A well-known global coffee chain recently settled a Fair Credit Reporting Act (FCRA) lawsuit.
As part of the settlement, the two named plaintiffs will receive an amount not to exceed $10,000 each while the plaintiffs’ attorneys receive $1.285 million. The remainder of the class will be entitled to various settlement options depending on the tier in which they fall which ranges from a $125 gift card to a cash payment plus a gift card.
The employer also agreed to change its business practices including ceasing the practice of having its background check provider send “fail” notifications via email to branch managers.
The pre-adverse action letter should also specify a “waiting period” which represents the time an employer will wait before making a final employment decision. While no specific waiting period is outlined in the FCRA itself, there are local and state laws that do require a specific waiting period. Employers should consult with qualified legal counsel to determine if there are any jurisdiction-specific requirements with which they need to comply.
During this waiting period, the impacted individual may dispute information contained within the report. Consumer Reporting Agencies (CRAs) are obligated to conduct a reinvestigation at no charge once a dispute is filed. The FCRA does not address whether the position must remain open during the waiting period, but again, employers should consult with legal counsel to determine if there are any applicable local or state requirements.
Following this waiting period, the employer may make a final employment decision. If the employer chooses to proceed with the adverse employment decision, they must send a final adverse action notice to the individual.
Given the vast amount of litigation related to adverse action requirements, employers should conduct routine review of their practices, provide training to relevant staff and consult with qualified legal counsel as needed.
Settlement
The lawsuits involved allegations that the employer violated the FCRA’s adverse action requirements by failing to provide notice before subjecting them to an adverse employment action that was based on a background check (formally known as a consumer report). It’s important to note that the employer denied the allegations in the complaint and denied all liability.As part of the settlement, the two named plaintiffs will receive an amount not to exceed $10,000 each while the plaintiffs’ attorneys receive $1.285 million. The remainder of the class will be entitled to various settlement options depending on the tier in which they fall which ranges from a $125 gift card to a cash payment plus a gift card.
The employer also agreed to change its business practices including ceasing the practice of having its background check provider send “fail” notifications via email to branch managers.
Adverse Action Reminder
As a reminder, the FCRA requires employers follow a two-step adverse action process. The first step is referred to as “pre-adverse action”. This step should occur before making any adverse employment decision, such as choosing not to hire an individual, deciding to terminate an employee or not promoting an employee. As part of the pre-adverse action process, employers must provide a pre-adverse action letter, a copy of the consumer report, a copy of the document “A Summary of Your Rights Under the Fair Credit Reporting Act” and any applicable state notices.The pre-adverse action letter should also specify a “waiting period” which represents the time an employer will wait before making a final employment decision. While no specific waiting period is outlined in the FCRA itself, there are local and state laws that do require a specific waiting period. Employers should consult with qualified legal counsel to determine if there are any jurisdiction-specific requirements with which they need to comply.
During this waiting period, the impacted individual may dispute information contained within the report. Consumer Reporting Agencies (CRAs) are obligated to conduct a reinvestigation at no charge once a dispute is filed. The FCRA does not address whether the position must remain open during the waiting period, but again, employers should consult with legal counsel to determine if there are any applicable local or state requirements.
Following this waiting period, the employer may make a final employment decision. If the employer chooses to proceed with the adverse employment decision, they must send a final adverse action notice to the individual.
Given the vast amount of litigation related to adverse action requirements, employers should conduct routine review of their practices, provide training to relevant staff and consult with qualified legal counsel as needed.