Locked out of the gig economy: When background checks get it wrong

Checkr, the background check engine powering much of the gig economy, is usually in the news for one of two reasons: Either it's raised a whole bunch of money — the startup is now valued at $2.2 billion — or it's cleared an Uber driver who goes on to assault his passengers.

But the tech industry darling, which spun out of Y Combinator in 2014 and now processes 1.5 million background checks every month for the likes of Uber and Lyft, has an equal and opposite problem on its hands: a growing number of lawsuits accusing Checkr of churning out erroneous background checks that allegedly cost innocent people their livelihoods.

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Take Amy Rae. In November 2017, she was double parked outside her 10-year-old's school waiting to drop off the football jersey he was supposed to wear in a photo shoot for the local paper. Before Rae could complete the handoff, she says a police officer spotted her and told her to move. When Rae protested, he asked for her license. Rae reached for her purse and realized she'd left her wallet at home in her rush to get out the door. According to her driving record, the officer wrote her a ticket for failure to have a license in her possession. Rae paid the fine and moved on with her life.

That is, until four months later when Rae, a full-time office manager who drives for Uber part time, opened her app one night and found that her account had been blocked due to some issue with her background check. It turned out that rather than telling Uber that Rae didn't have her license in her possession, a minor violation, Checkr reported she was driving with no license at all. It was one little mistake, but more than two years later, Rae is still trying to wind her way out of the Kafkaesque maze she stepped into that day in November.

Over the years, Rae says she has been repeatedly suspended from Uber over her background check, only to be reinstated and suspended again. Rae says she was making hundreds of dollars a week as an Uber driver, income that disappeared when she was suspended. Even though it's only a part-time job, Rae says that as a 37-year-old single mother of two with one kid in college, she's felt the pinch.

"This could literally destroy someone's life," Rae says. So, late last year, she started Googling the company. "I was like, 'There have to be people who sue them for this.'"

Rae was right. Since 2015, Checkr has faced some 80 lawsuits under the Fair Credit Reporting Act, which regulates both credit reports and background checks. Rae filed one in 2018. Roughly half of those suits have been filed in the last year alone. In court documents, the plaintiffs have accused Checkr of a wide range of wrongdoings, from mistaking them with other people to misreporting their offenses to including past criminal activity that is too old to report under the law. One class action suit filed in November 2019 concerns Jose Montanez, who was famously exonerated after serving more than 20 years in prison for a murder he didn't commit. When he got out and applied to work for Uber, the case alleges, he was denied because Checkr's report included a murder conviction.

These cases, some of which have been dismissed or ended in confidential settlements, represent only a fraction of the complaints about Checkr flooding Twitter and online review sites, like the Better Business Bureau. Time and again, people report getting the same runaround.

"Checkr blames Uber. Uber blames Checkr, and who suffers?" says Alexis Lehmann, an attorney with the Philadelphia-based firm Francis Mailman Soumilas, which has represented dozens of consumers in these cases. "The drivers can't get anywhere."

Uber declined to comment for this story. Checkr also declined Protocol's requests for an interview. But in a statement, a spokesperson said, "We understand that candidates are people whose lives are affected by the results we deliver, so we're committed to the highest standards of accuracy and fairness in our reporting."

Checkr, of course, is not the only background check company in the world or even in the gig economy. And it's not the first to face these kinds of suits. Its competitors like Hireright and Sterling Talent Solutions have faced similar accusations. Some law firms exist for the explicit purpose of suing consumer reporting agencies. According to Eric Ellman, senior vice president for public policy at the Consumer Data Industry Association, these types of lawsuits are growing across the industry. "There's been a steady rise over the years in FCRA litigation in part because there's a low barrier to sue and a high potential payoff at the end," he says.

The prevalence of these suits is partly a product of Checkr's success.

But Checkr has pitched itself as a different kind of background check company, one that's fairer, more accurate, and worthy of Silicon Valley venture capitalists' millions. Over the last few years, Checkr has become an increasingly popular target for these suits thanks to the explosive growth of the gig economy, the fact that Checkr serves so many of the gig economy's biggest players, and growing pressure on companies like Uber to enhance security with more-frequent background checks.

In other words, the prevalence of these suits is partly a product of Checkr's success. The company prides itself on using automation to speed up the historically manual background check process. It stands to reason that the more reports Checkr runs, the more errors it might produce.

In an interview with angel investor Jason Calacanis last fall, Checkr's CEO Daniel Yanisse stressed the importance of getting things right. "It's not just a transaction. It's human lives we're touching and real people we're sharing information about," he said in the interview.

But lawyers in these cases argue that Checkr isn't living up to its commitment, failing to put in place adequate systems to correct issues in a timely or permanent fashion, which can have disastrous financial repercussions for people.

Jerome Miller, a 69-year-old Army veteran who served in Korea and Vietnam, had been driving for Uber in his hometown of Charleston, South Carolina, since 2014. In 2018, he upgraded his 2013 Dodge Avenger to a shiny new Lincoln MKT so he could begin offering premium rides. "My customers loved it," he says.

Then, in January 2019, he, too, got an email from Checkr, stating that his license had expired. Records from the Department of Motor Vehicles reviewed by Protocol show that his license was, in fact, active. Miller contacted a representative for Uber, who instructed him to contact Checkr. Even after he contacted Checkr, Miller's lawyer says, it took about three months before the company revised his record and he was able to drive for Uber again.

During that time, Miller says he started falling behind on his car payments. Eventually, he says, his new Lincoln was repossessed, so that even once his account was reinstated, it would be impossible to recover what he'd lost. In June of that year, Miller sought legal help from Francis Mailman Soumilas. That suit was dismissed in September. Lehmann, Miller's attorney, says, "The matter has been resolved."

In the case of Christopher Twumasi-Ankrah, a Ghanaian immigrant living in Cleveland with his wife and 4-year-old daughter, Checkr's report wasn't so much inaccurate as it lacked crucial details. Among the driving violations it listed were two accidents: one, in which the police record shows Twumasi-Ankrah was the victim of a hit-and-run, and another in which a court determined Twumasi-Ankrah was not at fault. Uber suspended him for having three or more traffic violations or accidents, but Twumasi-Ankrah contends those two should not have been counted. In January 2019, he sued Checkr for violation of the FCRA.

Checkr filed a motion to dismiss Twumasi-Ankrah, arguing that the information included in the reports was, in fact, accurate. A judge in the Northern District of Ohio sided with the company. Now, Twumasi-Ankrah and his lawyer, Sergei Lemberg, are appealing the decision.

Checkr declined to share internal figures about the accuracy of its reports. But Ellman pointed to past legal cases involving LexisNexis, which also provides background checks; that company reported that only 0.2% of its reports are ever disputed. Another case, involving a background check company called General Information Solutions, yielded similar results, showing that between 2013 and 2016, only 0.175% percent of records were disputed.

"The anecdotal allegations of high numbers of erroneous reports must be assessed within the context of the many millions of consumer reports that are generated each year," Ellman says. He notes that the law requires that credit reporting agencies implement "reasonable procedures" to ensure accuracy.

In his interview with Yanisse, Calacanis asked the founder how Checkr handles inevitable errors in background checks. Yanisse explained that Checkr has an online portal, where people can launch a dispute and work with Checkr's team to fix their report. The law requires disputes to be resolved within 30 days (Checkr's spokesperson says the company resolves them faster than that). "We want everyone to be empowered to see their data to be able to control and fix it if there's an issue," Yanisse said.

What Yanisse didn't mention is that in order to access that portal, people need to check a box agreeing to Checkr's terms of service, which includes an arbitration provision. Often, people agree to these terms before they've even seen what's in their report. That's because the very first email Checkr sends out notifying job applicants there's a problem includes a link to the portal, urging them to click to find out more. Applicants can call Checkr to circumvent this process and get their report directly, but court records and interviews indicate many don't. If people access the portal, Checkr gives them 30 days to opt out of the arbitration agreement, but that fact is buried at the bottom of the company's terms of service. Often, applicants don't know they've opted in to such an agreement to begin with.

In some cases, courts have upheld those agreements. But employment lawyers say the law is still murky as to whether these arbitration agreements between job applicants and Checkr, a third-party entity, are enforceable.

Under the law, job applicants are entitled to view their consumer reports, including background checks. That's true whether they agree to Checkr's terms of service or not, says Christopher McNerney, an associate at the employment law firm Outten & Golden, which specializes in workplace discrimination. Once an applicant has agreed to those terms, however, McNerney says there's still an argument to be made that the contract isn't valid, because the applicant hasn't received any benefit from the transaction.

"The company will say the benefit is the consumer report," McNerney says. "But the company is legally and contractually obligated to provide that already."

Still, McNerney says that argument is, in some ways, beside the point, since the existence of an arbitration agreement can, in and of itself, have a chilling effect.

"These are sophisticated companies," he says, "and they understand whether or not the arbitration agreement is enforceable, they get a certain benefit from the deterrence effect of forcing people to sign this arbitration agreement, in hopes that they'll then think, 'Well, I can't pursue my rights anymore.'"

That's if they know they have these rights at all. The nature of the gig economy, particularly the rideshare economy, is such that many of the applicants for these jobs don't have the resources to mount a legal defense. "You're talking about a lot of immigrants, a lot of minorities," says Mark Mailman, managing shareholder of Francis Mailman Soumilas. "You're definitely talking about people who have been incarcerated, who have had previous run-ins with the law, who have gotten out and now can get a job. They can be vulnerable people."

One irony of all of this is that, within its own company, Checkr is a rather progressive employer, dedicated to hiring people who have been arrested or incarcerated. In fact, according to the interview with Calacanis, 5% of the company's workforce has a criminal background. "It's our mission to provide a fairer future for people who have made a mistake in the past," Yanisse said in the interview.

The question Rae, Miller, Twumasi-Ankrah and others are asking is whether Checkr is doing enough to rectify its own mistakes, too.