On July 7, the United States District Court for the Southern District of California preliminarily approved a $1.75 million class action settlement under the Fair Credit Reporting Act involving Chuck E. Cheese's background check practices. This settlement serves as another reminder of the risks that employers face in conducting background checks on prospective employees.
In Ford v. CEC Entertainment, Inc. d/b/a Chuck E. Cheese, the plaintiffs alleged Chuck E. Cheese violated the FCRA by informing applicants that a background check would be obtained through a disclosure form that contained extraneous, impermissible information. The FCRA requires employers to provide applicants with a clear and conspicuous disclosure, consisting solely of the disclosure, that a background check will be obtained. According to the plaintiffs, Chuck E. Cheese allegedly violated the FCRA by embedding the disclosure within the employment application, including a provision in the disclosure regarding the meaning of "at-will" employment, incorporating a certification in the disclosure that the application materials were correct and complete, and including a liability release.
The preliminarily-approved settlement applies to approximately 28,000 class members. According to the settlement documents, the settlement includes automatic payments of approximately $38 to each class member. It also includes an incentive award to the class representative of up to $5,000 and up to one-third of the $1.75 million settlement fund for attorneys' fees. Chuck E. Cheese also made changes to its background check disclosure as part of the proposed settlement.
The Ford settlement is part of a growing list of multi-million dollar settlements pertaining to employers' background check practices and their disclosure forms. The technical compliance issues associated with background screening disclosure forms combined with the availability of statutory damages under the FCRA will continue to create enhanced risk for companies that use background screening as part of their hiring efforts.
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