Uber faces a class action lawsuit over use of credit reports during background checks

By Michael Carney , written on November 28, 2014

From The News Desk

Uber’s legal problems are piling up. The company is fighting for regulatory clearance to operate in numerous jurisdictions, including, most recently, Nevada. At the same time, it’s being sued by the National Federation of the Blind for discrimination against blind people and service dogs. Another lawsuit accuses the company of charging bogus surcharges and tolls to passengers traveling to and from Boston’s Logan Airport.

As of Monday, the company can add one more fight to that list, as it faces a class action lawsuit brought in a San Francisco court by former Boston driver Abdul Kadir Mohamed who accuses the company of violating the Fair Credit Reporting Act (FCRA).

In his complaint, embedded in full below, Mohamed accuses Uber of failing to notify him of, and allowing him to respond to, problems with his credit report before denying his application to drive for the company. As an existing Uber Black driver, Mohamed claims that he decided to switch to UberX and in the process spent $25,000 to purchase a new vehicle at the company’s request. It was shortly after making this purchase and beginning driving under the company’s ride-hailing platform that Uber turned off his account and sent him an email explaining that his termination was related, in part, to information obtained via his credit report.

The lawsuit claims that the company “deprived him of his livelihood and left him without an alternative means of providing for his family, including his seven children.” It’s unclear based on the suit what exactly were the issues with the credit report other than that it “indicated a minor criminal record,” which the suit explains away as something that “stems from his seven children receiving much-needed Medicaid benefits.”

The use of credit reports in making hiring decisions is not unique to Uber, but the practice has been a controversial one, particularly in the wake of the 2008 recession and national foreclosure crisis. In this case, however, Uber could likely have learned the same information about Mohamed via a criminal background check – although the company hasn’t always been so thorough in that regard.

Uber isn’t being accused of misusing credit reports in its hiring process. Rather, it’s being accused of violating California and Massachusetts laws requiring any employer to alert prospective employees – or in Uber’s case, independent contractors – about issues arising out of its review of these reports. Whether the non-employee classification of the company’s drivers will have any bearing on this case remains to be seen.

Uber wasn’t reviewing the credit reports itself. Instead, it contracted that work out to a firm by the name of Hirease, which runs background checks on its behalf. According to the lawsuit, Uber and Hirease, which is also a plaintiff, failed “to provide pre-adverse action notices and a reasonable opportunity to dispute information.” Mohamed claims he received an email “in the middle of night” notifying him he had been rejected. This same email stated that he had received a copy of his consumer report and his rights under the FCRA, neither of which were the case.

An email posted to an Uber driver subreddit several months ago seems to give a glimpse into this communication, reading:

Dear Consumer:

In reference to your proposal to enter an independent contractor relationship,[Uber subsidiary] Rasier Providence, RI regrets to inform you that they are unable to further consider your proposal at this time. The decision, in part, is the result of information obtained through the Consumer Reporting Agency identified below.

In accordance with the Fair Credit Reporting Act, you have previously received a copy of this information and a copy of your rights under the Act.  You have the right to obtain within 60 days of receipt of this letter a free copy of your consumer report from the Consumer Reporting Agency as identified below, which complies and maintains files on consumers on a nationwide basis.

You have the right to dispute any information contained in the report that you believe may be inaccurate or incomplete by contacting Hirease or, if the report is a credit report, by contacting the credit bureau that furnished the report. According to the complaint, Hirease offers a service in which it automatically sends candidates a package containing adverse action notices to an applicant and a copy of the consumer report. Thus, it states, “Uber and Rasier could have easily and cost-effectively complied with the mandates of the FCRA, CCRAA, and MCRA by purchasing such services, but failed to do so.”

The lawsuit seeks punitive damages of up to $5,000 per Fair Credit Reporting Act violation.

As Uber grows in size, and valuation, it becomes an increasingly large target for lawsuits. But looking beyond its attractive deep pockets, the company seems to be making life harder on itself by cutting corners and, in this case, violating simple employment practices.

View the full class action complaint below: