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Whole Foods and the fair credit reporting act -- "It's not easy being green"

Russ Samson Iowa Employment & Labor Law Dickinson Law Des Moines Iowa

Posted on 04/07/2015 at 03:48 PM by Russell Samson

In a recent survey, over 90% of employees at Whole Foods, Inc. reported that the company had great bosses, a great atmosphere, great rewards and great communications.  The employee rankings were high enough to land Whole Foods 55th on Fortunes 2015 list of the 100 best companies to work for.  But there are indications that, like most companies, there are some “disgruntled” workers. In fact, Whole Foods was recently hit with a class-action lawsuit, which alleges that during the hiring process, in conjunction with background checks the company intended to run, the company used a consent form that violated the Fair Credit Reporting Act (“FCRA”). Under the FCRA, employers are required to take a series of mandated steps when seeking to obtain, and then when using, consumer reports to make employment decisions such as hiring (including pre-employment background checks), promotions, reassignment, and retention.  Among other requirements, the FCRA requires that an employer not procure a consumer report for employment purposes unless:

  • a written, “clear and conspicuous” disclosure has been made to the applicant or employee that a “consumer report” may be obtained;
  • the employer must have the written authorization from the applicant or employee to obtain a “consumer report;”
  • the disclosure must be made before, and the written authorization must be obtained before,  the “consumer report” is obtained by the employer;
  • the disclosure and the authorization must be in a document that consists “solely” of that information

In the class-action lawsuit filed against Whole Foods – Speer v. Whole Food Market Group, Inc., Case No: 8:14-cv-3035-T-26TBM (M.D. Fla.) – the plaintiffs are alleging, among other things, that Whole Foods obtained a consumer report as part of the hiring process without complying with FCRA’s requirement that “the disclosure and the authorization be in a document that consists ‘solely’ of that information.” According to the lawsuit, applicants must first read and sign two forms, a “Disclosure Statement” and the “Consent and Release of Information.”  The consent form provides in relevant part: I further understand and authorize [Whole Foods] or those authorized by them to procure a consumer report on me as part of a process of consideration as an employee . . . I release all parties from liability for any damages which may result from the disclosure of any information outlined herein.  [Bold added for emphasis.] The plaintiffs in Speer are not challenging the validity or the effectiveness of the one-sentence release quoted above.  Rather they allege that the consent form is both an authorization to procure a consumer report and a release, and that combining the two violates that the FCRA’s requirement that “the disclosure and the authorization must be in a document that consists ‘solely’ of that information.” So why should this matter to Iowa employers?  The answer is relatively simple:  if an employer violates the FCRA, it may be liable for statutory damages, which can range from not less than $100.00 to no more than $1,000.00 per applicant, as well as punitive damages, and “costs of the action together with reasonable attorney’s fees as determined by the court.”  15 U.S. Code § 1681n. The individual damages may appear to be relatively minor.  However, for an organization like Whole Foods with – according to the Fortune article -- some 422 locations, and 76,726 employees around the country, the costs can be substantial.  And my guess would be the attorney fees might prove to be substantial in and of themselves.  In the last several months, discount retail chain Dollar General and Publix Super Markets have together agreed to pay nearly $11 million to settle similar class actions brought against each.  The federal court in the Publix action approved the payment of $2,395,458.38 in attorneys’ fees and costs.  While the Dollar General settlement has not yet received final court approval, the negotiated agreement recites an application for attorney fees that do not exceed 25% of the $4,080,000.00 total settlement fund will not be contested by Dollar General. While it happens less and less, we hate to see “employment applications” which attempt to incorporate FCRA disclosure / authorizations into a general statement / release at the end of the document.  While it is OK to include general acknowledgements and agreements at the end of employment applications, using the employment application for FCRA disclosures and permissions doesn’t comply with FCRA and could expose an employer to this kind of lawsuit In Speer, at least there were separate documents.  However, rather than having a sentence releasing claims in some separate document, someone made the decision to include a single sentence release in the authorization required by the FCRA.  Without prejudging the outcome of the Speer ligation, we do know that Whole Foods – having failed to have the litigation dismissed at the outset on motion -- will be required to spend a substantial amount of money to defend itself. Iowa employers:  might it be time to have a competent professional review the documents you use in conjunction with your application process so that you are at least able to make an appropriate assessment as to whether you are at risk of violating the FCRA?

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