LinkedIn Lawsuit: Potential FCRA Violations Mean HR Might Need To Lawyer Up

When you’re a company with the size and scale of LinkedIn, you’ve basically got a big target on your back – and a long list of people out to get you. Or so it would seem from the flurry of lawsuits, most recently for violations of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681,et seq. (see embed below for full copy of the FCRA).

The issue at hand this time centers on LinkedIn’s “Search for References” functionality, a feature offered to all premium account holders and, it appears, to job applicants after they have directly applied for any position posted via LinkedIn’s “job postings” product.

In this potentially precedent setting class action lawsuit, filed October 9, 2014 in the Northern District of California, alleges that LinkedIn sold their reference functionality to prospective employers by marketing its ability to “obtain reports containing “Trusted References” for all job applicants who are members of LinkedIn.”

 

The class action lawsuit, filed in the Northern District of California on October 9, 2014, alleges that LinkedIn sold this functionality to prospective employers, marketing the ability to “obtain reports containing “Trusted References” for job applicants who are members of LinkedIn.”

In all actuality, the “reports” at issue in the lawsuit are nothing more than an aggregated list of people in the requestor’s network that worked at the same company as the subject user during the same time period.

The last page of the lawsuit provides a sample report:

Whether or not the above “reports” meet the minimum criteria to fit the definition of a Consumer Report under the FCRA is questionable, at bst. If the court, however, decides that LinkedIn is, in fact, acting as a Consumer Reporting Agency, and its “Search for References” function actually constitutes a background check or even a simple database search under the FCRA, than the employers whose recruiters, hiring managers or sourcers utilized LinkedIn’s referencing function in relation to any job candidate actually might be found liable for violating a variety of federal and state employment screening laws.

 Lawyer Up: The Liability Isn’t With LinkedIn

Even rookie recruiters know that an employee’s written authorization is absolutely required before requesting or initiating a consumer report. In the membership terms and conditions provided to LinkedIn Recruiter users, or even in general job applications, disclosures do not in and of themselves constitute an actual authorization of a consumer report on a candidate initiated by a potential employer. In fact, under the FCRA, a written authorization for an employer to obtain a consumer report must include no more information other than a signed authorization by an employee (15 U.S.C. § 1681b(b)(2)(A). 

This latest lawsuit levied against LinkedIn raises an issue that has, until now, flown largely under the radar of the world of HR and recruiting. LinkedIn has always refused to publicly self-identify or affiliate in any way with traditional job boards, resume databases or any other subset of HR Technology, positioning itself instead as a social network.  This, despite the fact that the entire Fortune 1002014-10-16_14-27-46 are paid subscribers with multiple seat licenses to LinkedIn’s Recruiter product.

LinkedIn Recruiter, in fact, is the most widely used and most profitable recruiting technology product on the market today, controlling a large share of an incredibly lucrative market in which it claims it does not compete.

Its penetration with both large and small employers alike, with agency and corporate recruiters, sourcers and sales reps, is almost complete.  But its their aggressive pursuit of the rest of the pie that the lawsuit addresses directly, in particular pointing to what appear to be contradictory marketing strategies simultaneously employed by LinkedIn:

“Though LinkedIn aggregates a significant amount of consumer information, LinkedIn represents to its members that it does not license or sell member content to third-parties to show to anyone else without the express permission of the particular member.

LinkedIn has multiple utilities for job seekers, recruiters and potential employers. 

LinkedIn allows businesses to post employment opportunities, and search for active and passive job candidates, and for LinkedIn members to search for, and apply for those employment opportunities. LinkedIn pitches itself to businesses as the “ultimate talent pool to source the best candidates for your hiring needs.” 

Conversely, LinkedIn pitches itself to consumers as “the one stop shop for your professional life,” allowing consumers to “connect to people, see job postings, get discovered for what you do best and more.” 

In fact, in LinkedIn’s most recently quarterly SEC financial filing for the second quarter of the year after market close on July 31, LinkedIn publicly asserted the claim to investors and the markets that there they’d passed the million job posting threshold on their platform, a milestone sure to spike confidence in the company.

Most HR Technology companies currently competing in an extremely commoditized market have already realized when it comes to recruiting, there’s no such thing as halfway in.

In fact, the litany of legal and compliance issues involved in offering a tool that’s intrinsically expected to drive such a large portion of the hiring process make almost any tool illegal unless that technology is explicitly designed and exclusively offered to direct employers.

This is why so many sourcing tools come into immediate question, and rightfully so, as to their viability as a core component of a fully compliant hiring process.

Corporate Human Resources, as a group, generally tend to find themselves very concerned, to say the least, when internal recruiters utilize tools that lack certain required privacy, anti-discrimination, and equal opportunity issues required to ensure compliance with the complex labyrinth of hiring rules and regulations.

What this most recent lawsuit has done, finally, is address what is an inarguable fact: that LinkedIn facilitates a false sense of being a legitimate professional network to its members while simultaneously profiting on the expansive and, apparently, expensive pool of talent that LinkedIn customers are willing to shell out millions of dollars for every year in the Quixotian quest to recruit top talent – even though the numbers show that they have no competitive advantage using LinkedIn recruiter, since they are paying to view identical databases to see identical profiles.

LinkedIn Lawsuit: More Liability Lawsuits Likely for Employers

I2014-10-16_14-36-36t’s at this point the general public has become pretty much largely aware that for any social network, it’s the members themselves who are the product, an issue mainstream enough to fuel Ello’s spectacular boom and bust as a social network that actually valued its users – a salient selling point in a day where privacy violations are the expectation rather than the exception.

LinkedIn, however, has found in its referral product a unique way to package and monetize member data to both employers and consumer marketers while largely ignoring the mountain of extant protections involved for potential employers.

These issues are unique to LinkedIn, as companies like Facebook and Twitter, ostensible competitors until one considers that their lack of liability rests in that their exploitation of member data involves direct marketing to consumers, without the use of recruiters or sourcers (or marketers) as an intermediary.

Whether or not the Plaintiffs in this particular class action LinkedIn lawsuit have a leg to stand on, or whether LinkedIn will ultimately bear any liability for the actions of the employers ultimately using their referral product for any reason generally held to be non-compliant – which looks like a very real possibility.

If not in this suit than it will likely happen in a seemingly inevitable case coming soon to a circuit court near you – that you should probably start paying attention and start calling your employment attorneys.

DISCLAIMER:  This article and any links provided are for general informational purposes only and should not be construed as professional or legal advice. Receipt of these materials does not create an attorney-client relationship nor is it a solicitation or advertisement to provide legal services.  The views expressed in this article may be outdated or repealed by current law. Do not act upon this information without seeking professional counsel in the appropriate jurisdiction.

NicoleGreenbergSTreckerAbout the Author: Nicole Greenberg, Esq. serves as Managing Director at STA Worldwide, a global professional services firm specializing in IT staffing, project management and consulting services. A licensed Illinois attorney and member of the American Bar Association, Nicole has over a decade of experience in talent acquisition and recruiting strategy.

Recognized as “the world’s only lawyer with a focus on sourcing,” Nicole is a highly sought after public speaker, presenting on compliance, sourcing and technology topics to industry audiences around the world, and her writing on these subjects has been recently featured by top publications like SourceCon, Recruiting Daily and HRExaminer.

A lifelong native of Chicago, Nicole is a graduate of Lake Forest College and received her Juris Doctor from the John Marshall Law School. Follow Nicole on Twitter @NGSEsq or connect with her on LinkedIn.

 



  • maureensharib

    Nicole, thanks for this robust and thoughtful article. You mention that “so many sourcing tools come into immediate question, and rightfully so, as to their viability as a core component of a fully compliant hiring process.” I can tell you of one that doesn’t come into question: phone sourcing. It’s fast, clean and economical.
    You call in and ask for the person who holds a specific title. Boom. you’re out of there. There’s no messing around with analyzing any “data”, ordering any results or directing any traffic. The chips fall where they may and from there the results may be allowed to speak for themselves.
    Maureen Sharib
    Phone Sourcer
    513 646 7306
    maureen at techtrak.com
    http://www.techtrak.com

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  • Rich W

    I agree, this is a well done piece and more attention needs to be placed on LinkedIn’s actions.

    In almost every company I’ve been involved employees compete constantly for visibility, scarce resources and promotion. The competition can be brutal and when the winner solidifies power the losers find their future limited. Some are terminated, some are encouraged to leave. I’ve seen star performers punished for simply being aligned with an unpopular manager. These battles have real consequences on coworkers. They lose income and their life goes into chaos. They will not quickly forget that experience nor the people involved. This happens every day. Politics is the reality of work life.

    Now suppose you were among the fortunate that prospered while your colleagues suffered and some number of years later you’re seeking employment with a new firm. Would the defeated “provide reliable feedback about a job candidate” as LinkedIn claims. The last thing one would do is offer the names of those having a vendetta against them as a “Trusted Reference”. Yet this is exactly what LinkedIn is doing by selling filtered messaging services to individuals without the knowledge or consent of its non-paying members.

    The potential harm to LinkedIn’s members is real. Hopefully the courts will deliver a remedy, but the most effective remedy may happen when members stop using the network.

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