Employment Law Daily Frito-Lay to pay nearly $1M to settle FCRA background check notification suit
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Friday, August 12, 2016

Frito-Lay to pay nearly $1M to settle FCRA background check notification suit

By Dave Strausfeld, J.D. Frito-Lay has agreed to pay nearly $1M to settle a nationwide class action alleging that it failed to provide notice to job applicants and employees prior to taking adverse employment action against them based on information disclosed in a consumer report. Each of the almost 3000 class members who were allegedly denied Fair Credit Reporting Act-mandated notice, if they do not opt out, will receive checks for approximately $200, under a settlement granted preliminary approval by a federal district court in California (Roe v. Frito-Lay, Inc., August 5, 2016, Gilliam, H. Jr.). The lawsuit alleges that Frito-Lay took adverse action against job applicants and employees based at least in part on a consumer report without providing the requisite notice under the FCRA. Settlement terms. Under the settlement reached after 18 months of negotiation with the help of a mediator, Frito-Lay has agreed to pay a gross settlement sum of $950,000. After subtracting attorneys’ fees, reasonable settlement administration costs, and so forth, the remainder of the settlement fund will be distributed to settlement class members equally on a pro-rata basis. Uncashed checks will revert to the fund, and class members who timely cash their initial checks will receive a pro-rata share of the unclaimed amount. Class counsel are authorized to apply for an attorneys’ fees award of up to 33 percent of the gross settlement, along with an award of reasonable costs. The named plaintiff is slated to receive an incentive payment of no more than $10,000. Class members ascertainable from company’s records. The court first conditionally certified a settlement class. One requirement not enumerated in Rule 23, the court observed after finding all the express requirements met, is that the class must be clearly ascertainable. Here, the putative class met the ascertainability test because it relied on Frito-Lay’s records, such as files of individuals in the company’s applicant tracking system that contained a disposition of "Background Check Review—Fail" or "Criminal Background Fail." Under the settlement, Frito-Lay agreed to provide the claims administrator with the name, most current mailing address, telephone number, email address (if available), and social security number for each of the 2,928 individuals who came within the class definition. This information would allow the claims administrator to identify and locate class members with sufficient confidence to satisfy the ascertainability requirement, the court ruled. Settlement fair. The proposed settlement fell within the range of reasonableness, the court found. As the named plaintiff argued, a net recovery of approximately $200 per class member was fair because, without being able to prove actual damages, each individual would only be able to recover statutory penalties of $100 to $1,000—and then only if it could be established that Frito-Lay violated the FCRA willfully. If any class members could prove actual damages, which are recoverable under the FCRA, they were sufficiently protected because they could opt out of the settlement. Also factoring into the proposed settlement’s reasonableness were the risks to the plaintiff in continuing to litigate. In order to prevail in this action, she would be required to successfully move for class certification under Rule 23, survive summary judgment, and receive a favorable verdict capable of withstanding a potential appeal. Frito-Lay continued to deny all wrongdoing, and the path ahead for the plaintiff would not be smooth. Based on these considerations, the $950,000 gross settlement amount, roughly 32 percent of Frito-Lay’s potential statutory damage exposure, was reasonable, held the court in granting the settlement preliminary approval.

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