Michael Helfand

There is a specific law that says how and when an employer or potential employer can do a background check on you. The law also says what the employer can and can’t do with the information it gathers. Several large employers have recently been sued for violating this law, prompting multi-million dollar settlements with the employees and potential employees who were affected.

The law is called the Fair Credit Reporting Act, or FCRA. The rules on background checks apply to job applicants and current employees. There are a couple of important aspects to this law. One is that you must be given notice of any background check. Another important aspect is that the employer can’t penalize you for what the report contains without taking some very specific steps. The law protects applicants and employees when it comes to criminal background checks as well as consumer credit checks.

Under FCRA, a job applicant or employee must consent to a background check, in writing. In order for this to happen, the applicant or employee must be given a written disclosure. This disclosure is required to be “clear and conspicuous,” which means, for example, that it shouldn’t be buried in an employment application that contains a lot of extra or irrelevant information.

Next, when a background check is complete, the employer can’t simply fire or refuse to hire that person based on what they find. The employer must first provide the applicant or employee with a copy of the report in question and must tell the applicant or employee that they intend to take adverse action based on that report. And the employer must give the applicant or employee reasonable time to dispute the report. These are very specific steps that are often skipped.

The most obvious type of adverse action in these situations is firing an employee or refusing to hire an applicant based on a report. However, the law protects employees against other types of adverse action, such as getting a demotion or being denied a promotion based on what comes back in a report.

Employers who violate FCRA can be sued for damages, including actual damages, punitive damages and statutory penalties of up to $1,000 per violation. Employees in some cases have joined together in class action lawsuits, in which they sue their employer as a group for FCRA violations. Recent lawsuits have involved Michaels, Whole Foods Market Group Inc., Publix Super Markets Inc., and Dollar General Corp.

If you have questions about a background check that was performed without your consent, or a situation in which you suffered adverse employment action after a background check without getting notice or a chance to dispute the report, feel free to give us a call at (800) 517-1614. We’ll talk to anyone for free about potential legal issues, including whether they might have a claim against their employer for violating this law.  There is no fee for the attorneys we recommend who take on these cases unless they are successful.  And we consider these cases anywhere in the United States.

Corporate fraud seems to be everywhere these days. The story is often the same – bad decisions by a few executives that affect the lives of many. Corporate fraud not only endangers the health of the corporation itself but also impacts employees, clients and anyone who has bought stock in the corporation as an investor.

People who have been wronged often use the law to try and recover what they have lost. In the case of investors, they can sue for securities fraud if they were misled or outright lied to and relied on that misinformation when making their investment. One example is when a corporation puts out misleading financial statements that make them look better than they actually are. People invest, thinking the company looks financially healthy, but then the truth comes out and the stock prices take a hit. And shareholders lose money because they relied on that false information.

These cases are generally class actions, which means that a group of plaintiffs sues together because they have similar claims. A lead plaintiff is responsible for representing the entire class. The court appoints this lead plaintiff and that plaintiff’s lawyer acts as the main attorney for the case. The lead plaintiff might be the investor with the largest investment, or they might be chosen for another reason. Not every investor is automatically part of the class. There’s usually a class period – a specific time period – that the lawsuit covers.

Not all cases are based on bad financial statements. There was a recent Illinois case against a company that ran psychiatric hospitals, including one in Forest Park and one in Streamwood. It had come out that patients in these two facilities were being harmed. One report said that mentally disabled children were sexually assaulted over the course of several years. The investors’ lawsuit said that the company made false and misleading statements about the quality of care provided at its facilities. In other words, the company hid these less-than-favorable incidents and as a result the stock price was inflated. Investors, including large investors such as pension funds, lost millions of dollars. There is a tentative settlement agreement for $65 million, which still has to be approved by the court.

Another recent case is against Halliburton. Plaintiffs claim that the company misled investors, exaggerated the positive effects of a merger and lied about its exposure to asbestos liability. They say that the stock price took a big hit when the truth came out. Defendants can win these cases by trying to prove that the fraud did not affect the stock price.

You can be a plaintiff in a securities fraud case if you bought stock during the time period in question, even if you didn’t specifically rely on the company’s financial statements. Not everyone reads corporate reports, but they do look at stock prices. Courts have said, generally speaking, that relying on the stock prices is enough.  If you are looking for an attorney, contact us at any time.