Lawyers for Uber and Lyft might be sharing a ride to the same courtroom. The rival car-hailing firms, both based in San Francisco, are being sued by the same driver, who is accusing them of illegally obtaining credit reports and background checks while failing to follow proper disclosure and authorization procedures.
In two nearly identical legal complaints filed Monday, Michael Nokchan, who worked as a driver for Uber Technologies Inc. and Lyft Inc., said the alleged violations took place after he applied for jobs with the firms. In the complaints, Nokchan admitted he signed a document authorizing the companies to obtain background checks, but he said the authorizations were unclear and buried with other extraneous information. Under the Fair Credit Reporting Act, it’s illegal for companies to obtain background checks on prospective employees unless a clear disclosure is made in a stand-alone document.
As the lawsuit notes, the U.S. Federal Trade Commission has stated that background-check disclosures “may not be part of an employment application because the language [is] intended to ensure that it appears conspicuously in a document not encumbered by any other information. The reason for requiring that the disclosure be in a stand-alone document is to prevent consumers from being distracted by other information side-by-side within the disclosure.”
A spokeswoman for Lyft said the lawsuit is “without merit and we look forward to resolving it quickly and effectively.”
A spokesperson for Uber did not immediately respond to a request for comment.
Nokchan’s lawyer is seeking class-action status for both suits, alleging that the companies routinely conduct background checks on “prospective, current and former employees” and use the information in connection with their hiring process “without complying with the law.”
In Uber’s case, Monday’s suit marks at least the second time it has been sued over background checks. The company, along with its subsidiary Rasier LLC, was sued in November by a Boston cabdriver who said he was fired over information found on his background report but was not given a chance to explain the contents of the report, as the FCRA allows.
The Fair Credit Reporting Act, with its maze of confusing consent and disclosure requirements, has become lush ground for lawsuits in recent years. In a blog post last year, James Randisi, an expert in background investigations, said companies have to take extra special precautions not to become “low-hanging fruit” for law firms looking for an easy score. “Plaintiff lawyers are discovering a fertile area for lawsuits,” Randisi wrote. “The area of attack is a company’s lack of compliance with required consent and disclosures in the FCRA as it relates to the hiring process.”