Frito-Lay Will Pay $2.4M to Settle Background Check Class Action Lawsuit

Top Class Actions’s website and social media posts use affiliate links. If you make a purchase using such links, we may receive a commission, but it will not result in any additional charges to you. Please review our Affiliate Link Disclosure for more information.

Frito-Lay Inc., a subsidiary of Pepsico Inc., has agreed to pay $2.4 million to settle a class action lawsuit alleging that the company violated the Fair Credit Reporting Act by using consumer credit reports when they conducted background checks as part of a hiring process without properly disclosing this practice to the job applicant.

Plaintiff Marcus Chism, a former Frito-Lay employee, requested preliminary approval of the settlement on Friday from a California federal judge.

This settlement will end his Frito-Lay class action lawsuit that claimed the company unlawfully failed to disclose the fact that they incorporated consumer reports into the background checks they run on job applicants.

The Frito-Lay FCRA class action lawsuit implicates Pepsico, Frito-Lay, and First Advantage Background Services Corp., the company Frito-Lay used to conduct the background checks on its employees.

The $2.4 million Frito-Lay class action settlement was reportedly reached after two mediated discussions between Chism and Frito-Lay. The two parties agreed upon a gross settlement of $62.87 per Class Member and a net settlement of at least $40. Reports show that this compensation is in line with, if not slightly higher than comparable settlements for alleged FCRA violations in the Northern District of California.

Chism expressed that he felt that the settlement was fair and reasonable, stating that he hopes to move the legal process forward to “preliminarily approve the settlement agreement, direct the dissemination of notice to [affected job applicants], and set a hearing date and briefing schedule for final settlement approval and…fee and expense application.”

The Frito-Lay background check class action lawsuit was originally filed in January 2017. It claimed that the company made routine practice of acquiring investigative consumer credit reports when conducting background checks of job applicants as well as of current and former employees.

Allegedly, to comply with the FCRA, the company should have provided applicants and employees with a stand-alone disclosure of the practice. According to Chism, such a disclosure is required by state and federal law. Chism argues that the company did not take this action, and instead, put the disclosure in a general document that each individual subjected to a background check was required to sign. Allegedly, this document contained the disclosure as well as information on having his documents photocopied, and an assurance that his responses to information requested was correct.

According to Chism, the document contained the phrase “I have been given a stand-alone, consumer notification that a report will be requested and used for the purpose of evaluating me for employment or retention as an employee.” He says that this statement was not true, and that in accordance with the FCRA, this statement was improperly included in this general document.

Chism went on to claim that the statement is “akin to a liability release in that it is exculpatory, effectively requiring the employee to agree that the stand-alone disclosure requirement has been complied with,” arguing that Frito-Lay’s inclusion of the above statement functioned only to absolve them of guilt, rather than to actually provide applicants and employees with a true disclosure of their practice of using consumer reports in background checks. He went on to say that the statement “is intended to have the same end result as a liability release; Frito-Lay escape liability because of a document signed by the applicant.”

The plaintiff proposes two Classes of recipients for the settlement — all prospective job applicants as well as all current and former Frito-Lay employees who applied for a job with the company in the last five years and those who applied for a job in the last seven.

Chism is represented by Shaun Setareh and Thomas Segal of Setereh Law Group.

The Frito-Lay Employee Background Check Class Action Lawsuit is Marcus Chism v. Pepsico Inc., Case No. 3:17-cv-00152-VC, in the U.S. District Court for the Northern District of California.