant is legally entitled to certain notifications including a copy of the report. This case (and its enormous settlement) emphasizes the importance of employers ensuring compliance with the FCRA for employment screening. Employers also need to be aware of any applicable state laws.

Questions or concerns? Call Attorney Nancy E. Joerg of Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.