Dive Brief:
- 7-Eleven has agreed to pay out $1,972,500 to a class of approximately 50,000 job applicants to settle allegations that it used an improper consumer report disclosure under the federal Fair Credit Reporting Act (FCRA) (Munoz v. 7-Eleven, Inc., No. 18-cv-03893 (C.D. Calif. June 17, 2019)).
- 7-Eleven allegedly violated FCRA's stand-alone disclosure requirement by providing consumer report disclosures to its applicants and employees that contained additional information, including facts about state law, information about the background check provider, and a blanket authorization allowing the disclosure of information directly to 7-Eleven. The plaintiffs also claimed that 7-Eleven had regular access to legal counsel, that it had the resources to comply with FCRA, and that its systematic failure to do so was "willful."
- As part of the settlement, 7-Eleven agreed to use a stand-alone disclosure going forward.
Dive Insight:
This is not the first time in recent history that a high-profile company has settled FCRA violations. Delta Air Lines, for example, paid $2.3 million to settle a class-action lawsuit alleging that it failed to provide more than 40,000 applicants the proper background check disclosures required by the FCRA and California law. Frito-Lay settled a similar case last year, and Walmart has been sued as well.
Unfortunately for employers, because they tend to use background checks for large numbers of people — usually potential hires — rather than just a few, problems in this area can easily spawn catastrophically expensive class actions. Over the past decade, in fact, employers have paid out a total of $174 million to resolve background-check lawsuits.
How can businesses stay out of legal hot water? Experts advise having a FCRA-compliant process in place that is used every single time a background check is requested, whether it's a credit report or a criminal background check.
That process must include four key steps, attorneys have advised: Notify the applicant or employee that the background check will be carried out; get written permission from the applicant; provide the applicant with a copy of the report and a summary of rights in the event a decision is made to not hire the applicant as a result of what the check uncovered; and satisfy all applicable recordkeeping requirements relating to document retention and destruction.
Matthew Simpson, a partner with Fisher Phillips, previously told HR Dive that employers tend to make two common mistakes when it comes to FCRA compliance: including extraneous language in the form that notifies employees of the background check (what those suing 7-Eleven alleged the company did) and making an adverse employment decision before providing the applicant with a copy of the report and a rundown of his or her rights.
