On January 7, 2015, Genesis Healthcare became one of the most recent companies to face a class action lawsuit under the FCRA based on its background check practices.  This lawsuit should serve as a reminder to companies to verify that their procedures for obtaining and using background checks comply with the FCRA’s disclosure and adverse action requirements.

According to the complaint, Genesis Healthcare obtains background check reports from a consumer reporting agency, which are used in making employment decisions.  When the consumer reporting agency generates the report, however, it does not simply transmit the report to Genesis Healthcare.  Like many employers, the complaint alleges that the consumer reporting agency adjudicates the consumer report using a predefined hiring criteria that Genesis Healthcare provides.

The Plaintiff claims that the manner in which the consumer reporting agency evaluates the consumer reports it generates for Genesis Healthcare constitutes instantaneous adverse action under the FCRA.  According to the complaint, when the consumer reporting agency adjudicates an applicant as “Does Not Meet Hiring Criteria,” this constitutes adverse action because Genesis Healthcare accepts this recommendation “without any independent investigation or exercise of discretion.”  Because the consumer reporting agency and Genesis Healthcare allegedly fail to send pre-adverse action letters and the accompanying documents prior to this adjudication, the Plaintiff claims that Genesis Healthcare violates the FCRA.

The theory Plaintiff advances in the Genesis Healthcare case has become increasingly popular among plaintiffs’ counsel in recent years.  Employers should verify that when using a consumer reporting agency in connection with their background check procedures, their processes comply with the Fair Credit Reporting Act.