Dive Brief:

• Frito-Lay Inc. has agreed to pay $2.4 million to resolve claims that it violated the Fair Credit Reporting Act by using improper disclosure forms for obtaining consumer reports for pre-employment background checks (Chism v. PepsiCo, Inc. Frito-Lay, Inc., First Advantage Background Services Corp. (No. 3:17-cv-00152, N.D. Calif.)). The settlement class of 38,174 job applicants will share the settlement if it receives court approval.
• Under the FCRA, a consumer report for employment purposes can’t be obtained without, among other things, providing a “clear and conspicuous disclosure” in a document that consists solely of the disclosure. The plaintiffs alleged Frito-Lay violated the FCRA by including the disclosure in a document that also included “impermissible extraneous information.”
• Frito-Lay said its noncompliance was not “willful” and argued that the forms were lawful because they were separate from the disclosures and/or a lawful part of the disclosure screens, according to court papers. The suit also named the employer's parent company, Pepsico, and a vendor, First Advantage Background Services Corp.

Dive Insight:

Background check missteps continue to result in massive settlement payments for large employers. Last month, Target agreed to pay $3.7 million to settle a class action lawsuit alleging that it conducted an “overly broad and outdated criminal background check policy” that discriminated against African-American and Latino applicants. The plaintiffs alleged that Target’s previous background check policy automatically disqualified a large number of otherwise qualified minority candidates. Target has since removed the criminal history question from its employment applicants and when it asks about criminal history later in the hiring process, provides an opportunity for applicants to explain criminal convictions.

For employers looking for FCRA best practices, the U.S. Equal Employment Opportunity Commission and the Federal Trade Commission offer some guidance. The law has specific requirements for employers using third-party background check providers, and many deal with disclosures and permission. Relevant to the Frito-Lay suit, the government guidance says that the law's required disclosure "must be in writing and in a stand-alone format." Additionally, "[t]he notice can't be in an employment application," the agency says. "You can include some minor additional information in the notice (like a brief description of the nature of consumer reports), but only if it doesn't confuse or detract from the notice."

Employers should note that the law has additional requirements, especially for employers using background information to deny an applicant a job offer, and that state and local laws may apply as well.