Pizza Hut Served An FCRA Class Action Lawsuit

Article Written by Allison Reddoch

pizza hut logoPizza Hut became the latest major restaurant chain to come under fire for how it screens potential hires. The lawsuit, filed in New York federal court, accuses Pizza Hut of violating the Fair Credit Reporting Act (“FCRA”), which regulates employers’ use of background reports during the hiring process.

The FCRA is widely-known as the federal law that regulates the exchange of credit information between credit bureaus and lenders. For decades, most lawsuits targeted the nation-wide credit reporting agencies (“CRAs”) and claims against employers were rare. However, since early 2014, there have been approximately thirty FCRA class-action lawsuits brought against employers in the retail, restaurant, theater, manufacturing, and transportation industries.

This recent rise in FCRA class actions is likely due to the plaintiff’s bar view that the FCRA’s remedial provisions are “class action friendly.” An applicant or employee may sue an employer for “negligent” or “willful” non-compliance with the FCRA. Class actions typically allege willful non-compliance because plaintiffs can pursue statutory damages (ranging from $100 to $1,000) for each alleged “willful” violation. In contrast, plaintiffs may only recover “actual damages” for alleged “negligent” violations. Typically, because an employer’s violation of the FCRA concerns paperwork defects, actual damages are nominal at best. Further, the U.S. Supreme Court’s 2013 ruling that individualized damages issues may preclude class certification in certain cases may have had the unintended effect of increasing the FCRA’s appeal to class action lawyers. Many believe that the statutory damages under the FCRA make class certification easier to obtain because individualized damages assessments are unnecessary. Lastly, and quite possibly most appealing to the plaintiffs’ bar, is that the FCRA allows prevailing plaintiffs to recover their attorneys’ fees.

Of course, the headline catching, high dollar settlements have also driven the increase in FCRA class action litigation. In October 2014, grocery chain Publix Super Markets, Inc. and discount retail chain Dollar General Corp. agreed to settle FCRA class actions for $6.8 million and $4 million respectively. While these settlement figures are dwarfed by the number of high-profile settlements in cases brought against CRAs, the plaintiff’s bar remains steadfast in their pursuit of class claims against employers.

The lawsuit filed against Pizza Hut is illustrative of the most popular claims brought against employers; namely that the employer’s background check disclosure form contains “extraneous” language, such as a release of liability, which is not permitted under the FCRA. Another common cause of action attacks an employer’s failure to provide any pre-adverse action notice, or if notice is provided, the employer failed to wait an appropriate amount of time before taking final adverse action against an individual.

To mitigate any chance of FCRA litigation, employers should….Continue Reading

FCRA Class Action Lawsuit Filing Here…Pizza-Hut-FCRA-Filing