That's A Lotta Cheddar: Pizza Chain Pays Big to End Background Check Case

Hinshaw & Culbertson LLP

The parent company of Chuck E. Cheese's restaurants, CEC Entertainment, Inc., has agreed to pay $1.75M to settle a class action lawsuit in California brought by applicants who claimed the company provided improper background check notices during the hiring process. 

The kid-friendly restaurant chain will pay approximately 28,500 job seekers about $38 each with their attorneys pocketing up to $577,000. In the case, Franchesca Ford, Isabel Rodriguez v. CEC Entertainment, Inc. d/b/a Chuck E. Cheese's, Applicants claimed that their rights were violated under the Fair Credit Reporting Act and California law when they were not provided a separate, stand-alone pre-authorization form to secure background checks; instead, the company allegedly made the critical error of bundling the disclosure form with other application documents. The lawsuit also alleges that the disclosure form failed to include the checkbox for an applicant to receive a copy of the report, which is required under California state law.

This agreement is just the latest example of retailers paying hefty multi-million dollar settlements for allegedly failing to comply with the requirements of the FCRA and its California counterparts under the California Consumer Credit Reporting Agencies Act and the California Investigative Consumer Reporting Agencies Act. But California employers are not alone. In the past few years, companies across the country have seen a marked increase in similar class actions alleging violations of the FCRA and related state statutes especially as laws regulating these issues become more onerous. Providing applicants with proper disclosure notices to conduct background checks during the hiring process is cumbersome and difficult to do correctly and at the right time. And these efforts require even greater attention and additional disclosures when a prospective employee is not hired or their job offer is withdrawn due to the results of a background check.

A careful review of a company's background check procedures and related applicant notices is imperative to minimize the prospects of costly litigation.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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