Background checks are assumed seemingly standard and straightforward but as Petco Animal Supplies found the hard way the Fair Credit Reporting Act (FCRA) contains very strict protocols and technicalities that can cost your company millions if not followed precisely.
After a class action lawsuit was filed in a California state court in May 2016 Petco Animal Supplies Inc. settled at $1.2 million with two job applicants in a class that claims the company violated the federal FCRA with unlawful background check policies, according to Top Class Actions In the Jacklyn Feist, et al. v. Petco Animal Supplies Inc., et al case Petco allegedly violates FCRA in two ways:
Procured consumer reports on applicants without providing a stand-alone disclosure. According to the lawsuit, the form was simply in fine print as a part of their online application process.
Failed to provide notifications before taking adverse action on the basis of information received from the consumer reports.
Rather than continuing litigations November 16th, 2018, Petco agreed to pay over $1.2 million in settlements.
And in case you are wondering how this lawsuit helped job applicants who used the forms and processes in question, the majority will receive $20. Yes, you read it correctly. Of the 1.2 million dollars paid by Petco for these seemingly technical violations, only approximately $20 goes to 37,279 applicants who applied for a job.
The complete payout made by Petco to the settlement class is broken down like this:
The attorneys: $300,000
Lead attorney costs: Approximately $15,000
The Settlement Administrator: Approximately $114,000
The lead plaintiffs will receive $10,000
The applicants (37,279 class members) who claim the background check form was non-compliant: $20 each.
The applicants ( 52 class members) who claim the Adverse Action process was non-compliant: $150 each.
As usual in these cases, the attorneys looking for these technical violations of the FCRA and sue employers are the ones who benefit the most.
Petco continues to deny wrongdoing, regardless the Petco/FCRA lawsuit is an important reminder of the legal and financial ramifications that can occur when companies don’t consistently and thoroughly update hiring procedures and forms.
The key takeaway for any employer is that both you and your background check vendor have to maintain a thorough understanding of all areas of compliance.
Please contact us here for free forms and information on how to keep your screening process in full compliance.