Labor & Employment Law Daily Wrap Up, CLASS ACTIONS—S.D.N.Y.: Employee denied certification in suit alleging employer improperly relied on consumer reports, (Feb 18, 2025)

By Ronald Miller, J.D.

The court agreed with the employer that the typicality requirement had not been satisfied due to the unique factual circumstances underlying the employee’s claim.

An employee was not entitled to certification of a Rule 23 class on claims that an employer improperly relied on consumer reports “to take adverse employment actions” against her without providing her a copy of the reports pursuant to the Fair Credit Reporting Act (FCRA), a federal district court in New York found. Because the employee failed to demonstrate by a preponderance of the evidence that the Rule 23(a) requirement of typicality or the Rule 23(b)(3) requirements of predominance and superiority had been satisfied, the employee’s motion for class certification was denied (Nguyen-Wilhite v. Tapestry, Inc., No. 1:23-cv-03339 (JLR) (S.D.N.Y. Feb. 14, 2025)).

Background checks. Tapestry operates retail stores throughout the United States for several brands, including Coach. The company “conduct[s] background checks on all applicants for... employment,” which entails “verifying information in a candidate’s application and running criminal checks.” After an applicant is “provided with an offer and... the offer is accepted,” Tapestry will initiate a background check with the applicant’s consent.

Since 2018, these background checks have been conducted by a vendor, First Advantage Background Services Corp. Tapestry supplies First Advantage with a matrix of hiring criteria for each element of a background check—such as criminal history—to inform First Advantage when it should flag an applicant’s report for further review by Tapestry. After a background check is completed, First Advantage will mark each element of the report as “pass” if Tapestry’s hiring criteria are met, or “decisional” if they are not.

“Decisional” flags. If there are “decisional” flags on an applicant’s report, Tapestry will review the report to confirm whether the applicant satisfies Tapestry’s hiring criteria. If those criteria are not met, Tapestry will mark the background check as “on hold” in the applicant’s profile, which triggers an “automated process with First Advantage,” and “tells the store that they cannot move forward with the applicant [or] release that position to someone else.”

When the “on hold” process is initiated, First Advantage will send the applicant a “pre-adverse letter,” which notifies the applicant that Tapestry “has made a preliminary decision to rescind their conditional offer of employment” based on the results of the background check, encloses a copy of the report and a summary of rights under the FCRA, and outlines a process for the applicant to dispute the accuracy of the report within five business days.

If the applicant timely lodges a dispute with First Advantage, Tapestry receives an email notification and directs the relevant store to “save[] [a position] for that applicant to allow them to go through the dispute process.” If the dispute is successful the background check... clear[s],” and Tapestry will change the applicant’s background-check status from “on hold” to “eligible.” If, after five business days, the applicant has not successfully “disputed the information that was used to determine their eligibility,... First Advantage will automatically send [an] adverse letter” to the applicant and change the applicant’s background-check status from “on hold” to “ineligible.”

Theft conviction. The employee began working at a Coach store in March 2022, before resigning in July 2022 because she was moving away from the area. In mid-November 2022, she reapplied for a sales position at another Coach store, and was verbally offered the job. On November 17, 2022, the employee authorized First Advantage to conduct a background check to determine her employment eligibility. On November 18, 2022, Tapestry, “conditional[ly] clear[ed]” the employee to commence employment while the background check was pending.

Thereafter, the employee’s background check indicated that she had been convicted of petty theft. When she arrived for her shift later that day, she was informed that she “had to go home” because her background report indicated a theft conviction.

After confirming that the employee was advised that her background check did not clear, Tapestry changed her status from “decisional” to “on hold,” which “automatically trigger[ed] a pre-adverse letter to be sent [to Plaintiff] from the [First Advantage] system.”

Report disputed. On December 2, 2022, the employee informed the store manager that she had initiated a dispute. First Advantage did not accurately mark her dispute in the system. Therefore, on December 6, 2022, the employee was sent an adverse letter informing her that Tapestry had rescinded her “conditional offer of employment” based on the information contained in her report.

At some point, First Advantage corrected Plaintiff’s report to remove the criminal conviction, but Tapestry “did [not] receive any notification in December of 2022 that the employee’s report had been revised.”

FCRA notification. On February 17, 2023, the employee initiated her lawsuit. Her complaint alleged that Tapestry routinely relies on consumer background reports “to take adverse employment actions” against job applicants and current employees without first providing those individuals with “sufficient and timely notification and a copy of the report and a summary of rights” as required by Section 1681b(b)(3) of the FCRA.

The employee sought certification of a Rule 23(b)(3) class comprising all persons for whom Tapestry obtained a background check for employment purposes from February 17, 2018 until the date of the court’s class certification order, for whom the background check included a “‘decisional’ score,” and for whom “(3) Tapestry applied an ‘On Hold’ status following internal adjudication of the background check.”

The court addressed the four requirements of Rule 23(a) and the two requirements of Rule 23(b)(3). The court found that the employee had not satisfied the requirements of typicality, predominance, or superiority.

Rule 23(a) requirements. Tapestry admitted that within the proposed class period, it caused pre-adverse action letters to be sent to at least 105 “On Hold” applicants based on information contained in those applicants’ background reports. Because the employee had shown by a preponderance of the evidence that the class contained more than 40 members, the court found that the numerosity requirement had been satisfied.

Commonality. The employee proposed two common questions of law grounded in class members’ experience with “Tapestry’s common hiring practices”: (1) whether “placing them in a status [On Hold] that prevented them from working, being present in a store, or being paid” constitutes “adverse action” under the FCRA; and (2) whether “Tapestry’s conduct was willful.” The court disagreed with Tapestry’s contention that the employee had not satisfied the commonality requirement. The court found that both of the common questions of law that the employee proposed “are susceptible to classwide proof” because Tapestry has used a standardized process since 2018 to obtain consumer reports for all applicants to determine their employment eligibility.

Typicality. Typicality is satisfied when each class member’s claim arises from the same course of events and each class member makes similar legal arguments to prove the defendant’s liability. Here, the employee asserted that “[her] claims are typical of those of the class” because, as with “all of the proposed class members, Tapestry obtained a background report about plaintiff and used it to evaluate her eligibility for employment” and “took adverse employment action against [her] based on the background report” without providing the required notice.

The court agreed with Tapestry that the typicality requirement had not been satisfied due to the unique factual circumstances underlying the employee’s claim. In this case, the employee tried to equate a finding of “on hold” with a final determination that the candidate is “ineligible” and therefore an adverse action. However, the court did not find that internal decision by Tapestry to place an applicant “on hold,” without more, is an adverse action under the FCRA. Further, the employee had not identified even one other class member who was conditionally cleared to start working before being placed “on hold” due to a later-completed background check. Accordingly, the court found that the employee had not satisfied the typicality requirement.

Rule 23(b) requirements. The employee contended “common issues predominate” in this case because “[t]he central issue for each class member’s section 1681b(b)(3) claim is the same.” Tapestry countered that the predominance requirement had not been satisfied because the employee’s individual claim was dependent entirely on her individual experience and “departures from Tapestry’s lawful approach.”

The court concluded that because Tapestry’s general background-check policy does not, on its face, violate the FCRA, and because the employee had not identified other class members whose offers were rescinded after they conditionally began to work like her, the claims of other class members would depend on whether they experienced deviations from Tapestry’s standard procedures.

The employee also failed to show that there were any systematic deficiencies in Tapestry’s procedures that could be proved with “generalized evidence” on a classwide basis, such as evidence that First Advantage’s dispute process was futile or pretextual. Thus, the viability of the employee’s claim depended on individualized issues regarding departures from Tapestry’s usual procedures. Accordingly, the employee had not satisfied the predominance requirement.

The case is No. 1:23-cv-03339 (JLR).

Judge: Rochon, J.

Attorneys: James A. Francis (Francis Mailman Soumilas) for Huong Thu Nguyen-Wilhite. Jonathan Stoler (Sheppard Mullin Richter & Hampton) for Tapestry, Inc.

Companies: Tapestry, Inc.

Cases: ClassActions Privacy NewYorkNews