Judge OKs $5.9M settlement over fair credit act

September 8, 2011
By  Bethany Krajelis, Law Bulletin staff writer

A federal judge has approved a $5.9 million settlement in a class-action lawsuit over the Fair Credit Reporting Act (FCRA).

The settlement is believed to be the largest settlement involving employment-related FCRA claims ever, said Christopher J. Wilmes, an associate with Hughes, Socol, Piers, Resnick & Dym Ltd., who serves on the legal team representing the plaintiffs.

Wilmes said U.S. District Judge Rebecca R. Pallmeyer on Wednesday put her stamp of approval on the settlement, nearly two years after the original class-action complaint was filed against First Student Inc., a school bus service operator, in the U.S. District Court for the Central District of Illinois.

Filed by former employees of First Student, the lawsuit accused the company of violating FCRA when it obtained criminal background check reports about its employees without their authorization.

It further alleged that in some instances, the company used those reports to terminate employment without providing employees a copy of their reports as required by FCRA.

Wilmes said that lawsuit was consolidated with a separate suit that was filed in the U.S. District Court for the Northern District of Illinois and made the same claims against First Transit, which provides public sector transit services.

Both First Student and First Transit are units of FirstGroup America.

Wilmes said a settlement was reached after extensive mediation and without a looming trial date.

James A. McKenna, a partner at Jackson, Lewis LLP, represented both companies. He declined to comment, but did confirm the terms of the settlement.

Under the settlement, class members who complete a claim form are entitled to share $4.15 million. Wilmes said the rest of the $5.9 million settlement is earmarked for attorneys’ fees and costs associated with administering the settlement.

Wilmes said 156 employees who were fired by First Student or First Transit based on unauthorized criminal background check reports are entitled to receive about $1,850 each under the settlement.

Nearly 250 employees who were terminated based on the reports and without first receiving a copy of their report could get about $750, he said.

Wilmes said about 37,000 employees who were subjected to these background checks in violation of FCRA, but continued to work at First Student or First Transit, could receive anywhere between $53 to $269.

“This settlement agreement represents a great victory for the thousands of workers who had criminal background checks performed on them without their written authorization and who otherwise were not provided the procedural protections afforded by the Fair Credit Reporting Act,” he said.

Wilmes said this case presented an issue that “is going to be coming to the forefront a lot more as criminal background checks become less expensive and as employers become more obsessed with the background of their employees.”

He said employers should be more transparent about their use of background check reports and comply with FCRA, which among other provisions, requires employers to notify employees that a report may be obtained, to get written authorization to procure the report and to provide the report before taking any adverse action.

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