Publix joins a growing list of companies that have settled class action lawsuits that alleged violations of the Fair Credit Reporting Act (FCRA). In this settlement, Publix admits to no violations of FCRA, but does agree to pay a total of $6.8 million.
The issue in the case was the assertion that Publix failed to provide adequate disclosure of its intent to conduct background checks on job applicants. The company’s application form did include a request for authorization to do the checks, but plaintiffs argued that the method was not a standalone document as required under FCRA.
Even more striking than the recently publicized Dollar General FCRA case that was settled a few weeks ago for $4 million, Publix was sued for a seemingly technical violation–a simple procedure to provide background check disclosure using a separate document could have prevented this particular lawsuit.
The message is clear: No bending the FCRA rules.
The Publix case illustrates the logic of the class action lawsuit based on FCRA rules. The rules are clear enough that even a minor variance in the hiring process can be construed as a violation. Damages authorized in FCRA cases range from $100 to $1000 per person, plus payments to attorneys. Therefore, if there is a large class (in the Publix case, the class is over 90,000 people), even a small per person settlement can multiply into a large total cost.
The financial characteristics of an FCRA lawsuit are not lost on the trial lawyers. They stand to benefit greatly with a contingency fee in the 25% to 33% range: If the plaintiffs’ lawyers in the Publix case received 25%, their payday was $1.7 million. In other words, the lawyers have an intense incentive to find and certify a class for an FCRA violation even when the per person settlement benefit is only $55, like in the Publix settlement.
From the company’s point of view, the $55 per person cost plus the lawyers’ fees is about the same or even less than the low end benefit stipulated in the law (at $100 per person). By settling, the company can probably lock in a lower total cost than it might have with the uncertain outcome of a trial. Unfortunately, the cost in the Publix case is still a solid 7-figure number.
The takeaway in this case is that employers should design hiring processes in full compliance with the FCRA. The steps for authorization and disclosure are clearly specified and straightforward. The minor cost of implementing these procedures is small compared with the potential losses in a class action lawsuit. And the trial lawyers who represent consumer interests are paying attention.
Are you aware of the FCRA rules? Are you confident in your company’s processes? If you answered no to either question, we encourage you to dig deeper and talk with us about a compliant process.