Companies that use background screenings as part of their hiring process are facing increased risks nowadays — including lawsuits with million-dollar payouts — if they do not comply with federal requirements for checking a prospective employee’s credit history.
One example: the Chuck E. Cheese restaurant chain. The company recently agreed to pay $1.75 million in a class-action suit that alleged it did not provide proper disclosures in its background check process, as required by the Fair Credit Reporting Act.
Under the FCRA, employers can only obtain a current employee’s or job applicant’s credit report by getting permission through a stand-alone preauthorization form. The FCRA requires that employers provide job applicants with a clear and conspicuous disclosure that a background check will be obtained.
More than 28,000 Chuck E. Cheese job applicants joined the class action in Ford v. CEC Entertainment, Inc. d/b/a Chuck E. Cheese. About 450 class members also claimed the restaurant chain took adverse action against them because of the improper background checks.
According to the plaintiffs in the case, Chuck E. Cheese improperly embedded the required disclosure within its job application. The plaintiffs also alleged the restaurant chain wrongly included a provision about the meaning of “at-will” employment, incorporated a certification that the application materials were correct and complete, and included a liability release.
The $1.75 million settlement has been approved by the U.S. District Court for the Southern District of California, according to Law 360 (subscription required). As part of the resolution, Chuck E. Cheese also agreed to change its background check forms.
The attorneys in Sommers Schwartz’s Employment Litigation Group have handled employee background screening cases and are ready to speak with you about any suspicions you may have about your background check. Please contact us today.