Kohl’s Faces a Class Action Lawsuit Alleging Several Violations of the Fair Credit Reporting Act

Edgar M. Rivera, Esq.

On June 10, 2015, in Coleman v. Kohl’s Department Stores Inc., Plaintiff Kaynie Coleman filed a class action in the Northern District of California against Kohl’s, alleging that Kohl’s violated the Fair Credit Reporting Act (“FCRA”) by unlawfully acquiring consumer reports and investigative consumer reports to conduct background checks on perspective, current and former employees, and used that information in connection with the hiring process.

In the employment context, the FCRA provides protection for prospective employees against the misuse and misreporting of credit information.  The FCRA requires employers to follow specific procedures when they use consumer-reporting agencies to obtain “consumer reports” or “investigative consumer reports” on job applicants for employment purposes.  The FCRA defines a “consumer report” as “any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living,” which may include driving records, employment verifications, education verifications, criminal records.  The most common employer violations of the FCRA are: (i) failing to provide a consent form before obtaining a report; (ii) failing to provide stand-alone disclosure and consent forms, i.e., a “separate, clear and conspicuous document”; (iii) failing to provide the applicant with a copy of the summary of rights under the FCRA; (iv) basing hiring decisions on non-conviction criminal data older than seven years; and (v) failing to follow proper pre-adverse and adverse action steps when denying employment based on information contained in a consumer report, for example, providing a copy of the report.

The gravamen of the complaint against Kohl’s is that it committed a variety of statutory violations, including: (i) failure to make a proper disclosure; (ii) failure to obtain proper authorization; and (iii) failure to provide a summary of rights prior to procuring a consumer report.  Kohl’s moved to dismiss the complaint for failing to state a claim, as well as on statute of limitations grounds.  The plaintiff argued that Kohl’s motion ignored well-established case law holding that an employer violate the FCRA by including a liability release in a disclosure document.  Similar motions to dismiss were denied in other FCRA cases, including Avila v. NOW Healhth Group Inc., in the Northern District of Illinois, and in Speer v. Whole Food Mkt. Group, Inc., in the Middle District of Florida.  The plaintiff further argued that Kohl’s erroneously started the statute of limitation period on the date Coleman signed the disclosure/release form; rather, the period actually began on the date Kohl’s procured the report, so the claims are timely.

At a hearing on September 23, 2015, before U.S. Magistrate Judge Joseph, Judge Spiro implied that he did not believe the plaintiff’s claims were propitious, stating, “So if the only thing [Kohl’s] presented was the second page, the disclosure, that would comply with the statute?”  The plaintiff’s attorney, Brandon Hill of Wenzel Fenton Cabassa PA responded that it would, stating, “The release isn’t unlawful in itself, just when presented with the other document.”  Judge Spiro replied, “Really, where’s the case that says that? They can read the package. … I gotta say, this makes no sense whatsoever.”  Attorney Hill read the relevant portion of the FCRA, explaining that because Kohl’s notification was combined with other materials, it was not “separate, clear, and conspicuous.” Judge Spiro was not impressed, simply replying, “That argument is ridiculous.”  Without ruling on the motion, on September 30, 2015, the court set a case management scheduling order to proceed with the litigation.

Kohl’s joins a growing number of similar large-scale FCRA class action lawsuits, including actions against such corporations as Sears, Aerotek, Lowe’s, Swift Transportation, and Whole Foods.

If you believe an employer has unlawfully taken adverse action against you on the basis of a background check, please contact The Harman Firm, LLP.