$3 Million FCRA Settlement by Food Lion Parent

Apr 30, 2015

As I have been writing for well over a year, Fair Credit Reporting Act class action lawsuits (FCRA – the federal law that governs employee background checks, and which places very specific disclosure requirements upon employers) have been and are continuing.

In Brown v. Delhaize America, LLC, the Food Lion parent company agreed to settle for $3 million, and it is easy to understand why.  With nearly 60,000 total class members, the Food Lion parent company was facing a potential liability of nearly $60 million in statutory damages, plus punitive damages and attorneys' fees.  Thus a settlement that equates to about 5 cents on the dollar of the potential liability of this FCRA violations damages award, made it a prudent business decision, as it significantly mitigated risk to the Food Lion parent company.

The two main issues that were raised in this class action lawsuit were (1) a separate and distinct employee disclosure form – whose sole purpose is to delineate the FCRA disclosures for the background check, was not provided, and (2) pre-adverse action notices were not given to those individuals who were subject to an adverse action, i.e., job applicants who were not hired, or, employees who were either terminated, demoted or not promoted, based upon the results of the background check report (referred to as the "consumer report" under the Fair Credit Reporting Act).

It is crucial for employers to understand that the separate and distinct "FCRA employee disclosure form" cannot be part of the general employment application, and it is prohibited to include any language in this "employee disclosure form" other than to provide the requisite FCRA disclosures.  In particular, any language related to a general release of liability for the employer should be excluded from the "FCRA employee disclosure form."  Further, when an adverse action, as defined by the FCRA is taken, the Fair Credit Reporting Act dictates that a "pre-adverse action notice" be sent to the consumer, prior to the "adverse action notice" (and at least 5 business days should transpire between the issuance of these notices... otherwise the employer could be cited for not providing sufficient time between these notices).

Seeking the guidance of a reliable background screening company can help employers avoid similar legal landmines, as knowledgeable background screening firms can enable employers to implement proper and compliant employee background screening procedures and disclosure forms.

Posted by: Rudy Troisi.  President, Reliable Background Screening.




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