“I Did It…But Don’t Tell!” Rejected Job Applicant Says Background Report Should Have Excluded his Admission of Fraud against Former Employer

2 minute read | February.13.2014

Last week, a plaintiff sued the creator and the operator of the Esteem criminal background database—LexisNexis and First Advantage—alleging that they gave prohibited information to potential employers, which ultimately barred him from getting a job. Tsang v. LexisNexis Risk Solutions, Inc., No. CV-14-0493 (N.D. Cal. Jan. 31, 2014).

Tsang explains in his complaint that his former employer investigated and ultimately terminated him for refund fraud after he admitted guilt. He claims, however, that he was coerced into signing an admission statement, and he was never formally convicted of the crime. Nevertheless, his forced admission made its way into the Esteem database and was ultimately reported to prospective employers.

Tsang claims that reporting the admission in the Esteem database violated the federal Fair Credit Reporting Act (“FRCA”).  FCRA prohibits consumer reporting agencies from making an inquiry about an individual when preparing a background report where the same inquiry by a prospective employer would violate a state equal employment opportunity law or regulation.  See 15 U.S.C. § 1681d(d)(2). California Labor Code § 432.7 and California Code of Regulations § 7287.4 prohibit public and private employers from seeking from any source, or considering as a factor in determining any condition of employment, information concerning any “arrest or detention that did not result in a conviction.”

Tsang claims that, because he was never convicted of a crime, the Esteem database should not have included any information related to the refund fraud—despite his admission of guilt. Tsang also seeks to represent a class of others who applied for employment in California and were subject to an Esteem report that included details for a theft or other alleged crime but did not result in conviction. Tsang’s suit follows two others that he filed in November against employers Dollar General and T.J. Maxx who allegedly rejected him for employment after reviewing the Esteem report.

As we have previously reported, employers’ use of criminal background checks in making employment decisions has been the subject of increased scrutiny and lawmaking. Though it remains to be seen whether the courts will accept Tsang’s theories of liability, these lawsuits are yet another reminder to employers to carefully review their existing background check policies.