The convenience store chain 7-Eleven recently paid out nearly $2 million to settle a class-action lawsuit that alleges it violated the Fair Credit Reporting Act (FCRA). The class-action lawsuit—Munoz v. 7-Eleven, Inc., filed in the state of California—spans approximately 50,000 job applicants. In addition to the settlement payout, the lawsuit will push 7-Eleven to correct its employee background check process to ensure FCRA compliance in the future.
The alleged violations involve the part of the FCRA that requires employers to utilize a standalone disclosure document when informing candidates about background checks. Under FCRA rules, the background check disclosure can either be provided as a standalone form or combined with the background check consent/authorization form. The form cannot include any other information, whether details about the job, employer, or background check provider. The idea is that the disclosure form or disclosure/authorization form will give candidates or employees complete clarity about what they are authorizing an employer or prospective employer to do during the vetting process.
Per a report from HR Dive, the lawsuit against 7-Eleven argues that the employer included extra information on its disclosure form, including details about the background check provider and relevant state laws. The form also asked for “a blanket authorization allowing the disclosure of information directly to 7-Eleven.”
7-Eleven ultimately agreed to settle the lawsuit, paying $1,972,500 to the class of applicants.
HR Dive noted that several other major companies have had recent legal troubles related to FCRA background check disclosures. These companies include Frito-Lay and Delta Air Lines. Walmart is also facing a lawsuit for background checks that have allegedly had a disparate impact on minority applicants. In total, HR Dive said companies have paid out approximately $174 million in the past decade just to settle background check lawsuits.
Because most employers use the same basic background check process for every candidate they screen, a single lapse in FCRA compliance can snowball into a large and costly class-action lawsuit, especially for large national or multinational organizations: the impact of an FCRA faux pas will be amplified across many different locations. The 7-Eleven class-action case will cost the business about $40 per applicant, but that amount adds up given the number of class members.
Including unnecessary information or language in a disclosure is one of the most common violations of FCRA compliance. Many employers are unclear on which information is considered necessary for this form and which information is considered extraneous. For this reason, it is extremely important for employers to educate themselves on the finer points of FCRA compliance before implementing a new background check strategy.
At Blinkx, we are happy to help by providing Learning Center pages that highlight important details about the FCRA and FCRA compliance. If you have any additional questions in this regard, feel free to contact us directly.