(CN) - Business networking site LinkedIn faces yet another federal class action, this time over allegations that it furnishes users' consumer reports to paid subscribers.
Lead plaintiffs Tracee Sweet, Lisa Jaramillo, James Ralston and Tiffany Thomas sued LinkedIn in San Francisco federal court last week, claiming multiple violations of the Fair Credit Reporting Act (FCRA) in a 24-page complaint.
The plaintiffs accuse the company of furnishing potential employers - and any LinkedIn member that has a premium subscription - with consumer reports packaged as reference reports, without meeting all the requirements under FCRA.
According to the complaint, employers looking to hire can look at names and employment positions of other LinkedIn members who are "linked" to the candidate because they have worked together.
Once the employer pays the required subscription fee, it can generate its own list of what LinkedIn calls "trusted references" for the potential employee. But LinkedIn never informs the prospective employee that a third party has been given the information, the plaintiffs say in their complaint.
Employers and other premium subscription users can then use LinkedIn's search function to view the profile of any trusted reference and message them through the company's internal messaging system, InMail.
This provides employers with a powerful tool to "anonymously dig into the employment history of any LinkedIn member, and make hiring and firing decisions based upon the information they gather, without the knowledge of the member, and without safeguards in place to the accuracy of the information that the potential employer has obtained," the plaintiffs state in the complaint.
But the real problem is that the accuracy of the report received by the employer relies not just on the candidate being completely honest about their own work history, but also the honesty of the trusted reference the employer uses to research the applicant. Any departure from the truth by a trusted reference could cost a potential employee a job opportunity, the plaintiffs claim.
Sweet says in the complaint that she was denied a job in the hospitality industry after being viewed on LinkedIn by an unnamed company's general manager, who called her in for an interview and initially offered her a job on the spot.
But the company rescinded its offer several days later, according to the complaint. Sweet says that when she asked why she was no longer being offered the job, "the general manager told her that the company had checked some references and, based on those references, had changed its mind."
The general manager had refused Sweet's offer to provide them with references, however, leaving Sweet to suspect that the information gleaned from LinkedIn had derailed her chances, according to the complaint.
Plaintiff Ralston, Thomas and Jaramillo say they all had similar outcomes after connecting with potential employers through LinkedIn.
The plaintiffs say in their complaint that LinkedIn provides paid subscribers with the equivalent of a user's credit report without also giving a summary of the consumer's rights - a requirement of FCRA. Furthermore, LinkedIn gives up the reports to any paid user without verifying identity, intent, or even the accuracy of the information the reports are based on - two more violations of the credit reporting law, the complaint states.
The jilted jobseekers ask for class certification and statutory, actual and punitive damages for five alleged violations of FCRA.
They are represented by Todd Friedman in Beverly Hills, Calif.
LinkedIn says on its website that generated $427 million - 80 percent of its revenue stream - from its premium subscriptions and talent solutions services in the second quarter of this year alone. The company claims to be the world's largest web-based professional network with over 300 million members worldwide.
The company is no stranger to accusations over its business practices. In 2013, another federal class action accused LinkedIn of hacking into users' accounts and harvesting their email contacts for a barrage of promotional spam.
In that case, a federal judge found earlier this year that while users give LinkedIn permission to collect email addresses from their accounts when they sign up for the service, their consent might not extend to the onslaught of "reminder" emails that come later, the judge said.