Walgreens Settles FCRA Class Action Lawsuit: Implications for Contractors

Background Screening | Industry Information | July 24, 2024

Walgreens recently settled a case alleging that the national drugstore chain violated the Federal Fair Credit Reporting Act (FCRA) by sending a disposition email too soon after job applicants received a copy of their background check. This message notified applicants that they were disqualified from employment based on the background check results. While Walgreens denies any wrongdoing, the case serves as a crucial reminder for businesses, including those working with contractors, to adhere to FCRA requirements.

Key Takeaways for Contractor Screening

The case highlights the importance of providing sufficient time between the Pre-Adverse Action Notice and the Adverse Action Notice. The FCRA does not specify a required time frame between these notices, but courts have generally settled on a “reasonable time,” often considered to be not less than 5 business days. This time allows the individual to review and respond to the information in their background report.

For businesses engaging contractors, the same principles apply. It’s essential to provide contractors with adequate notice and time to address any issues or inaccuracies in their background reports before taking any adverse action, such as disqualification from a contract or project.

Best Practices for Handling Adverse Actions

1. Provide Pre-Adverse Action Notice: Before taking any adverse action based on information in a background check, give the contractor a copy of the report and a summary of their rights under the FCRA. This step allows them to review the report and identify any inaccuracies.
2. Allow Time for Response: Ensure a reasonable period, typically at least 5 business days, between sending the Pre-Adverse Action Notice and making a final decision. This period is crucial for the contractor to contact you with any disputes or explanations.
   • a notice that includes a copy of the consumer report you relied on to make your decision; and
   • a copy of A Summary of Your Rights Under the Fair Credit Reporting Act, which the company that gave you the report should have given to you. 
   • Issue a Final Adverse Action Notice: If, after reviewing any response, you decide to proceed with an adverse action, provide the contractor with a final notice. Before you reject a job application, reassign or terminate an employee, deny a promotion, or take any other adverse employment action based on information in a consumer report, you must give the applicant or employee:
   • Giving the person the notice in advance gives the person the opportunity to review the report and tell you if it is correct.

Importance of Compliance and Fairness

Adhering to FCRA requirements is not just about legal compliance; it’s also about ensuring fairness and transparency in your contractor screening processes. Contractors, like employees, should have the opportunity to address any issues that may arise from background checks, especially given the possibility of errors in records or identification.

By providing clear communication and adequate time for contractors to respond, you can avoid potential legal issues and build a more trustworthy and transparent contracting process. It’s advisable to review your current procedures with legal counsel to ensure they align with the “reasonable time” standard and other FCRA requirements.

Ensuring that your processes are fair and compliant not only protects your business from legal risks but also fosters a more equitable environment for all contractors involved.

The Federal Trade Commission has provided some guidance for users of consumer reports: https://www.ftc.gov/business-guidance/resources/using-consumer-reports-what-employers-need-know. We have excerpted some of the information below.

After You Take an Adverse Action

If you take an adverse action based on information in a consumer report, you must give the applicant or employee a notice of that fact – orally, in writing, or electronically.