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A class action suit claimed the retailer failed to provide a proper disclosure document or follow the required adverse action process.

About The Lawsuit

A class action suit alleged that Petco procured background checks without properly disclosing their intention to do so. It also claimed the retailer did not follow an adverse action process that is mandated by the Fair Credit Reporting Act (FCRA).

The case was called Feist v. Petco Animal Supplies, Inc. It was heard by Judge Marilyn L. Huff who stated: “All persons regarding whom Defendant procured or caused to be procured a consumer report for employment purposes during the period from May 1, 2014 through December 31, 2015. Included in the Settlement Class is a subclass consisting of those against whom Petco took an adverse action subsequent to procuring a consumer report and did not receive a pre-adverse action notification letter.”

The Settlement

In November 2018, the judge authorized a $1.2 settlement in favor of the plaintiffs. This decision did not come easily. It took a two-year court battle to reach this point. After deliberation, Petco agreed to pay the full amount.

Despite the conclusion, Petco reportedly denies any wrongdoing. Regardless, this situation provides an important reminder that it is essential to always comply with the FCRA as well as relevant state and local laws.

How The $1.2 Million Will Be Divided

Participants in the class action suit were placed in two groups: the Disclosure Class and the Adverse Action Subclass. The settlement will offer the following payouts:

· $20 for each member of the Disclosure Class.
· $150 for each member of the Adverse Action Subclass.
· The lead plaintiffs will receive $10,000 as an incentive award.
· The remaining $430,000 will cover attorney fees and costs as well as a payment to the settlement administrator.

What Employers Should Know

The case against Petco serves as a reminder that every employer must provide a disclosure before running a background check on any person. This must be a standalone document that informs the recipient of the employer’s intention to run a background check on them. It must consist only of the disclosure and not have any additional or confusing content. Until the subject signs these documents, a background screening cannot begin.

This case also demonstrates the importance of following the FCRA mandated adverse action process. Employers may choose to take an adverse action, such as not hiring a candidate, but only after completing a few steps. First, the person must receive a pre-adverse notice along with other required documents. The individual must then have time to dispute the results of their background check. If no dispute is filed, or if one is initiated but a reinvestigation shows the initial report was correct, then the employer may continue with the adverse action.

Complying with federal, state and local laws is essential for every employer. One of the best ways to remain compliant is to fully document your screening policies, follow them consistently and work with a Consumer Reporting Agency that is accredited by the National Association of Professional Background Screeners.

Backgrounds Online provides sample disclosure and authorization forms for our clients. We also create educational resources that contain useful information about topics such as the adverse action process. If you have questions about running background checks on your applicants, employees, contractors or volunteers, please contact us. Every one of our team members who process background checks earns their FCRA Certification and is highly trained and knowledgeable. We are available Monday through Friday from 5am to 6pm PT.