April 22, 2025
A U.S. District Judge for the Northern District of California has rejected a $1.3 million settlement deal. This deal would have resolved claims against an employer that allegedly failed to inform nearly 30,000 workers it would perform background checks.
Part of this deal would have allowed the charity to receive leftover funds. However, the judge claimed this arrangement lacked a suitable relationship with the plaintiffs or alleged violations. In this case, the issues concern allegations that the defending employer failed to comply with the Fair Credit Reporting Act (FCRA) notification requirements.
The issues began when the defendant employed the class representative in 2019. Before starting his employment, the employer performed a background check on the class representative. The class representative claims that he would not have authorized this background check “had he not been confused by extraneous and superfluous language included in (the employer’s) disclosure forms.”
Under 15 U.S.C.§ 1681b(b)(2)(A) of the FCRA, it is stated, “Except as provided in subparagraph (B), a person may not procure a consumer report, or cause a consumer report to be procured, for employment purposes with respect to any consumer, unless-
“(i) a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes; and
“(ii) the consumer has authorized in writing (which authorization may be made on the document referred to in clause (i)) the procurement of the report by that person.”
Settling this FCRA case would have covered a settlement class of 29,628 people who had applied to work for the defendant from November 20, 2014, to February 28, 2022. It would have paid the class representative $7,500 and the other individuals in the settlement class $25. Additionally, the settlement would pay administrative costs of $73,000, attorney fees of $425,000, and attorney costs of up to $24,000.
Any funds that remained after 180 days since the second distribution would have gone to a charity organization for children. However, the judge dismissed the motion to resolve the claims without prejudice. As a result, the parties may revise the agreement and seek preliminary approval for the modified agreement instead.
This case shows how important it is to comply with all applicable laws and regulations when conducting background checks. The best way to do this is to partner with an experienced background check company.
Stay updated on all the new FCRA, EEOC, and other compliance laws with JDP. Contact a Sales Rep today for more information.