LexisNexis cannot dismiss claims that its background-check service violates the Fair Credit Reporting Act, a federal judge ruled.
LexisNexis Risk & Information Analytics Group offers a service called Esteem that informs employers when job applicants have a history of theft or fraud.
Subscribing employers pay LexisNexis a fee in return for its background checks on current and potential employees. Members must also inform LexisNexis when their employees and customers are implicated in new theft incidents.
Subscribers can submit incident reports only if they referred the incident for criminal prosecution, or if the employee admits guilt.
If the employee admits guilt, that individual must make an "admission statement," consisting of a signed statement describing the incident and admitting guilt. When a subscriber requests information on a current employee or prospect, LexisNexis searches its system for the employee's personal information.
Once LexisNexis verifies a match, it assigns an "adjudication score." If the employee falls below a certain standard, the employee gets a "noncompetitive score."
Clients never receive a subject's admission statement, but LexisNexis does send them a report and the adjudication score.
The Fair Credit Reporting Act gives employees the right to review such reports before their employer can take adverse action.
As an additional service, LexisNexis sends these letters, known as "pre-adverse action letters," on employers' letterhead to employees or prospective employees who match their records.
The pre-adverse action letters LexisNexis sends out contain a copy of the report, but do not include a copy of the admission statement.
LexisNexis' pre-adverse action letters also include a disclaimer that the company "did not participate in any employment decision and will be unable to provide any specific reasons as to why the employer may choose to take an adverse employment action."
In a federal class action, Goode and Goodman said LexisNexis violated the Fair Credit Reporting Act by taking adverse action against them before providing them with a copy of their consumer reports.
They say LexisNexis takes an adverse action when it verifies an Esteem match and adjudicates them as noncompetitive, before sending pre-adverse action letters.
LexisNexis disputed this characterization in a motion to dismiss. It also argued that the employer is solely responsible for relaying the consumer report before taking adverse action.
As an agent for the employer, LexisNexis said it could not be held liable under the Fair Credit Reporting Act.
Another section of the FCRA requires consumer-reporting agency to clearly and accurately disclose all the information in a consumer's file upon request.
Goodman and Goode claim LexisNexis' refusal to turn over the admission statements in their files violated this provision.
LexisNexis argued that its interpretation of the law led it to believe it was required to turn over only the actual report, and nothing else.
Court Filing: http://www.courthousenews.com/2012/03/29/esteem.pdf