Allegations of LinkedIn Violating the Fair Credit Reporting Act


fair credit reporting act

LinkedIn may not enjoy this holiday season due to recent legal allegations it has grappled, and will continue to grapple, with.  Not long after it reached a $ 6 million settlement regarding unpaid wages to hundreds of employees, LinkedIn is now defending a new class action lawsuit alleging that its “Reference Search” service violates the Fair Credit Reporting Act (FCRA).

What is the Class Action Lawsuit About?:

The Plaintiffs’ Claim:

Four LinkedIn users have filed a class action lawsuit in the United States District Court in Northern California, captioned Sweet v. LinkedIn Corp.   The “Reference Search” service is only available to premium account holders.   The service identifies connections (people) in the premium account holder’s network who share a common past employer with the job applicant.   So, essentially, it organizes, cross-references and provides information to premium account holders about who might have some relevant information about the job applicant’s work at a prior employer.  The premium account holder can also send inMail to those identified common connections without notice to the job applicant.

The four named plaintiffs allege that they were denied jobs with prospective employers because those employers contacted other LinkedIn users identified by the “Reference Search” as having worked with them.  In their Complaint, the Plaintiffs admit that they do not know the date and timing of any Reference Search conducted by any prospective employer, nor do they know to whom the results of any Reference Search were given.  This is so because, according to Plaintiffs, LinkedIn does not disclose to its members when Reference Search reports are run.  Plaintiffs’ complaint, however, assumes that each of their prospective employers used the Reference Search service, and denied employment based on what they learned by talking with some of the mutual connections identified by the service.  As a result, Plaintiffs allege LinkedIn violated the FCRA.

The FCRA (in sum):

Under the FCRA, employers must provide to job applicants (and employees) a disclosure that a consumer report/background check will be performed, and the employer should obtain the individual’s authorization to proceed with the check.  Furthermore, the employer must provide notice to the individual if it will take adverse action (not hire the individual, for example), before the employer takes that action.  The FCRA also requires an employer to provide a post-adverse action notice as well.

Importantly, the FCRA requirements apply to employers who engage a Consumer Reporting Agency.  Thus, for example, if the employer’s own human resources personnel, or if the hiring manager, performs social media research on a job applicant, the FCRA does not apply to those actions.

What Can We Learn From This Case (so far):

This case will be interesting to keep an eye on to see how the legal issues evolve.  Plaintiffs will need to argue around some basic facts about LinkedIn, namely that: users voluntarily sign up for LinkedIn, voluntarily put as much (or as little) information on their LinkedIn profiles, voluntarily connect (or reject requests to connect) with others, and are reminded when signing up (and periodically) about their privacy settings and that the main function of LinkedIn is to “link” people and networks.  All of these facts weigh heavily against any type of FCRA violation.  This is particularly true because LinkedIn really appears to be a much quicker and more efficient way of doing what employers did before social media existed:  asking around the office to see if anyone knows the applicant, or worked at the same company as the applicant.  It does not compile mysterious or confidential credit report information, criminal background checks, bankruptcy information and the like that the FCRA was meant to focus on.

Ultimately, there are other potential pitfalls for using social media to research potential employees, including those identified here:  Employers Be Cautious Using Social Media To Screen Job Applicants.

Coincidentally, a more traditional FCRA case was just filed against Uber and Hirease, LLC (a company that performs background checks) also in the federal court in Northern California (Mohamed v. Uber Technologies Inc., et al.)  These two cases will be on similar litigation timelines and in the same U.S. District Court.  As a result, they should provide an excellent comparison of the issues as they play out with a more traditional Consumer Reporting Agency (Hirease, LLC) and with a company that will deny that it is a Consumer Reporting Agency (LinkedIn).  Both cases should be monitored closely.

Nearly $ 6 Million Settlement for Unpaid Wages:

Finally, the other case of note involves LinkedIn’s internal treatment of its own employees.  (Since this case does not directly focus on Social Media and Employment Law, only a short summary is provided here).  The U.S. Department of Labor and LinkedIn reached a settlement to provide 359 LinkedIn employees and former employees in California, Illinois, Nebraska and New York with unpaid wages and damages.  Essentially, the Labor Department claimed that LinkedIn failed to record and pay for all hours worked in a workweek, including overtime in violation of the Fair Labor Standards Act.  Thus, LinkedIn agreed to settle the claims and pay $ 3.35 million in overtime back wages and $ 2.51 million in damages.  According to the Labor Department, LinkedIn also agreed to provide compliance training and distribute its policy prohibiting off-the-clock work to all nonexempt employees and their managers; meet with managers of current affected employees to remind them that overtime work must be recorded and paid for; and remind employees of LinkedIn’s policy prohibiting retaliation against any employee who raises concerns about workplace issues.  To LinkedIn’s credit, Dr. David Weil, administrator of the Wage and Hour Division, noted that LinkedIn “has shown a great deal of integrity by fully cooperating with investigators and stepping up to the plate without hesitation to help make workers whole.”

What we can learn from this case:

Employers need to have clearly written policies about recording work time, particularly for nonexempt employees.  Then, employers must train their workforce to understand and comply with the policies.  Furthermore, employers can discourage (or prohibit) their employees from checking email, text messages, and doing work beyond their normal shift hours, without prior authorization and without proper time recording.  For more on this topic, please see this post titled “Employers:  More Employees With Personal Mobile Devices Means More Problems In The Workplace.”

Employees should be sure to record all time worked for the employer pursuant to the employer’s policies.  Failure to comply, may result in disciplinary action, including termination.  If an employee believes s/he has not been paid for all time work, it is typically wise to go to the company’s Human Resources department, a trusted supervisor, or manager to explain the situation and to get it rectified quickly and efficiently.  If still not satisfied with a resolution, employees can certainly contact (in the United States) the U.S. Department of Labor and/or the employees’ applicable state agency.

Information provided on this website is not legal advice and it does not create an attorney-client relationship, nor should you act on anything stated in this article without conferring with the Author or other legal counsel regarding your specific situation.

Maximize Social Business


India investigating Amazon for violating ecommerce laws


modiJust over a month after Amazon announced a whopping $ 2 billion investment into expanding its India ecommerce operations, India’s press is reporting that an arm of the Finance Ministry is investigating the company, along with Silicon Valley favorite Flipkart and other foreign-invested ecommerce outfits, for violating the country’s laws banning foreign direct investment in retail ecommerce.

In late July, Flipkart announced it had raised $ 1 billion from global venture capital firms, the second largest investment round in 2014 after Uber — followed a day later by Amazon’s $ 2 billion commitment to India.

Leaked word that India’s Enforcement Directorate of the Finance Ministry is investigating foreign investors in local commerce — initially prompted by India’s central bank — comes as a surprise, given the many pro-ecommerce signals floated by newly-elected ultranationalist leader Narendra Modi. The investigations may represent a political feint before Modi opens up commerce to foreigners — an unpopular policy that could be devastating for India’s local retail industry and supply chain — or perhaps it could be the first sign of local institutional pushback against Modi’s plans to open up to Amazon, eBay and other giants.

Last month, Pando reported on the potentially hugely disruptive politics of allowing Big Tech ecommerce into India’s nascent ecommerce markets. The previous center-left government led by the Congress Party rejected allowing FDI into India’s ecommerce in 2012, based on worries about the potential for catastrophic disruption in retail and small and medium sized enterprises. But that sort of disruption could completely remake India’s political economy in a way much more advantageous to the ultranationalist BJP Party and its base, including India’s billionaires and its tech industry

Modi and his BJP Party are popular among India’s techies, and with Silicon Valley heavyweights Google and Pierre Omidyar, among others. In June, shortly after Modi’s landslide election victory, Pando reported that Modi’s new government met with representatives from Big Tech giants Amazon, Google and eBay and others, to forge new laws allowing foreign investment in ecommerce, particularly in the B2C retail sector. Ebay has invested nearly $ 200 million in Snapdeal, Flipkart’s leading local rival.

We also reported on how Omidyar Network’s top man in India, Jayant Sinha, simultaneously held a secret second job working to elect the ultranationalist Modi and BJP Party since at least 2012. That year, Omidyar Network was accused by India’s intelligence chief of violating India’s national security interests by funding an NGO that secretly lobbied India lawmakers on foreign investment in retail and ecommerce.

Google and the Ford Foundation also funded the same NGO accused of illegally and secretly lobbying. The co-founder of the NGO, CV Madhukar, is now a director at Omidyar Network India Advisors.

Pierre Omidyar is the chairman and largest shareholder in eBay/PayPal.

As reported by Pando, India’s current laws banning foreign ownership in ecommerce and business-to-consumer retailing has led firms with foreign investors, like Flipkart and Snapdeal, to concoct almost comical schemes to get around the laws. Fake retail companies were set up by the owners of Flipkart and others, and then “sold” to their blood relatives; while their supposedly independent B2C offices were found to be located inside the B2B warehouses. We know this thanks to an amazing business-gonzo report in 2012 by India’s Businessworld.

Modi and Big Tech have been openly supportive of each other both before and after the elections, so it’s difficult to know exactly what or why the current investigations are happening. But India has long been a difficult market to crack, and resistance to allowing in potentially catastrophic ecommerce giants like Amazon and eBay is known to be strong.

According to the Economic Times, Amazon has not been officially given notice or charged with any wrongdoing; rather, the Economic Directorate “has sought information regarding Amazon’s business model and that it is studying e-tailer’s model [sic] of online marketplace in India.”

The newspaper also reports that the Enforcement Directorate found Flipkart guilty of violating foreign direct investment laws, and may be slapped with a fine soon.

Whether or not this is Modi woofing before announcing an unpopular open FDI policy in ecommerce, or real pushback from India’s bureaucracy, retailers and small and medium-sized enterprises is yet to be seen.