Magallon v. Robert Half International, Inc. Class Action Settlement Highlights Importance of FCRA Compliance in Background Checks
- myHRscreens Expert
- Jul 24
- 3 min read
The recent class action settlement involving staffing giant Robert Half International, Inc. underscores the critical importance of the Fair Credit Reporting Act (FCRA) compliance during pre-employment background checks. It is imperative that employers and staffing agencies must ensure they follow proper adverse and pre-adverse action procedures to avoid significant legal and financial consequences.
Table of Contents
Overview of the Magallon v. Robert Half International, Inc. Case
The class action lawsuit, Magallon v. Robert Half International, Inc., was filed in 2013 and involved allegations that the staffing firm violated the FCRA by failing to follow proper pre-adverse action procedures. Specifically, the plaintiffs claimed that Robert Half internally determined certain job candidates were “not placeable” based on background check findings before providing them with the legally required pre-adverse action notice.
The lawsuit alleged that this practice denied candidates the opportunity to review and dispute the accuracy of the background information that influenced the company’s decision. This is a key requirement under the FCRA, which mandates that employers provide both a copy of the consumer report and a summary of rights before taking adverse employment action.
After over a decade of litigation, it was never definitively decided whether this conduct qualified as premature “adverse action” under the FCRA. Instead, the court ruled that this question would need to be resolved by a jury. Robert Half likely chose to settle to avoid the cost and potential risk associated with the scheduled three-week jury trial. The settlement, valued at approximately $4.38 million, will provide compensation to more than 2,300 affected individuals, with each claimant expected to receive roughly $956.
The case highlights the potential costs of non-compliance and the importance of having structured policies in place when using background checks for hiring decisions.
Understanding FCRA Adverse and Pre-Adverse Action
Pre-adverse action occurs when an employer intends to take an employment-related action based on information found in a background check- but, they must first notify the candidate. This notification gives the individual the opportunity to review the report and dispute any inaccuracies before the decision becomes final.
Adverse action refers to the final decision- such as rescinding a job offer, declining to hire or terminating employment- after the pre-adverse notice period has passed and the candidate has had the chance to respond.
Failure to follow these steps, as seen in the Magallon v. Robert Half International, Inc. case, can result in substantial legal exposure under the FCRA, as well as substantial financial loss.
FCRA Compliance and Employer Responsibilities
It is imperative employers following the prescribed Adverse Action process. The federal process requires the following three steps.
Providing a Pre-Adverse Action Notice: Before making a final decision, the employer must provide the applicant with a pre-adverse action notice. This notice includes a copy of the consumer report and a summary of the applicant’s rights under the FCRA.
Waiting Period: After issuing the notice, the employer must allow a reasonable amount of time (typically at least five business days) for the applicant to review the report and dispute any inaccuracies.
Final Decision: If the employer decides to proceed with the adverse action, it must then send an adverse action notice to the applicant, explaining the decision and providing information on the consumer reporting agency that supplied the report.
In addition to federal requirements, some states and municipalities have additional regulations regarding background checks and the pre-adverse action process. Employers must be aware of and comply with both federal, state and local municipality laws.
Best Practices for Employers
To maintain compliance and reduce risk, employers should:
Establish a clear, documented background screening policy.
Use standardized pre-adverse and adverse action notices.
Provide candidates with sufficient time (typically five business days) to dispute findings.
Work with an experienced background screening provider, like MyHRScreens, to ensure accurate reports and compliant procedures.
How MyHRScreens Can Help
MyHRScreens delivers a robust and compliant solution for employers navigating the complex adverse action requirements outlined by the FCRA, as well as staffing industry and PEO-specific employee screening. Our streamlined, user-friendly process helps organizations remain aligned with both federal and state regulations while simplifying each step of the adverse action workflow.
Through our Greenlight workflow hub, employers can easily issue pre-adverse action notices, track and manage the mandatory waiting periods and finalize adverse action notices with confidence. This efficient approach minimizes the risk of costly non-compliance while promoting fairness and transparency throughout the hiring process.
With MyHRScreens, employers gain the tools and support needed to make well-informed hiring decisions, protect applicant rights and maintain best practices in every stage of recruitment. To learn more about our adverse action solutions, contact us at 866-899-8970 ext. 118, email klewis@myhrscreens.com, or schedule a convenient consultation below:
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