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FCRA Lawsuits Gain Momentum with $1.2 Million Settlement in Petco Case

The end of the year is as good a time as any for a Fair Credit Reporting Act (FCRA) compliance reminder, especially in light of a recent class action settlement involving a major national retailer in Hire Image.  On November 16th, the United States District Court for the Southern District of California granted final approval of a $1.2 million class action settlement against Petco Animal Supplies, Inc.  Feist v. Petco Animal Supplies, Inc. demonstrates that the trend of class action lawsuits brought against employers for alleged violations under the FCRA is not slowing down.

Petco Animal Supplies, Inc. is a major national retailer that sells pet care products and services. The named Plaintiff in the case was a former job applicant of the company, who alleged that she was not properly notified that Petco would be reviewing her consumer reports and as such, was “deprived of an opportunity to review and challenge the report” upon which the denial of employment was based.

The class action was initially filed against Petco in May of 2016.  The lawsuit challenged the company’s form of disclosure for employment background checks, alleging that Petco violated the FCRA by: (1) obtaining consumer reports for employment purposes without the required stand-alone disclosure and (2) not obtaining the required authorization.

While a background check consent form was included in a series of forms in the Petco job application, the forms also contained over thirty paragraphs, including information on other authorizations, a summary of consumer rights in other states, a summary of consumer rights under the FCRA, and a list of entities that enforce the FCRA.  As such, the Plaintiff argued that the background check consent form violated the FCRA requirement that the disclosure be made “in a document that consists solely of the disclosure.”

The FCRA is intended to protect consumers from either willful or negligent inclusion of inaccurate information in their background check reports. It also regulates the collection, dissemination, and use of consumer information.  While it is intended to protect the accuracy and privacy of information used in employment decisions, it is not intended to stop employers from using background screenings.  Rather, it mandates that employers follow specific rules with regard to that information and authorizations obtained from the consumer.

In this case, the judge certified the class as follows: “All persons regarding whom Defendant procured or caused to be procured a consumer report for employment purposes during the period from May 1, 2014 through December 31, 2015. Included in the Settlement Class is a subclass consisting of those against whom Petco took an adverse action subsequent to procuring a consumer report and did not receive a pre-adverse action notification letter.”

After the judge denied Petco’s Motion to Dismiss, Petco settled the suit and agreed to pay $1,200,000 to establish a settlement fund. Under the approved settlement, the lead plaintiffs would receive $10,000 as an incentive award and the attorneys would receive fees and costs.  The remaining class members (approximately 50,000) would receive an estimated $20 each.

This is not the first large FCRA-related settlement we have seen and it is certainly not going to be the last.   2017 saw cases involving Avis paying a $2.7 million settlement in a class action lawsuit and Postmates paying a $2.5 million settlement, among others.  This year brought class action lawsuits against McDonalds (pending), a PepsiCo Subsidiary ($1.2 million settlement), and now Petco.

Employers should not let down their guard when it comes to FCRA-related lawsuits, as plaintiffs’ attorneys will continue to creatively bring suits to show the “concrete injury” requirement established in Spokeo, Inc. v. Robins, Inc. in 2016.  Although most class action lawsuits that wind up in the news involve large, recognizable companies, employers of any size are at risk and should frequently review their forms and processes to ensure that they are in compliance with the FCRA. Employers should also review the laws in the states and cities in which they do business to ensure compliance with local laws.

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