Check It Out: Home Depot Becomes Latest Retailer Sued for Violations of the Fair Credit Reporting Act

Home Depot Inc. was recently slapped with a lawsuit in the United States District Court for the Northern District of Georgia, alleging that the behemoth retailer runs background checks on employees and job applicants without properly notifying them or providing copies of the reports before taking adverse action against them over the reports’ findings. Henderson v. The Home Depot, Inc., (N.D. Ga. Case No. 1:14-cv-02123). The lawsuit alleges that this practice is a violation of the federal Fair Credit Reporting Act (FCRA).

Lead plaintiff Trent Henderson alleges that he submitted an online application for a job at a Home Depot in Houston. After filling out his application, he was allegedly presented with an application confirmation page that required he agree to the terms and disclosures outlined on the page by clicking the “I Agree” button. Home Depot later allegedly called him for an interview and he submitted to a drug test. Home Depot allegedly then told him that he would not be receiving an offer of employment because of his background. The lawsuit alleges that after Home Depot ran a consumer report on Henderson as part of his application process, it saw something that it did not like and, without properly notifying Henderson or giving him a copy of the report, failed to hire him based on the findings in the report. The suit seeks class certification of all people who applied for employment with Home Depot on or after July 3, 2013, were subject to consumer reports, and were not properly informed of the reports. It also seeks to certify a class of all people who were faced with adverse employment actions without receiving the required notice and a copy of the report.

The FCRA is a federal law enforced by the Federal Trade Commission that regulates how consumer reporting agencies use certain types of information. Enacted in 1970 and substantially amended in the late 1990s and again in 2003, the FCRA, among other things, restricts who has access to sensitive credit, criminal background and motor vehicle information, and how that information can be used.

If an employer is going to use a report for employment purposes, the FCRA mandates that it must provide written notice to the applicant or employee and must obtain an applicant’s written permission before requesting a report about the individual from a so-called “consumer reporting agency.” If the employer intends to take adverse action against the applicant or employee based on information in the report, it must provide the person with a written pre-adverse action notice, with a copy of the report, and a notice of the person’s rights under the FCRA. The applicant or employee must be given a reasonable period of time (at least five days) to review the report and contest it if he or she wants to.

Then, if the employer follows through with the adverse action based on information in the report, it must give the applicant or employee notice to that effect, along with contact information for the consumer reporting agency, a statement that the agency did not make the decision to take the adverse action, and notice of the person’s right to dispute the information in the report.

Many states have mini-FCRA laws which impose different and more stringent requirements. Thus, employers should check the laws in the states in which they operate.

The FCRA is not the only trap that retailers and other employers must be cognizant of during the employment application process. We have previously reported on the trend of states and localities banning employers from seeking particular information on employment applications related to criminal convictions. In addition, many states have limited the rights of employers to consider credit information about employees and applicants. Several states also have laws that require certain language on application forms.